Patterns of housing markets in Hawassa city: the quest for social inclusion Open Access

The 2030 Agenda for Sustainable Development Goals (SDG), goal-11, is meant to make cities and human settlements inclusive, safe, resilient and sustainable (UN-HABITAT, 2020; United Nations, 2016). Similarly, the New Urban Agenda for the year 2063 declares housing provision as a critical urban planning component, and it also calls for housing policies that would foster social inclusion, economic effectiveness and environmental protection (UN-HABITAT, 2020; United Nations, 2017b).

At the regional level, Agenda 2063 of the African Union envisions for people in cities and settlements to have access to affordable and decent housing, including housing finance together with necessities of life, and improving livelihoods of people living in slums and informal settlements (African Union, 2015). At the national level, many countries of the world and Sub-Saharan Africa have incorporated adequate and affordable housing as a human right in their constitutions and attempted to adapt the global housing policies (UN-HABITAT, 2006).

Despite such growing concerns for recognizing housing development as an agenda at the global, regional and national levels, however, providing affordable and socially inclusive houses to households at the lower end of the market remains daunting in many countries of Sub-Saharan Africa. Indeed, the major challenge is the lack of adequate attention by governments in the same geography, despite the growing housing shortage, especially the low-income [¹], over the years. Estimates vary, yet the housing backlog in rapidly urbanizing cities of Africa is projected to be over 50 million housing units, ranging from the highest in Nigeria (17–20 million housing units) to countries with over 3 million housing units (Egypt, DRC and Tanzania). In Africa, about 17 countries, including Ethiopia, are facing a housing backlog of over 1 million units (Bah et al., 2018). The housing backlog in sub-Saharan Africa is estimated to be over 45 million housing units (Obioha, 2021).

Ethiopia exhibited a change in its government in 1991. The new government adopted identifiable land and housing policies to bridge the growing gaps between housing demand and supply and the subsequent housing shortage. For example, in its Proclamation No. 80/1993, the new government issued an “urban lands lease holding proclamation,” which mainly stipulates the legal and administrative procedures for citizens to acquire urban land for housing and other development activities. Accordingly, this proclamation entitles urban residents to hold and rent urban land for housing development for 99 years (Federal Negarit Gazeta, 1993). The government revised its urban land lease policy through its Proclamation No. 272/2002 and Proclamation No. 721/2011, respectively, mainly justified by the premises of promoting good governance and efficient, effective, equitable and well-functioning land and property market that would boost the free market economy (Federal Negarit Gazeta, 2002, 2011). In the meantime, the country initiated and implemented the Integrated Housing Development Program, guided by the Condominium Proclamation 370/2003. This housing option was initiated mainly hoping to bridge gaps in low-income housing (Federal Negarit Gazeta, 2003). Regardless of such efforts of the government, the realities of housing market patterns in rapidly urbanizing cities of the country do not seem to foster a socially inclusive housing market system as promised in the policy guidelines of the country, and the present study partly aims to bridge this knowledge gap.

The decentralization policy implemented in Ethiopia since the 1990s has led to significant urbanization, particularly in regional cities like Hawassa. This city has been strategically promoted as a hub for socioeconomic and political activities within the Southern Nations Nationalities and Peoples Region state (SNNPRS). The city’s annual population growth rate is 6.4%, exceeding the national average of 4%. In addition, its population density is notably high at 28 people per hectare, surpassing other rapidly growing cities in Ethiopia, such as Adama, Mekelle and Dire Dawa. As of the latest estimate, the total population of Hawassa is approximately nearly half a million, nearly doubling from 259,803 in 2007 in 15 years (Getachew et al., 2021). Moreover, the average annual expansion rate of Hawassa city was estimated to be 8.9%, and this expansion rate is higher compared to other rapidly growing cities in the country, except Addis Ababa, the capital city (MUDCo, 2020; Terfa et al., 2019).

These trends underscore Hawassa’s significant urbanization and population growth, positioning it as a key urban center within Ethiopia’s decentralization framework. With the surge of neoliberalism and the involvement of more and more actors in the housing market, however, income, policy and planning-based exclusions in the housing market have been growing in the city. The formal housing market does not seem responsive to the prevailing demand. Thus, the city is experiencing rapid commercialization of land for housing through formal and informal channels to the extent that it excludes middle- and low-income households because land and housing are exchanged in the black market. Nevertheless, income, policy and planning-based exclusions, which could be intentional or unintentional, do not seem to get the required attention either in policy or planning, but this does not comply with the global call for building an inclusive housing market system and the growing local housing shortage.

While previous empirical works in sub-Saharan Africa in general and Ethiopia and Hawassa in particular focused on the inner city housing market and urban form, growth of housing prices, housing delivery and policy responses, urban expansion, land use change, informal housing, peri-urbanization and affordability of condominium housing (Admasu, 2015, 2018; Alemayehu, 2008; Magina, 2016; Nguluma, 2003, 2018; Njaramba, 2017; Regassa and Regassa, 2015; Terfa et al., 2019; Tesfaye, 2019; Tiumelissan and Pankhurst, 2013), research gaps exist in analyzing housing market patterns and social inclusivity. Accordingly, the present study aims to address this gap using operational attributes of social inclusivity (Elsinga et al., 2020).

Further, one of the pressing challenges of fostering a socially inclusive housing market system in sub-Saharan Africa could be the lack of underlying theoretical premises backing policies/strategies or the lack of empirical evidence supported by periodic market assessment. In this study, the Social Market Theory is used to understand the government’s role in housing policymaking for the low-income, despite the adverse impacts of neoliberalism on housing markets (Kemeny, 1992, 1995). The key research questions guiding this study are:

This section highlights the conceptual and theoretical foundations that support the aim of the present study. First, it attempts to operationalize the concept of low-income and then discusses theoretical and conceptual frameworks that could provide insights into housing market patterns in the study area.

For a broader understanding of income groups, and more specifically the “low-income” people, the World Bank’s income classification was used. Considering Gross National Income per capita valued annually in US dollars, the Bank classifies the global economy into four income groups: low income, lower middle income, upper middle income and high income. Table 1 presents a summary of World Bank’s income category for the year 2024 to 2025 in USD (World Bank, 2024b). Nevertheless, the World Bank’s income category does not capture the very concept of the low-income group in Ethiopia, and the present study attempted to revisit how the concept is understood and operationalized. Accordingly:

If the current currency exchange value [³] is considered (1 US$ = 57.5 ETB), the threshold value for classifying the low-income groups in Ethiopia is quite minimal (annual income ranging from 30,000–36,000 Ethiopian Birr) when compared to the World Bank’s income category for the same group. This implies the need for a contextual understanding of the low-income during policy formulation, say housing policy, and this requires periodic need assessment at the city level. Similarly, the global poverty line is found to be at $2.15/day in 2022 (World Bank, 2024a). Based on the World Bank’s definition presented in Table 1, Ethiopia’s poverty line is far below the world average.

Developing a cohesive theory of housing remained challenging due to the field’s interdisciplinary nature and the rapid social and economic changes impacting housing markets (Aalbers, 2017; Clapham, 2018). Some scholars, such as King (2009), advocate for theorizing housing independently rather than borrowing from other disciplines, arguing that external social theories may not advance a distinct housing theory. Others, however, oppose this view (Ruonavaara, 2017). It was also argued that the rise of speculative housing investments adds further complexity in theorizing housing, as housing dynamics are shaped by varying local policies, financialization trends and global capital flows across regions (Aalbers, 2016, 2017; Aalbers et al., 2017; Aalbers and Christophers, 2014).

Despite the lack of a comprehensive theory in housing studies, aligning housing research with policy and theoretical foundations has been recommended (Clapham, 2018; Kemeny, 1992, 1995, 2006). In the present study, the Social Market Theory is used to understand housing market patterns and evaluate whether housing policy-making fosters a socially inclusive housing market system in the sampled city – Hawassa. The historical root of this theory dates back to the 1930s, despite much of the ideas derived from postwar Germany Kemeny, 1992, 1995). This theory was developed as an alternative to the extremes of classical liberalism and the command economy, partly aiming to offset the disastrous effects of laissez-faire and the command economy.

The proponents of the social market theory were called the Ordo-Kreis-meaning order group. This group developed the concept of a “third way,” which aims to construct a market situation that could ensure important social goals were built in the market called Marktwirtschaft (Kemeny, 1995). This signifies the importance of state intervention in the market; nevertheless, this must be marktkonform or market-conforming. For instance, implementing a low-income housing allowance system is an example of a Marktkonform intervention. This system provides financial assistance to low-income individuals or families to help them afford housing within the existing market framework. Similarly, demand-based rent pooling, in which the rents of attractive houses were high whereas the rents of unattractive houses were low, signifies marktkonform. Conversely, blanket rent pooling, where all dwelling units of the same size, regardless of location and other factors, would lead to marktinkonform, resulting in over-demand for some houses and under-demand for others. This would finally lead to a hard-to-let condition (Kemeny, 1995).

The major propositions of the Social Market Theory are (i) the importance of state intervention in the market, which must be marktkonform or “market-conforming” rather than marktinkonform or “market disturbing”; (ii) markets ideally should hold some small concerns that could operate in their interests and this diversity need be balanced by market-conforming state intervention; and (iii) they propose for “managed markets” and this management should neither be submissive to the market nor it tries to determine and dominate it. Instead, it would be found in a third way, exhibiting neither laissez-faire nor disruptive market intervention (Kemeny, 1995; Peacock and Willgerodt, 1989). This theory, therefore, seeks state intervention in the market for adjustment, especially for disadvantaged groups (Kemeny, 1995). Similarly, (iv) the authors equally claim the importance of understanding housing policy in terms of the wider social interests and the practices and interests of the State (Kemeny, 1992).

Social Market Theory deviates from neoliberalism, stipulating that markets are embedded in wider social, political and cultural situations. Thus, the role of the government could not be to promote profit-driven markets and then develop emergency safety-net arrangements to address the resultant challenges but to keenly engage in the continuous construction and maintenance of the market. In doing so, the housing interests of the disadvantaged groups could be addressed to the extent of institutionalizing safety nets for these groups (marbling the fat with the meat analogy) (Kemeny, 1995). Thus, the social market theory demands continuous policy-making, monitoring and evaluation. Further, the Social Market Theory attempts to build markets that could strike a balance between economic and social priorities and thus ameliorate the undesirable effects of the market from within (ibid.).

Of course, Kemeny’s work has received criticism as much has changed in housing systems and the wider social and economic structures within which they are located since his publication in the 1990s (Stephens, 2017, 2020). However, his theory is believed to be influential in comparative housing studies, serving as an explanatory theory in its own right and as the independent variable in some studies that seek to compare the performance of different housing systems (Stephens, 2017). According to Stephens (2017), Kemeney’s series of publications reflects the significance of “middle range theories,” suggesting that long-term policies and economic processes shape housing structures and tenure types. For Kemeny, housing systems are “a strategic policy creation culturally sensitive and historically grounded social construction” (Kemeny, 2005, 2006; Stephens, 2017).

This section provides key variables related to housing markets that have been identified from empirical and theoretical literature. It also discusses important concepts of these variables, including their hypothetical relationships, as shown in Figure 1.

Following Goodman and Thibodeau (1998), the authors consider “housing markets” as geographic areas exhibiting the price of housing per unit of service with individual housing characteristics that are available for purchase. For Arnott (1987), the flow of services from a good is usually obtained through its purchase. In housing market analysis, therefore, renting is synonymously used with owning, and thus, every housing market policy aims to address the housing needs of renters or owners, implying the centrality of understanding tenure choice in the housing market and policy (Arnott, 1987). Housing markets exhibit two strands (formal and informal). Formal housing market typology is channeled by respecting government laws and regulations, including legal tenure options and standards. Conversely, the informal housing market refers to self-help housing options predominantly marketed in peri-urban areas of rapidly urbanizing cities in sub-Saharan Africa, largely obtained through informal channels and mainly backed by visible and invisible actors.

In housing market analysis, it is vital to distinguish housing needs from housing demand. Housing demand is understood as housing needs backed by the ability to pay, also called effective demand. Housing needs are socially determined requirements for accommodations and prevail when some households need a dwelling but do not have adequate finances to afford it (Oxley, 2004). Therefore, addressing the housing needs of some households requires compromising housing qualities and standards as well as tenure types to address individual and aggregate housing demands. Nevertheless, responding to housing needs and demand through housing development greatly relies on the combined operations of the markets (demand and supply), and an important element of such policy is land use planning (Oxley, 2004).

Cities are characterized by heterogeneity; for example, the housing market holds both formal and informal channels, which involve institutions and actors that could positively or adversely impact these markets. Understanding this heterogeneity demands the identification of the major actors and institutions and the processes embedded in the market (Silver, 2015). In his earliest work, John Turner reveals that any specific housing process can be viewed as a subsystem of a larger urban system or systems that can be seen separately. For Turner, any subject matter of value has three elements: people, the things they do and the relationship between them. He further illustrates that any housing process could be understood as the interaction between the people (actors) and their products (achievements) through the medium of their roles and responsibilities (activities) (Turner, 1976).

Using Giddens (1984), the present study considers “actors” as knowledgeable agents acting in specific contexts in their day-to-day activities. The involvement of actors and their actions could positively or adversely impact the housing market, and they could be visible and invisible (Mahiteme, 2006). In the housing market, however, the visible and invisible actors seem to be given negligible attention despite their growing role in the market with rapid urbanization and the rapid proliferation of informal settlements, especially in peri-urban Africa. According to Burgess, there are at least six different groups that compete for land and housing development in an urban setting: owner-occupiers, tenants, estate agents, landlords and developers, financial institutions and the government (Burgess, 1977, 1978). Nevertheless, the diversity of these actors and their roles varies between countries and contexts.

On top of this, housing markets are largely influenced by government policies such as land and housing laws, regulatory frameworks and urban spatial planning activities (Evans, 2004; Payne and Majale, 2004). Based on Glasson and Marshall (2007), spatial planning involves determining what can and should occur in specific locations. It explores the interaction of various policies and practices across regional spaces, placing the role of different areas within a broader context. Extending beyond conventional land-use planning, it establishes a strategic framework to guide future development and policy actions, regardless of whether they pertain to formal land-use planning regulations (Ibid). Concurrently, all planning decisions of significant size have social implications, and for many planners and planning agencies, social issues present themselves most strongly in the realm of housing (Levy, 2017).

It has been stipulated that urban land is at the core of any housing planning decision. In the same line of thought, it was succinctly described that “we cannot conceive of homes or businesses, even cloud computing, which depends on massive servers, without land” (Harris, 2014). Similarly, William Doebele argues that:

The concept of inclusion was introduced by referring to the economically disadvantaged groups who were excluded from the labor market in France in the 1970s (Anierobi and Obasi, 2021; Bulger et al., 2021; Davey and Gordon, 2021; Kummitha, 2017). In the subsequent years, the term has been widely used in the USA and other European countries, mainly referring to equity and protection of human rights along social and economic dimensions (Anierobi and Obasi, 2021). Nevertheless, defining social inclusion remained elusive; thus, there is a lack of consensus in defining it (Bulger et al., 2021; Davey and Gordon, 2021; Kummitha, 2017). The United Nations concept of social inclusion emphasizes on equity, social, economic and civic participation, as well as the protection of human rights (Bulger, 2018; Bulger et al., 2021). Some scholars argue that the concept of social inclusion is better understood by discussing its antidote-social exclusions, despite the inevitable variation in meaning based on the grounds of the scenario to be examined (Bulger et al., 2021; Davey and Gordon, 2021; Kummitha, 2017). Social inclusion could be understood from the point of view of redistribution of social opportunities to all sections of the population without any bias (Kummitha, 2017).

In housing market analysis, promoting inclusivity requires adopting the design for value (DfV) approach, which prioritizes a hierarchy of values, including inherent and operational values, alongside norms and design requirements (Elsinga et al., 2020). Inherent values are considered abstract and challenging to translate into policy or design, while operational values support the practical implementation of these inherent values. “Inclusiveness” in housing is identified as an inherent value, with accessibility, affordability and procedural justice serving as its operational values. And, the present study considers these operational values of social inclusivity for evaluating housing market options toward social inclusivity in the sampled city (ibid.). Indeed, it is understood that social inclusion is influenced by identifiable attributes of housing markets (demand, supply, access to land, prices and affordability), government policy, actors and their roles and external factors, namely, the free market and globalization.

Fostering an inclusive city has been a global agenda over the years (UN-HABITAT, 2003; United Nations, 2016, 2017a). SDG 11 calls for inclusive, safe, resilient and sustainable cities and human settlements. Nevertheless, the dimensions of fostering inclusiveness at a city level vary globally. According to UN-Habitat (2003), it is important to consider questions like “who is excluded,” “from what” and “how” in the discussion of an inclusive city (UN-HABITAT, 2003). In this regard, four dimensions of inclusion in cities of the Global South were identified and examined: economic dimension, spatial dimension, opportunity dimension and social/cultural dimensions (Jakhanwal, 2014).

Peri-urban areas are neither urban nor rural, and determining their physical space remains difficult given their evolving nature and multiple definitions, as well as names (Adell, 1999; Sahana et al., 2023; Wolff et al., 2021). In the present study, the peri-urban is defined as a contested and fuzzy space between the administratively urban and rural areas, and this space and its boundary change over time with de facto and/or de jure recognition by the municipality with spatial planning ordinances or spontaneously by other actors. The authors also understand peri-urban as a complex geographical setting characterized by competing actors (visible and invisible), competing land uses (formal and informal), as well as institutions and rules that are predominantly spontaneous. In this study, the term urban refers to a town or city with a defined municipal boundary (administratively recognized as urban), supported by spatial planning ordinances, and where land for housing is primarily acquired through formal or legal channels.

Despite urban land and housing markets being local in their price trends, they are intertwined with global flows of credit, communication and supply chains (Harris, 2014). In the present study, external factors are conceived as housing market impacts emerging from the free market economy, mainly induced by neoliberalism and globalization (Harvey, 2005b). According to the neoliberal view, what matters is to “get the prices right” and let market forces do their work (Pieterse, 2010). The role of a neoliberal state is to:

Facilitate and stimulate all business interests with the belief that this will foster growth and innovation and this is the only means to eradicate poverty and to deliver, in the long-run, higher standards of living to the mass of the population (Harvey, 2005b).

Contrary to what has been stipulated in neoliberalism theory, however, governments of the developing world have withdrawn from their conventional role by eliminating all forms of their regulatory activity or intervention (Harris, 2014; Harvey, 2005a, 2005b; Pieterse, 2010). This withdrawal of the state from its conventional role of monitoring the market is not without adverse impacts, especially on low-income groups.

With the surge of neoliberalism, the exchange-value of urban spaces overrides the use-value, which favors the urban few despite the possibility of producing urban space by marginalized groups (Lata, 2020). Neoliberalism has been believed to intensify the emergence of more and more actors into the market under the banner of public–private partnerships, as well as the intensification of informal markets, despite their adverse impacts on the urban poor (Bert Helmsing, 2003). Moreover, with neoliberalism, land and property markets are highly threatened in the processes as the poor confront new alliances in international property capital, the national and city politics surrounding land and its access and the emerging middle classes, all of which dream of controlling and speculating on it (Beall, 2002). Public–private partnerships that mounted worldwide in the post-1990s did not seem to provide positive outcomes, including serving the interest of the poor and thus allowing spaces for government intervention to safeguard the interest of the poor (MirafTable, 2003, 2004).

Hawassa, one of the rapidly urbanizing cities in Ethiopia, is located along the Ethio-Kenya highway, approximately 275 km from the capital, Addis Ababa. Although established in the early 1960s, the city’s growth remained gradual until the late 1980s. Since the post-1990s, Hawassa experienced rapid urbanization, largely necessitated by the then-decentralization policy that designated this city as the administrative center of the SNNPRS. Following the 2018 referendum that dissolved the former SNNPRS, the city has been serving as the administrative capital of the new SIDAMA Region. Currently, the city is organized into eight sub-cities [⁴] and 32 kebeles [⁵], as shown in Figure 2.

Hawassa City exhibits a diversified economy capable of sustaining itself through various sources of income. For example, its revenue grew from less than 120m in 2010 to approximately 2.5bn ETB in 2022 [1 US$ =57 ETB], signifying rapid economic growth (Getachew et al., 2021). Key sectors contributing to this financial independence include manufacturing, transport, hospitality and tourism, construction, wholesale and retail, among others (ibid.). This city has also been hosting the country’s flagship project, Hawassa Industrial Park, since 2016, which is believed to employ 60,000 people (Hassan et al., 2020). Together, these sectors form a substantial portion of the city’s GDP, demonstrating its economic resilience and potential for growth (Getachew et al., 2021).

Hawassa city was selected as a case study using purposive sampling and based on the justification that the city has undergone rapid urbanization compared to other regional cities in the country in terms of annual rate of population growth, average rate of physical expansion and density, as briefly discussed in section one. The city was designated as the socioeconomic and political hub for the former SNNPRS in the post-1990s, leading to rapid urbanization primarily driven by migration. Its annual population growth rate surpasses that of other rapidly growing cities like Adama, Mekelle and Dire Dawa, as shown in Table 2 (MUDCo, 2020).

The present study seeks to understand the formal and informal housing market patterns, and it necessitates sampling sub-cities and kebeles exhibiting these attributes. Accordingly, Tula sub-city (which holds urban and rural kebeles) and Tabor sub-city (which holds the largest population in the city) were purposefully selected as samples from which case study kebeles were identified. The selection of the two sub-cities was based on empirical evidence that revealed rapid urban growth in the north-eastern and southern directions of Hawassa between 1987 and 2017. Likewise, it was evidenced that the built-up area of Hawassa increased from 6.1 square kilometers in 1987 to 39.1 in 2017, implying a total urban growth of 540% (Terfa et al., 2019). Similarly, Dato Odahe, one of the kebeles located in the north-eastern part of Hawassa city, and Tilte, located in the south-western part of the city, were purposefully selected as samples aiming to capture the inherent housing market dynamics in the city. Figure 2 illustrates the location of the study area, including the two sampled kebeles.

The selection of Dato-odahe kebele was based on its geographical location, the fact that it is one of the oldest and biggest informal settlements in the city inhabited by a mix of residents; it has partly undergone demolition and upgrading; previous researchers have accounted for issues related to regularization and tenure security, which helps for validation (Admasu, 2015; Admasu, 2018; Kinfu et al., 2019); it has been facing land use competitions for other development activities; and it recently received resettled residents from other sub-cities as well. It is believed that these characteristics, therefore, helped the researcher to obtain rich information. Similarly, Tilte kebele, located in the southwest, shares many of the same traits as Dato-odahe. However, it also has distinct features, such as a more diverse population, relatively better road infrastructure, emerging urban characteristics and improved access to various social services and utilities.

This study used both quantitative and qualitative data. Thus, it was designed to follow convergent parallel mixed methods (QUAN+QUAL), seeking concurrent data triangulation. This method was also chosen to offset the limitations embedded in the separate use of qualitative or quantitative methods and aims to achieve validity and reliability (Creswell, 2014). For the qualitative part of the present study, the number of samples depends on the theoretical saturation of the research objectives as specified in the literature (Bryman, 2012). Accordingly, 12 (12) key informants (officers, elders and brokers) were selected using purposive sampling, including snowballing technique, and were interviewed using a semi-structured questionnaire, and this helped to include informants who provided the most relevant data for the study (Yin, 2011).

To determine the sample size for the household survey, a combination of Cochran’s equations was used (Cochran, 1977):

where n is the sample size, z is the selected critical value of the desired confidence level (which is estimated to be 95% confidence; thus, z = 1.96), p is the estimated proportion of an attribute present in the population (in this study, since no estimate is available from previous studies, it is set at 50% or 0.50), q is equivalent to 1−p(1–0.5 = 0.5), and e is the desired level of precision (in this case, 0.05). Using the possibility of a slight sample size reduction in equation (ii), Cochran’s equation yields 309 sample households to be surveyed. Finally, 325 sample households (including a 5% contingency) were surveyed, of which 307 questionnaires were returned, making the response rate relatively higher (94.5%).

For the purpose of this study, semi-structured interviews, questionnaires and document reviews were used as data collection instruments. Semi-structured interviews were conducted with 12 key informants who were purposefully identified using snowball sampling, including 2 spatial planners, 4 housing/land development experts working in the land and housing department at different levels, 2 kebele administrators, 2 elders of the city and 2 brokers. The use of semi-structured interviews is believed to be significant in that it allows for careful use of prompts, making it possible to follow up on points, ensuring that the broad direction of the questions is maintained (Cochrane, 2014). This approach facilitated the collection of qualitative data on housing market actors and their roles within the sampled city. In addition, it enriched the findings by providing broader insights into both formal and informal housing market trends, thereby enhancing the study’s validity and reliability.

The study used questionnaires to obtain data from the randomly identified 325 sample households, aiming to capture a broader understanding of housing markets in Hawassa city. This tool also helped to grasp the opinion of residents on how the formal and informal housing markets operate in general and the extent to which the housing market fosters social inclusion. The choice of this tool also facilitated the collection of a wide range of data from households considering all objectives so that conclusions and generalizations were drawn based on observations derived from samples (Creswell, 2014). During data collection, a combination of cluster and random sampling techniques was used to conduct household-level surveys using a questionnaire. It is believed that cluster sampling always follows a multistage approach in that clusters are sampled first, and then further clusters or population units are sampled (Bryman, 2012). The survey questions were designed to be close-ended but provided options to capture a different view from respondents. Data were collected (door to door) with the help of 11 trained enumerators identified from the sampled kebeles, and this approach encouraged obtaining higher response rates from household surveys. Using these enumerators also facilitated the identification of house owners and renters because the latter groups have not been the subject of the present study, and this could be open for further research. The rejection rates (5.5%) were attributed to respondent mortality or problems related to returning fully or partially unfilled questionnaires.

In addition, land and housing-related proclamations, spatial planning and policy documents, government reports at different levels of administration, housing delivery manuals and regulatory frameworks, housing market advertisements (tender-based housing, for example), as well as scientific literature on the same issue were reviewed to maintain a broader understanding of the housing market and social inclusion. Documents were analyzed by their contents, and the primary goal of content analysis was to capture the general important message of existing documents (Kothari, 2004). This approach contributed to a better understanding of housing policy-making and played a significant role in corroborating the findings from other sources.

Ultimately, data were coded and organized using a thematic approach, ensuring that both qualitative and quantitative data were validated and triangulated. Descriptive statistical techniques, including percentages, averages and standard deviations, were used to present and analyze household surveys and secondary data. In addition, a five-point Likert scale was used to capture respondents’ opinions on various attributes of formal housing markets. In the Likert scale, a respondent is asked to respond to each of the statements in terms of several degrees, usually ranging from three to seven (Bryman, 2012; Kothari, 2004). Besides, key-informant interviews and documents [reports from the housing/land department of the city and policy documents and guidelines] were analyzed qualitatively using themes that have been identified based on objectives.

The result presented in Table 3 shows that nearly two-thirds of the respondents in the study area were male, while 37% were female, highlighting gender disparity in property acquisition in the study area. Regarding age composition, most respondents (76%) were between 26 and 50 years old, indicating the importance of the productive age group in acquiring property. Notably, 11% of the respondents were younger residents who had also acquired housing in the sampled kebeles. Based on the results presented in Table 3, it is possible to infer that most of these groups inherited residential plots from their parents. Nevertheless, this approach does not signify a genuine way of acquiring property, as some secret transactions are disguised as inheritance during periods of stricter land monitoring by the city’s municipality.

As per the results, the majority of households (78%) in the sampled kebeles were found to be employed, whereas 18% were unemployed, and this group may constitute farmers/housewives or emergent households who inherited residential plots from parents. Government employees were found to be 68%, implying the dominance of the middle class in the peri-urban. Those working in private businesses and NGOs constitute 23% and 8%, respectively. However, this employment distribution differs from the reports provided by the city administration during the regularization process. According to Local Development Plan reports for the two sampled kebeles, only 23% of residents in Tilte and 14% in Dato were government employees, while private sector workers comprised 36% and 49% in these areas, respectively. This divergence could be attributed to differences in data collection methods, the specific neighborhoods sampled and the spatial coverage of the study area. From the findings, it can be inferred that the housing markets in the sampled kebeles of Hawassa have been relatively successful in meeting the housing needs of government employees, despite rising property prices over the years. However, the critical question remains: Will housing markets in the peri-urban areas continue to attract government employees and other low-income residents as prices continue to rise?

Figure 3 illustrates the family characteristics of the respondents. Accordingly, 68% of the sampled households are married, implying the role of family-making in property acquisition. Indeed, 19% of unmarried residents also possess property, and this group could include economically active young adults or those preparing to establish a family. Similarly, nearly 10% of the respondents were found to constitute widowed, separated and divorced household heads. In regards to family size, the majority of the surveyed households (57%) exhibit four to six family members, whereas 37% of the households possess one to three family members, and this implies the link between family size and shelter acquisition in the sampled kebeles. However, the share of households with extended family (seven–nine) was found to be insignificant. Of course, the data in the same figure demonstrates notable disparities between Tilte and Dato kebeles.

Figure 4 presents the income distribution of respondents in the study area. The data shows that 36% of households earn a monthly income between 5,000 and 10,000 ETB, indicating that housing markets in the peri-urban kebeles of Hawassa have become attractive to this income group. Similarly, around 28% of households fall into the upper-income category, earning over 10,000 ETB monthly. In addition, a significant portion of households (nearly 36%) earn between 500 and 5,000 ETB, reflecting the income diversity within these peri-urban neighborhoods. Despite the challenges of obtaining household income accurately, the results provide insight into the income diversity of the households. However, the vast majority (65%) fall well above the World Bank’s low-income category, implying those with better income inhabit the sampled neighborhoods. If the definition of low-income stipulated in the cooperative housing regulation is considered (a maximum of 3,000 ETB/month), the proportion of people that fall into the low-income category could reduce further in the study area, implying the penetration of middle and higher-income categories to peri-urban neighborhoods.

Table 4 summarizes the methods by which households acquired plots or houses, along with the corresponding years of acquisition. The majority of the respondents (58%) acquired their plots either by purchasing land from farmers (38%) or by buying a house (21%). Interviews with key informants indicate that there is often no clear distinction between purchasing plots and houses in the peri-urban areas of Hawassa. Vacant plots are frequently sold as though they include houses, a common practice in both formal and informal settlements. This practice of the city’s residents has been widely understood as a rule of thumb to comply with national land law, which stipulates that “land belongs to the government and its people and cannot be traded” (Federal Negarit Gazeta, 1995). Field observation indicates that these transactions likely occur with the municipality’s knowledge, underscoring a lack of adequate monitoring by relevant authorities.

Data from Table 4 reveals that the majority of plots in the sampled kebeles (78%) were acquired between 1985 and 2010, with the highest transactions occurring between 1996 and 2010 (60%). In addition, informal channels for acquiring housing or land have shown an increasing trend over the years, while formal market options, such as land leases, have declined, though this option still accounts for 21%. Inheritance (13%) may not signify a legitimate form of property acquisition, as some of the transactions were masked as inheritance during periods of stricter land monitoring by the city’s municipality. Although minimal (1.6%), the surge of tender-based land transactions in the sampled kebeles indicates a growing interest in the city’s administration in peri-urban areas.

One of the key questions to consider was: What are the driving forces behind the growth of informal housing and land markets in the sampled city? Surveyed households attributed 55% of the reasons to the rapid rise in housing and land prices in the formal markets, as well as the lack of inclusionary housing programs for low-income groups. Similarly, over 15% of respondents quoted the rapid commercialization of land and housing alongside the negative influence of brokers and speculators. Another 15% pointed to a combination of factors, with brokers and speculators being major actors. In addition, 12% of households highlighted the lack of fairness in the housing market.

Regarding accessibility and affordability of plots through the informal markets, one of the key informants posited that:

A broker interviewed about irregular land transactions in Hawassa City revealed that:

Another informant who is also a broker pointed out that:

Similarly, one of the interviewed elders claimed that:

Based on the results presented in the foregoing and upcoming sections, it can be inferred that the rapid growth of the informal housing market in Hawassa City is largely driven by policy and implementation gaps in the formal market, particularly for addressing the needs of low-income groups. This claim is supported by the fact that the existing housing market options lack accessibility, affordability and procedural transparency, failing to adequately meet the housing needs of low-income residents (also discussed in section five). In addition, the penetration of brokers and speculators into the informal market has further exacerbated the issue, yet adversely impacting the market to the low-income groups, including the peri-urban neighborhoods. Nonetheless, this study does not believe that peri-urban Hawassa is exclusive to the well-off segment of residents only. Field observation indicates that affordable plots are available to low-income residents of the city, provided they are willing to travel to the city’s periphery, where infrastructure is limited or absent.

This study seeks to understand housing market patterns in Hawassa city during the post-1990s period. However, it begins by examining housing markets in the pre-1990s to provide a broader perspective on the issue. Mainly guided by the then socialist housing policy, namely, proclamation No.47/1975, the housing market in Hawassa between the 1970s and 1990s was dominated by two housing options: kebele rental housing and cooperative housing [⁶]. In Ethiopia, Kebele rental housing units [⁷] resulted from the expropriation of extra houses by Proclamation No.47/1975 during the Dergue regime that ruled the country between 1974 and 1991. For example, out of the total 4,173 housing units administered by the city’s municipality, 73.2% (3,053) were inherited from the Dergue regime, signaling the recent administration’s piecemeal role in expanding these housing options. The production of these housing units did not get adequate attention since the fall of the Dergue regime, albeit they are believed to meet the housing needs of the low-income (see Table 5). According to key informants, kebele rental housing units are believed to be affordable, but they do not exhibit accessibility and procedural transparency to households at the lower end of the market.

Table 5 illustrates the distribution of low-cost housing options by sub-cities. From this data, it can be inferred that peri-urban Hawassa, particularly Tula sub-city, lacks sufficient low-cost housing options. However, these areas could offer relatively affordable plots to low-income groups if supported by appropriate policies/strategies. Similarly, key informants were unsure whether the target households inhabit these housing units due to the growing demand for the same housing options from other residents, particularly government employees in recent years. On top of this, the majority of these housing units (over 85%) are located in the inner city, yet facing revitalization given the growing demand for land in the inner city for other land uses, on the one hand, and the growing interest of the city’s administration in modernizing the inner city, on the other hand. This finding corroborates similar studies from sub-Saharan Africa. For example, Angola’s post-independent period favored home ownership, yet for political reasons (Cain, 2017; Development Workshop, 2009). Nonetheless, the same authors argue that “everyone cannot want to be a homeowner and, even if they do, they will be tenants at some point,” implying the significance of rental housing, especially for households at the lower end of the market. In this regard, Ethiopia needs to revisit its rental housing policy.

According to Lupala and Mulengeki (2010), cooperative housing emerged from the International Cooperative Alliance’s ideas for promoting home ownership to low-income groups in the 1960s, and it is with this global framework that the Ethiopian government adopted cooperative housing. This implies the role of global housing programs in influencing national-level housing policies. Nevertheless, the implementation of this housing option in Ethiopia has been more fragmented than initially outlined in the policy, and it appears to structurally exclude certain residents outside the targeted groups, as discussed in the following paragraphs.

It was evidenced that the role of cooperative housing in Tanzania has been reduced gradually with the demise of the socialist policy in favor of the free-market economy, which challenged the survival of these housing schemes to the extent that some collapsed (Lupala and Mulengeki, 2010). Similarly, cooperative housing in Ethiopia declined with the fall of the socialist Dergue regime in the early 1990s. Despite this, a recent study by Matsumoto and Crook (2021) reveals that cooperative housing stock in Ethiopia has produced a recognizable number of housing units (about 40,539 produced between the 1970s and 1992, despite most of these houses were built in the capital city, Addis Ababa). Although the production of cooperative housing units has been suspended in Addis Ababa, the capital city, this housing option has remained a key source of housing supply in secondary cities across the country since 2005 (Matsumoto and Crook, 2021).

Cognizant of the national housing policy direction, Hawassa City attempted to implement this housing option, mainly guided by Cooperative Societies Housing Guideline No. 20/2019. This guideline stipulates that the target households for this housing option are low-income groups, including (i) government employees with minimum income; (ii) group of individuals working in small and micro enterprises already and newcomers under the same group; (iii) returnees of former military members; and (iv) teachers working in primary school and high school. Besides, the guideline outlines the legal, financial and administrative procedures for implementing this housing option. This document specifies the aim, principles and registration procedures, including the required number of beneficiaries in a group, actors involved, the size of housing types, their respective costs and other procedural requirements of the target households, including defining “low-income.”

Of course, targeting some groups of the city’s residents (low-income) by the cooperative housing regulation discussed in the preceding paragraph is a “market conforming” intervention if seen through the lens of Social Market Theory. Nonetheless, the implementation of this housing option seems to favor government officers and a small group of city residents who have been recognized as low-income. Conversely, a sizeable number of residents in the same city are not employed and seek these housing options, despite the fact that this policy does not consider them. As per field observation, the progress of cooperative associations does not seem to be monitored and supported, despite the challenges they face in terms of skyrocketing construction costs. Accordingly, cooperative housing options are gradually skewed toward middle- and higher-income groups, and implementing this housing option remains more fragmented than anticipated in the policy.

Notwithstanding the challenges, this housing option contributed a sizeable number of housing units (nearly 2,400) between 2015 and 2018. According to field data, about 68 cooperative societies holding 981 households were beneficiaries between 2014 and 2016. In 2017/18, about 55 cooperative societies with 1,408 households, of which 481 female household heads (34%), were found to be beneficiaries of cooperative housing in Hawassa city. In the Tanzanian context, for example, cooperative housing has made significant progress by enabling low-income households to acquire plots, obtain titles to their land and properties over time, pool resources for house construction and access technical guidance and infrastructure support (Lupala and Mulengeki, 2010). In the same line of thought, the Ethiopian government needs to reiterate cooperative housing as one of the major housing supply channels in the rapidly urbanizing cities since 2005 (Federal Housing Corporation, 2023). However, the implementation of this policy exhibits limitations regarding social inclusivity.

Under the framework of the national land lease policies (Proclamation No.80/1993; Proclamation No. 272/2002; and Proclamation No. 721/2011), Hawassa city implemented lease-based housing [⁸] between the 1990s and mid-2000s. During this period, this housing option remained dominant, and a sizeable number of city residents (about 45,000) in Hawassa acquired plots for their housing using this option (Hawassa City Structural Plan, 2020). Over the years, this housing option has been abandoned in favor of the tender-based option. The municipality’s move favoring a tender-based land market for housing was mainly hoping to boost the municipality’s financial capacity given the ever-growing demand for land and the subsequent limited access to this scarce resource in the peri-urban. Nevertheless, this action by the government was accompanied by foreseen and unforeseen adverse impacts on the value of both formal and informal land and housing market options. Of course, this is a clear manifestation of the neoliberal market ideology and does not signify the “market conforming” role of the government as stipulated by the proponents of the Social Market Theory.

Proclamation No. 370/2003 adopted the condominium housing [⁹] in Ethiopia. Guided by this proclamation, Hawassa City produced a recognizable number of housing units for its residents. During the initiation phase, this housing option was mainly meant to address the housing needs of households at the lower end of the market, create employment opportunities and reduce dilapidated housing typologies in favor of building a modern city image (UN-HABITAT, 2011). During the implementation phase, however, the aimed housing program faced affordability challenges. As a result, these housing options were abandoned after two phases of trial-and-error in Hawassa city and other towns of the then SNNPRS between 2009 and 2011. As per the data obtained from the SIDAMA Region Bureau of Urban Development and Housing Construction, 3,538 condominium housing units were transferred to residents of Hawassa between 2009/10 and 2010/11. Even though this housing option boosted the housing stock in the city, the program failed to address the housing needs of the target low-income households. Table 6 summarizes the demand and supply trends of condominium housing units in Hawassa City between 2009/10 and 2010/11. Accordingly, supply was found to be limited for these housing units. Field data shows that the great majority of the same housing units were transferred to the well-off segment of the city’s residents, given the unforeseen challenges of affordability facing the target households. As per field data, only 15% of the targeted households managed to pay the down payment during the two phases of supplying these units. However, the data obtained from Ethiopia’s Ministry of Works and Urban Development shows the government’s attempt to enhance the inclusion of the target low-income households by (i) modifying the down payments (from 20 to 10%) for studio and one-bedroom type housing; (ii) increasing mortgage years for studio-type housing units (from 20 to 25 years); and this could be taken as a “market conforming” intervention, albeit the difficulty of meeting the anticipated target adequately. The housing typologies shown in Table 6 signify “market conforming” intervention despite the challenges of ensuring affordability for low-income people.

In Hawassa City, the tender-based housing [¹⁰] emerged as one of the dominant formal housing supply channels since 2013. The municipality transferred 1,927 residential units under this housing option between 2013 and 2023 in 17 phases, as presented in Table 7. This data shows that the city could address only 3.9% of the gross demand and 5.32% of the effective demand for this housing option. Effective demand shows an increasing trend and was found to be 82% on average. Similarly, trends of the minimum and maximum values of plots for this housing option reveal an abruptly increasing trend over the years, making the housing market unreachable to most city residents. For example, one of the key informants described that “tender-based housing options are highly commercial and largely attract residents with higher income, and most of them are speculators who buy housing plots for further transaction.” This claim is supported by the fact that the city’s land and housing department reported an individual winning 10 residential plots during the 17^th bid in 2023.

Similarly, a closer observation of maximum and minimum prices of tender-based housing shown in Table 7 justifies an abruptly rising price of land for residential housing per square meter since 2015. What is surprising from this result is the gap between maximum and minimum winning prices of the biddable plots (nearly six times during the 17th bid). This shows that some plots are more valued, given their geographical location and access to other urban amenities. In addition, the opinions of interviewed key informants show growing price trends of formal housing markets in Hawassa city over the years. Similarly, secondary data on condominium and cooperative housing demonstrate rising price patterns. For example, field data shows almost a doubling price trend in only a year, yet mainly justified by the rapid rise in the cost of construction materials and other factors embedded in the local context. On top of this, the cost of condominium housing units/square meter reveals a converging trend for different housing types, and this would have impacted the affordability of these houses to the target households [studio and three-bedroom cost 2,697 and 2,930 Ethiopian Birr, respectively]. Further, the data obtained from the city’s cooperative housing department reveals that the price of cooperative housing units per square meter was found to be 15,564 ETB, which is found to be comparable with the minimum price of tender-based residential plots shown in Table 7, signifying skyrocketing housing prices.

In a nutshell, the discussion in Section 4 demonstrates that Hawassa City exhibits formal and informal housing market patterns mainly guided by policy and regulatory frameworks, as well as market forces and recognizable actors. Figure 5 attempts to provide a broader understanding of housing market pathways in the same city since the 1970s.

From the findings, one can infer that the city’s administration initiated diverse formal housing options, yet in a fragmented manner and with declining housing market opportunities for low-income residents. The narrowing of housing markets to low-income groups could be justified by the involvement of more and more actors perpetuating the market with speculative goals, on the one hand, and the lack of “market-conforming” intervention by the city’s administration, supported by housing market assessments, on the other. Over the years, policy and implementation gaps embedded in the formal housing market options have largely necessitated the rapid proliferation of informal housing and land markets, including in the sampled neighborhoods in the peri-urban areas. For example, housing options originally meant for low-income people have been hijacked by the well-off segment of the city’s residents, given the surge of the neoliberal market economy that favored market-value and the government’s laissez-faire approach that failed to monitor this adversity. In this regard, condominium and cooperative housing schemes could be examples. On top of this, the national government, as well as the Hawassa city administration, does not seem to pay adequate attention to initiating and implementing socially inclusive housing market options, especially considering the skyrocketing prices.

Literature shows that a well-functioning housing market requires synchronizing three important attributes (Innes and Casabianca, 2021). The first attribute focuses on enhancing household income and improving access to affordable housing through demand-side interventions, such as promoting housing finance, mortgages and rental markets. The second attribute involves building efficient markets to improve the supply of affordable housing through an effective land administration system, flexible planning and the provision of adequate infrastructural services, supported by quality developers and affordable building materials. The third attribute focuses on creating an enabling housing market environment, supported by a stable macroeconomic framework (including housing data and analysis) and regulation, along with government support such as subsidies and guarantees (Clapham, 2018; Innes and Casabianca, 2021; World Bank, 1993). Similarly, Clapham (2018) claims that governments could exercise seven housing intervention approaches to address the housing issue: (i) regulation; (ii) direct provision; (iii) housing finance or subsidy; (iv) information system and guidance; (v) setting patterns of accountability; (vi) promoting discourse analysis; and (vii) nonintervention-decline to intervene in the market so that the market works freely.

The arguments of the writers described in the preceding paragraph are valid. However, the identified housing intervention approaches in Hawassa City are more skewed to supply-side market intervention, such as condominiums, cooperative housing and tender-based housing schemes in recent years. Conversely, the significant role of demand-side housing market interventions such as housing finance, mortgage facilities and promotion of rental markets was given negligible attention, despite the piecemeal achievement in condominium housing in Hawassa city. Regardless of these bottlenecks, however, similar studies show that there are possibilities to promote demand-side intervention, provided that the concerned stakeholders have the willingness and political commitment backed by land laws and regulatory frameworks. In the Indonesian city of Surakarta, for example, supply-side housing strategies such as public housing and housing subsidies were practiced, whereas on the demand side, relocation, slum upgrading and self-help were implemented to curb the housing shortage (Obermayr and Astuti, 2016).

Indeed, Hawassa city exhibits a positive story in regularizing informal settlements, in that it succeeded in regularizing over 17,000 informal houses, which are “market conforming.” Nonetheless, the recently initiated housing market options, such as tender-based housing and condominiums, seem to alienate the city’s low-income residents, given the skyrocketing prices. This has largely necessitated the intensification of the informal housing markets in the peri-urban because diversifying formal housing market options did not guarantee access and affordability of these options to the low-income, implying the need to evaluate “housing as a process.”

According to Regassa and Regassa (2015), 62% of residents in condominium housing in Hawassa city were classified as shelter poor, indicating that they spent more than 30% of their monthly income on housing expenses. Based on their study in Addis Ababa and Hawassa, Tiumelissan and Pankhurst (2013) revealed that condominium housing may not be a practical option for the very poor without subsidies, and they call for alternative housing approaches for these groups. However, Shitaye (2022) reported a contrasting finding, showing that 68% of the 219 tenants surveyed in Hawassa City spent 30% of their monthly income on rent. This divergence could be explained by variations in the quality of the houses and their spatial locations.

In the same vein, it was stipulated that housing pathways (social practices of households relating to housing over time and space) need to consider the relationship between structure and action (Clapham, 2002). And these pathways could be measured at the individual or community level (ibid.). Using the housing pathways approach, it was shown that both personal housing preferences and structural issues like local housing market conditions, infrastructure accessibility and landlord reluctance to rent refugees necessitated social exclusions in rural Germany (Weidinger and Kordel, 2023). Similarly, Aigner (2019) concludes that a large proportion of social housing does not necessarily indicate that newcomers have improved access to secure and affordable housing and emphasizes the significance of considering the actors involved in the housing search process.

In addition, it is understood that housing policy-making in the post-1990s encouraged enabling approaches (Croese et al., 2016). Conversely, the realities of housing market patterns in Hawassa City show divergence. More specifically, as shown in Table 8, the city does not seem to exercise enabling approaches to inclusive housing adequately, despite the global call for these housing attributes. Of course, households’ positive evaluation of the city on implementing the “regularization” policy is valid. Field data reveals that the city’s informal settlements are estimated to be 40,000, of which nearly half of these households were regularized, including Dato and Tilte kebeles.

In regards to policy, Article 40 of the Ethiopian Constitution establishes the “right to property”, with sub-article 3 specifying that “the right to ownership of rural and urban land, as well as all-natural resources, is exclusively vested in the State and the peoples of Ethiopia” (Federal Negarit Gazeta, 1995). To manage rural and urban lands, the government issued two distinct policies. Proclamation No. 456/2005 (article 5, sub-article 1) grants farmers, pastoralists and those engaged in agriculture the right to rural land at no cost, allowing them to retain their holdings (Federal Negarit Gazeta, 2005b). However, a significant challenge for these communities, particularly those near rapidly urbanizing areas, is the lack of permanent tenure security. To address this, the government introduced a separate policy under Proclamation No. 455/2005 (article 1) for expropriating rural land for public purposes, including provisions for compensation (Federal Negarit Gazeta, 2005a).

In subsequent years, the loopholes embedded in housing policy-making, such as expropriation based on compensation, induced adverse impacts, especially in rapidly urbanizing peri-urban areas of the country, as discussed in the upcoming paragraph. Likewise, the diverse formal housing modalities summarized in Figure 5 did not guarantee a viable housing market option, especially for low-income people, and this vacuum largely necessitated the informal housing markets, more specifically in peri-urban Hawassa. In this regard, similar studies reveal that the drivers of informal land acquisition and transformation in peri-urban Addis Ababa were rapid population growth and an inefficient formal land delivery system (Mersha et al., 2022). For the same authors, monetizing the land market largely necessitated the rush for informal land acquisition in peri-urban Addis Ababa. In addition, unfair compensation for expropriated land and the subsequent sense of tenure insecurity, speculation, nepotism, erroneous electoral promises and the lack of a formal land supply system perpetuated informal land transformation in peri-urban Addis Ababa (ibid.).

According to Baye et al. (2020), income inequality, skyrocketing prices of lease-based plots and inadequate compensation paid to peri-urban farmers during expropriation were major economic drivers for the growth of informal settlements in Woldia Town, Ethiopia. Similarly, based on their observation in Bahir Dar city, Ethiopia, Adam (2020) and Adigeh and Abebe (2023) have shown the adverse impact of land expropriation on farmers’ livelihoods, including their difficulty adapting to urban lifestyles (Ibid). Equally, Teklemariam and Cochrane (2021) investigated land rights and tenure security conditions of peri-urban farmers in Addis Ababa and Hawassa. The results show that peri-urban expansion and the resulting change in the tenure system induced a sense of tenure insecurity among peri-urban farmers. In Hawassa City, this sense of tenure insecurity largely necessitated the proliferation of informal settlements in the peri-urban, mainly orchestrated by visible and invisible actors, as discussed in the present study.

The discussion in section two justifies the significance of understanding social inclusion using its antidote, “social exclusion.” Social exclusion can be seen in three major strands: neoliberal, radical and transformational Beall (2002). (i) neoliberalists argue that social exclusion is an inevitable but unintentional adverse impact of the global economic system that could range from the national level to the social level and then to individuals; (ii) the radical position claims that social exclusions are equated with relative deprivation that could result in poverty and inequality; and (iii) transformational perspective justifies the role of social relations, which are rooted in the formal and informal institutions of a society resulting in social exclusions. Ethnic and space-based evidences of social exclusions have also been evidenced from Faisalabad-Pakistan and Johannesburg-South Africa (Beall, 2002).

Based on their studies on mixed-income neighborhood development in the USA, a group of authors identified three levels of social inclusion/exclusion: structural level (policies, systems and infrastructure examining the political, economic and social forces which actors and institutions control); relational level (social networks and interactions among actors in their neighborhood, including residents, representatives and other community stakeholders); and personal level (educational, health and economic status) (Bulger et al., 2021). When evaluated through the lens of exclusion literature discussed in the foregoing paragraphs, the identifiable housing market options in Hawassa City exhibit limitations of social inclusivity, as presented in Table 9. The available housing market options in Hawassa city could be categorized into three broad groups of exclusion:

1. government-administered housing market options exhibit structural/relational level exclusions and transformational approaches of exclusions;

2. tender-based housing and land lease are characterized by structural/personal level exclusions and neoliberal approaches of social exclusions; and

3. informal housing markets exemplify personal/relational level exclusions as well as neoliberal and transformational approaches of exclusions.

Proponents of the social market theory argue that markets should hold some small concerns that could operate in their interests, and this diversity needs to be balanced by market-conforming state intervention. They also argue for “managed markets,” and this management should neither be submissive to the market nor does it try to determine and dominate it. Instead, it would be found in the third-way-neither laissez faire nor disruptive market intervention. This theory, therefore, seeks state intervention in the market for adjustment (Kemeny, 1995). Nevertheless, the persistent challenge in Hawassa city is the lack of viable housing options, especially targeting the low-income. Of course, the city implemented recognizable housing market interventions to adjust the market. Examples could be regularizing informal settlements and diversifying land and housing market options (cooperative housing and condominiums). Indeed, diversifying housing market options has faced the challenges of accessibility, affordability and procedural justice over the years.

Estimates vary across countries, but the value of land comprises the lion’s share of house ownership (Asfour, 2017). In this regard, the government should play its role of “market adjustment” through innovative land management approaches such as land value capture and inclusionary zoning, especially for low-income city residents (Nzau and Trillo, 2020). The challenge for promoting this approach is the fact that neoliberalism favors the market-value of urban land over its use-value and necessitates a capitalist mode of housing production and building a modern city image (Baffoe et al., 2020; Melo, 2016; Mutinda, 2021; Ramsamy, 1995). Neoliberalism witnessed the penetration of more and more actors into the formal and informal housing markets, though adversely impacting it through speculation and rapid commercialization (ibid.). Regrettably, the potential of public–private partnerships through inclusionary zoning remains underused, despite being encouraged by neoliberal principles.

This study aims to investigate the realities of housing markets in Hawassa City, Ethiopia, and interrogate whether these markets foster social inclusion for households at the lower end of the market in the post-1990s. According to the results, property acquisition in the study area is largely linked to the socioeconomic (income and employment) and demographic characteristics of the respondents (age, sex, marital status and family making). Over 75% of property owners fall between 26 and 50 years of age, underscoring the key role of the productive age group in property ownership. Regarding sex composition, nearly two-thirds were found to be male, implicating gender disparity in property ownership in the study area. Likewise, nearly 70% of the property owners were found to be married, of which 95% of these households exhibit family members ranging from four to six (57%) and one to three (37%). The majority of households (78%) in the sampled kebeles were found to be employed. Despite the challenges of obtaining household income accurately, the vast majority (65%) fall well above the World Bank’s low-income category, implying those with higher income inhabit the sampled neighborhoods.

The findings reveal that the housing market in this city comprises both formal and informal patterns, primarily shaped by policy frameworks, market dynamics and key actors. These housing market patterns exhibit a blend of “market-conforming” and “market-disturbing.” For instance, initiatives promoting lease-based housing from the 1990s to 2000s, diversifying housing options between 2005 and 2010, and regularizing informal settlements are examples of “market-conforming” interventions, despite the embedded challenges related to accessibility, affordability and procedural transparency. On the other hand, the lack of oversight on emerging actors in peri-urban housing markets, a shift to tender-based land supply, the lack of promoting rental markets in the post-1990s and the absence of public–private partnerships for inclusionary housing represent “market-disturbing.”

The results demonstrate that the diversification of formal housing options did not guarantee housing access, particularly for low-income groups in Hawassa. Housing markets in Hawassa city have been characterized by exclusions that arise from both structural and neoliberal factors predominantly. The practice of formal housing intervention approaches often neglects the needs of lower-income residents, leading to the rapid proliferation of informal housing markets over the years. The city’s hands-off approach in managing peri-urban areas obstructed their effective utilization, exposing these areas to speculative actors that adversely impacted the informal markets as well.

The findings on the rapid commercialization of formal housing and the resulting exclusion of low-income residents, as well as the rapid growth of informal housing markets, align with other studies in rapidly urbanizing Ethiopian cities, where land market monetization has prompted increased informal land acquisition (Mersha et al., 2022; Weldegebriel et al., 2022; Baye et al., 2020). Similarly, a study from Tehran highlights how the commodification of housing contributes to policy failures in providing adequate housing (Zarghamfard et al., 2019). Based on the results from Hawassa City, therefore, this study challenges the assumption that informal housing markets can sustainably provide residential plots for lower-income households in rapidly urbanizing contexts (Adam, 2014; Adam, 2020). While low-income families are often the primary actors seeking informal plots in peri-urban areas, recent trends in Hawassa, such as gentrification, have made housing markets increasingly challenging for these groups. Nevertheless, the findings suggest that peri-urban Hawassa is not solely a high-income area, as long as low-income families are willing to travel significant distances.

Indeed, fostering homeownership among low-income urban residents, especially in rapidly urbanizing cities, remained a formidable challenge in sub-Saharan Africa. Similarly, Hawassa is recognized as a major urban center in Southern Ethiopia, holding the status of a regiopolis-a designation for secondary cities experiencing rapid urbanization and socioeconomic growth. In this city, land and housing markets have become increasingly competitive, particularly for households at the lower end of the market. According to the results, housing market patterns appear to lack sufficient focus on social inclusivity for low-income groups, highlighting the need to reassess housing policies aimed at these groups.

Therefore, a comprehensive understanding of housing markets and their attributes (demand, supply, prices, access to land and affordability), achieved through regular assessments of both formal and informal markets and the establishment of land and housing market databases, is highly significant. In this regard, the government should seek periodic housing/land market assessments to promote a socially inclusive housing market system. For example, the consideration of subsidized rental housing should be owed a priority within policy discussions to promote social inclusion and equitable urban development. Nonetheless, promoting socially inclusive housing and urban development necessitates (i) political commitment; (ii) an administration system that could monitor housing/land market trends backed by regular market assessments; (iii) a task force that would be able to identify housing market actors with speculative goals; and (iv) building a housing market system that could balance the vested interests of the free-market actors vis-à-vis the low-income majority. In addition, it is important to understand the adverse impacts of external factors (globalization and the neoliberal market) on local land/housing markets.

Of course, recent studies identified design-based solutions to low-income housing, such as inclusionary zoning (Calavita and Mallach, 2010; Floryan, 2010; Jacobus, 2015; UN-HABITAT, 2021), mass customization approaches (Anderson, 2009; Daud et al., 2012; Duarte, 2005; Lindhard, 2019; Vecchia and Kolarevic, 2020) and core-housing schemes (Jones and Stead, 2020). Nonetheless, implementing these strategies necessitates leveraging financial resources through public–private partnerships that might create mutually beneficial approaches centered on land management and incentives. For instance, in South Africa, housing finance options such as fixed interest rates and extended mortgage periods have been promoted (Marais and Cloete, 2017). Indeed, the search for innovative financial solutions must also consider the role of state intervention in mitigating market distortions caused by private sector interests (Taruvinga and Mooya, 2018).

Based on the findings, the present study suggests further research on the ethnographic understanding of the housing realities of low-income households, the analysis of visible and invisible actors in housing markets and the assessment of adverse impacts on peri-urban farmers. Moreover, formal and informal rental housing markets require further investigation.

The authors would like to acknowledge the German Academic Exchange Program (DAAD) for funding the student’s PhD under the In-region Scholarship scheme. The staff of Ardhi University School of Spatial Planning and Institute of Human Settlement Studies are acknowledged for their encouragement and constructive comments during the initial stage of this manuscript. Interviewed households, key informants and officers of the sampled city are highly acknowledged for their cooperation.

Funding: No funding was received for conducting this study.

Author contributions: Mr. Tesfaye Gebeyehu Admasu conceived and developed the idea for this scientific case, conducted a literature review, collected field data and drafted the manuscript. John Modestus Lupala and Fredrick Bwire Magina contributed by helping to frame the initial idea, selecting relevant literature, proofreading and refining the manuscript.

Statements and declarations: The authors have no conflict of interest to disclose.

Figure A1