Countries across the globe have public administrations that intervene in the housing sector in an attempt to provide quality and affordable houses where the private sector has failed to do so. The failure of some people to procure housing in certain areas may have an effect greater than that felt by the individual as the lack of housing in an area may prevent the optimal matching of qualified employees with the labour required by employers. Structural changes in the economy where new industries emerge and geographical prominence shifts, causing housing to become unaffordable, often create the need for some kind of public involvement in order to supply a safety net for those persons adversely affected by a dynamic economy.

However, the Ethiopian manifestation of this public service, the Rented House Agency CRHA), is failing to provide effective services, both according to its stated aims and to the economic justifications for the existence of such bodies. Furthermore, in an attempt to bring the Agency's holdings into an incentive oriented system, a Proclamation was issued in October 2005 ordering the privatisation of properties under RHA management. This well-intentioned move has yet to be enacted as the Agency is still managing or mismanaging some 20,000 units.

Moreover, with the recent real estate boom, the time is ripe for privatisation as prices for landowners are favourable at present and thus any responsive manager would realise the opportunity for profit; in this case a boost to the public coffers. It does not stop there though, as the incentive a private owner has to improve upon the premises he owns is far greater than the current system of bureaucracy laden inefficiency.

A visit to one of the RHA administered properties may be shocking as dilapidated buildings requiring renovations seem to be the norm rather than the exception. Often, residents themselves are willing to make the improvements that any responsible landlord would have done as part of his duty. However, the bureaucratic process hinders or occasionally blocks the advance of even simple projects as the required applications go unanswered or the response is delayed for even the simplest request. In the case of a private company, these ideas would be considered as value generating investments improving upon the asset stock of the company. In the case of a government agency, they are viewed as added work with the absence of the accompanying benefits of revenue generation that would accrue to a private entity.

Currently, the Agency is earning annual revenue close to 150 million Br through its rental units in Addis Abeba and Dire Dawa. While this may sound like a profitable enterprise for the government, it does not take into account a variety of cost factors, such as administrative costs, nor the opportunity cost of not selling off the properties during a hot real estate market.

In the last few years though, it has seemed as if the Agency has spent more time and effort in court cases with such high profile opponents as the Central Bank of Ethiopia (CBE), Eritrean Embassy and the Ministry of National Defence (MoND), as well as another 1,500 or so individuals it has had to face in court. No doubt the cost incurred by such drawn out battles is steep, and in some cases could have been avoided through proper management.

The sheer number of units the Agency administers reflects that its mandate goes well beyond providing low-income housing. The placement and architectural design of some of the properties as well indicate a higher-class pool of tenants. There is no reason that buildings such as these should not be sold to private investors who would then have the profit incentives to improve upon them. In these cases the affordable housing provision justification is absent and the need for swift sale glaring.

How long can the Agency sit on these properties hoping that a seller's market is perpetuated until it chooses to act on the privatisation proclamation? The benefits of privatising, giving an immediate cash flow, and then generating long-term income through taxation of the profit driven private owners as a source of income instead of direct management, is well accounted for in economic theory. One of the most beneficial aspects of a free market is that assets tend to flow to those who value them most and thus who are driven to make the efficiency enhancing investments to turn a profit. This philosophy stands in direct contrast to a government agency whose motive is often self-perpetuation rather than economics.

In an effort to beautify the city for the Millennium the government has considered many facets of city planning. One that seems to have been quite elusive, however, is the idea that RHA properties often exist as blemishes in otherwise attractive areas. In such cases it is rare that the building is providing a low income option, but rather is sitting, underutilised, when a private investor surely could conjure up a more efficient use of the space.

The sense of responsibility generated from private ownership of profits would do wonders for many of the crippled properties if the Agency were to quickly follow the privatisation proclamation. With this move, income would be generated and another inefficient government Agency could be dissolved.

One of the stated missions of RHA is to "improve the quality of houses through efficient maintenance and effective repair of houses." Since its creation in 1975 by the Derg regime, this task has been neglected. The current manifestation of this inadequacy is just another avoidable detriment to the capital.

House rent is a pressing problem facing many Addis Abeba city residents due in part to the recent inflation that seems to not have been accompanied by a rise in salaries in many cases. This gap, the one area where government intervention in the housing market has economic justification, is not being addressed by RHA and is consequently putting strain on many peoples' budgets.

Current rental and purchase prices are rising quickly in a city captured by Millennium fervour, hoping that Diaspora and other influxes to the capital will open their deep pockets. The growing international community in Addis Abeba does not bide well for middle and lower class residents searching for housing.

If RHA is not aiding the people it is intended to, then there is no justification for its lagging on privatisation directives.

Even if only partial but strategic privatisation were to take place, the Agency could focus its attention on providing cheap housing and thus do more of a service. This would mean selling off the higher income and more expensive units, bringing attention to making the necessary renovations and providing decent services to the remaining tenants.

Although RHA's failures may not directly impact everyone in the capital, it is unclear that the contribution it makes is positive, both economically and aesthetically. Moreover, it is representative of the dangers involved in bolstering inefficient government programmes that create an atmosphere of normalcy surrounding profound inadequacy. The deficiency in incentives and the resulting lack of effort on the part of RHA are detrimental to a country attempting to change. The rationale is clear for the privatisation of Agency holdings. it is now incumbent on the Agency to follow through and bring greater competition to the housing market.