The Demand for and Impacts of Government Housing: Evidence from Ethiopian Lotteries

The case for government supply of housing hinges on two key questions: do intended beneficiaries value it more than the cost to the state of providing it, and does relocation to remote housing sites impose unintended costs for movers or society? I study a large-scale lottery in Addis Ababa, Ethiopia, which randomly assigned slum residents to housing on the city’s outskirts. Leveraging eight years of low-attrition panel survey data alongside market rents, construction costs, and land values, I find that willingness to pay exceeds per-unit production costs for a substantial share of slum households. There is no evidence that housing negatively affects labour market outcomes, education, or household consumption—suggesting that there are neither unanticipated drawbacks for movers nor broader negative externalities. Multiple surveys allow me to track how households adjust to moves and how new mega-neighbourhoods evolve. Although social networks and neighbourhood amenities initially deteriorate for winners, they significantly improve after 8 years. The results differ significantly by randomly assigned lo-cation, implying a weaker case for centrally located housing given its higher cost relative to benefits.