The question of shelter has become more crucial with the rapid urbanization we seerntoday. Developing countries such as Ethiopia have paid too little attention to the shelterrnproblem and how deeply rooted it is in matters of urbanization. The existing housingrnstock plays the major role in housing provision in these developing countries.rnConsequently what is to be done with this existing housing stock is an overridingrnconcern of urban renewal efforts.rnVarious urban renewal approaches exist that have different effects on low incomernhousing, such as slum clearance and resettlement, rehabilitation and conservation,rnslum and squatter upgrading. A study into the very nature of low income housingrnpoints in the direction of the roots of the problem. There are various concepts as to thernnature of the inner city such as the idea of the compact city, diversity of use and equity.rnBy taking a case study area within the city of Addis Ababa the thesis explores thernnature and prospect of inner city low income housing in the context of the city. Therernhas been significant population growth; internal as well as external in Addis Ababa.rnThere have been changes of an economic, social and political nature that have affectedrnthe nature of inner city low income housing. Various aspects affect the condition of lowrnincome housing within the inner city such as the housing policy, forms of landrnownership, availability of financing, land values, regulations, poverty and rapidrnurbanization.rnThe thesis concludes that for a more effective and sustainable urban renewal approach,rnthe potentials of low income settlements must become an integral part of localrndevelopment plans. Our choice for the location of local plans should be based on innerrncity wide assessment of needs and potentials. At a more detailed level, the condition ofrnthe dwelling units has made improvements difficult for these settlements. The lack ofrnsecurity of tenure has limited the improvement drives of the people. There is a seriousrnproblem of poverty and there is a lack of secure employment. This has led to therninability for most of these settlers to get loans from banks. However, even with thernevident dilapidated condition of the settlement, the residents prefer to stay. Cooperatingrnwith community based organizations will have far reaching effects in areas such asrnproviding security for housing finance and community participation