Magister Artium - MA / As the title indicates, this research is concerned about the displacement and resettlement situation in Arada sub-city, Addis Ababa. The City Administration is implementing an urban redevelopment program to improve the poor infrastructural facilities, service provision,sewerage, sanitation, housing quality and supply. The implementation of these projects displaces households from their residential area exposing them to various impoverishment risks. The Impoverishment Risks and Reconstruction Model (Cernea, 2000), which is a tool used for managing risk identification, prevention and mitigation, stipulates displaced people could encounter one or more of the eight potential risks of landlessness, joblessness, homelessness, social disarticulation, marginalization, increased morbidity and mortality, food insecurity and loss of access to common property resources. Thus many development practitioners advocate the importance of democratization of the displacement and resettlement processes to reduce potential risks.The purpose of the research is to investigate how the displacement and resettlement process has been undertaken and to describe the impoverishment risks displaced households faced.This will contribute to the improvement of the program and other similar programs in the future as it is implemented with short, medium and long term plans. Thus it will indicate more constructive ways of implementing the displacement process that reduces risks by informing concerned agencies of more sustainable ways to configure and implement their work.Academically, the research will test the feasibility of the risk variables described by the IRR model to an inner area of urban context.Therefore, the research will answer the following questions: What impoverishment risks do the households face due to displacement and resettlement to the temporary and condominium houses? What coping mechanisms do households employ to adapt to the new circumstances? Was there access to information? Was the displacement and resettlement process participatory? The research noted that the displaced residents are exposed to impoverishment risks of homelessness, marginalization, lack of services, health hazard and economic impacts.The construction of the Condo house is of a much better standard than the temporary shelters.As a result the transfer of households to the Condo house has relieved them from the risks they had faced at the temporary shelter. However, the design of the Condo building, omission of basic facilities like a customary kitchen and the adopted communal neighborhood regulations imposes new type of risks such as the discontinuation of informal business and unsuitability to daily and cultural practices. The discontinuation of informal business both at the temporary shelter and later at the Condo house severely affected household income generation potential of poor households. These households are afraid that they may end up homeless as they are unable to pay the much more expensive house rental fee.The research concludes the impoverishment risks that displaced households faced could be mitigated by making the displacement and resettlement process participatory, transparent and by coordinating the activities of the implementing agencies. Moreover, this can be achieved by curbing the “demolish and relocate” approach used in the displacement and resettlement process to “relocate and demolish”. This will help to avoid housing the displaced in temporary shelters and associated governance shortcomings from the process which occurred due to the “demolish and relocate” approach.