Today, the increasing population in urban areas is forcing government agencies, builders and investors to focus on building real estate housings. However, the affordability of these housings is becoming a concern. This research examines the affordability of real estate housings in Bahir Dar to the residents. The study utilizes household income survey; conducts real estate market assessment; explores town housing policy and land tenure system; values financial accessibility; investigates the housing demand; compares and contrasts the experience of international housing policy and land tenure system with local system. The study develops a conceptual housing policy framework to address the housing affordability challenge. Four common internationally accepted approaches were used to measure the affordability of real estate housings. Based on the study a median household has 4,500 Birr monthly income. Results show that only 20% of residents have their own housing unit, while the majorities are living on rent and/or other means. Price of a prevailing standard real estate housing unit is approximately 2,200,000 Birr. Presently, only 14% of real estates are owned by local residents from more than 600 real estate houses sold in the city. This study can help the Municipal Government in identifying possible groups who need housing subsidy and can take a lesson to improve the housing policy. In addition, real estate investors can use it in improving their market strategies. Individuals can also benefit from the research for decision-making when investing in real estates.