a policy guide to rental housing in developing countries. quick policy guide series. volume 1

7/30/2019 A Policy Guide to Rental Housing in Developing Countries. Quick Policy Guide Series. Volume 1

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Quick Policy Guide Series - Volume 1

RENTAL HOUSINGIN DEVELOPING COUNTRIES

A POLICY GUIDE TO


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Quick Housing Policy Guides Series

As the scale of the housing challenge in the developing world increases at an alarming pace, theneed for real action to address affordable housing supply is becoming increasingly critical. To dealwith this challenge governments and local authorities need up-to-date knowledge on global housingpolicy approaches in order to formulate effective policy instruments. Therefore, the objective ofthe Quick Policy Guides series is to present, in an easy-to-read format, concepts, policy approaches,tools, and recommendations to facilitate policy development for addressing the growing housingchallenge. The ongoing series is coordinated and produced by the Housing Policy Section of UN-

HABITAT and to date the following volumes have been published:

Volume 1:A Policy Guide to Rental Housing in Developing Countries

Volume 2:Enabling Shelter Strategies: Design and Implementation Guide for Policymakers


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RENTAL HOUSINGIN DEVELOPING COUNTRIES

A POLICY GUIDE TO

Quick Policy Guide Series - Volume 1


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A POLICY GUIDE TO RENTAL HOUSING IN DEVELOPING COUNTRIES

ACkNOwLEDGmENTS

Principal Author: Alan GilbertTea Leader: Claudio Acioly Jr.Contributors: Clarissa Augustinus, Remy Sietchiping, Ulrik Westman,

Rasmus Precht, Matthew French, Christophe Lalande andClaudio Acioly Jr.

Prograe Assistant: Helen MusokeEnglish Editor: Matthew French and Roman Rollnik

Design and Layout: Gideon MureithiFinancial Contribution: Global Land Tool Network (GLTN)Printing: UNON, Publishing Services Section, Nairobi, ISO

14001:2004-certifed.

Disclaier

The designations employed and the presentation o the material in this guide do not implythe expression o any opinion whatsoever on the part o the Secretariat o the UnitedNations concerning the legal status o any country, territory, city or area o its authorities,

or concerning the delimitation o its rontiers or boundaries.

Views expressed in this publication do not necessarily reect those o the United NationsHuman Settlements Programme, the United Nations, or its Member States.

Excerpts may be reproduced without authorisation, on condition that the source isindicated.

HS Nuber: HS/024/11EISBN nuber (series): 978-92-1-132034-3

ISBN nuber (Volue): 978-92-1-132327-6

An electronic version o this publication is available or download rom the UN-HABITATweb-site at http://www.unhabitat.org, rom our regional ofces, or directly rom:

United Nations Human Settlements Programme (UN-HABITAT),P.O Box 30030,Nairobi 00100,KENYA

[email protected]


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In cities and towns around the worlda signicant proportion o residentsare tenants. For various reasonsmillions o people in developing and

developed countries rent, rather than own,the housing unit in which they dwell. Forinstance, low-income households whocannot presently meet the expense ohome ownership, recent urban migrants

who preer centrally located rentalaccommodation that gives them fexibility,young people who value mobility, andindividuals who choose to spend theirmoney on other priorities rather thanhome ownership are only a ew o thecharacteristics and motivations o tenants.

For millions o people rental housingprovides a signicant source o income.

While there are commercial, public-sector,social, and employer rental propertylandlords, in cities o the developing worldthe largest group o landlords are thesmall-scale landlords who supply rentalaccommodation, oten as part o their sel-built house, to generate a regular sourceo income and provide nancial securityduring old age.

Rental housing has remained a neglectedarea o national housing policy whichhas instead ocused, oten exclusively,on promoting home ownership.Consequently, rental housing has beenoverlooked with very ew governmentsimplementing any kind o policy to helpdevelop or regulate this orm o housing.

PREFACE

Yet rental housing is a key component oa well-unctioning housing market. Whilerenting is not the panacea to solving thehousing challenge in the developingworld, it does constitute a signicant andvital housing tenure option that should bepromoted alongside, not in competitionto, home ownership.

is guide clearly illustrates the need to placerental housing on the urban housing agenda.Policies must be developed to harness theopportunities or rental housing to contributeto making better cities. In order to improvenational and local housing policies whichrecognise and acilitate the developmento rental housing, the many myths andstereotypes surrounding rental housing needto be debunked. is guide is thereore

an important contribution to succinctlyoutlining the value o rental housingand its role in creating well unctioninghousing markets that can improve the livingconditions or all sectors o society.

I am convinced that this guide will helphousing practitioners, policy makers,academicians and housing rights activists intheir work to promote adequate housing orall. I wish to express my appreciation andgratitude to all those who have contributedto the preparation o this guide.

Dr Joan ClosExecutive DirectorUnited Nations Human SettlementsProgramme (UN-HABITAT)


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CONTENTS

Preace by Executive Director o UN-HABITAT iii

1. RENTAL HOUSING A NEGLECTED POLICY AREA OPTION 11.1 Home to hundreds o millions 11.2 Government neglect o rental housing 1

2. CHARACTERISTICS OF RENTAL HOUSING 52.1 Rental housing takes many orms 52.2 How many people rent? 52.3 Variations in housing tenure within countries 5

3. DEmAND AND SUPPLY 93.1 Key actors: constraints in tenure choice 93.2 THE SUPPLY SIDE - Who are the landlords? 10

3.2.1 Five kinds o landlord 113.2.2 e decline o public rental housing 123.2.3 e rise o the small landlord 133.2.4 Landlords and landladies 13

3.3 THE DEMAND SIDE Who are the tenants? 143.3.1 Reasons or renting 14

3.3.2 Tenants main characteristics 14

4. kEY ISSUES FOR POLICYmAkERS TO CONSIDER 194.1 Not everyone preers homeownership 194.2 Renting is not inequitable 194.3 Landlord-tenant relations 204.4 Eviction o tenants - when it is wrong and when it is right 214.5 Rental housing allows or mobility 224.6 Rent levels are not too high poverty levels are 234.7 Quality o rental housing 24

4.8 One persons rent is anothers income 24

5. POLICY GUIDELINES 275.1 Put rental housing on the urban housing agenda 275.2 Stop promising universal homeownership 275.3 Avoid rent controls they rarely work well 285.4 Provide subsidies or low-income tenants 295.5 Provide subsidies and nance or private landlords o

low-income rental housing 295.6 Facilitate settlement upgrading and the improvement o existing low

quality rental housing 31


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5.7 Promote security o tenure or tenants 32

5.8 Develop and promote mechanisms or written contracts, conciliationand arbitration 33

5.9 Promote rental housing in aid agency and development bank assistanceprojects 34

6. EPILOGUE 37

7. REFERENCES AND BIBLIOGRAPHY 39


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Renting is common in the villas o Caracas, Venezuela.Photo UN-HABITAT/Claudio Acioly Jr.


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CHAPTER

1.1. Hoe to hundreds of illions

Hundreds o millions o tenants live in thecities o Arica, Asia and Latin America although we are uncertain o the precisenumbers. Newly arrived migrants, students,people who have recently changed their jobor got divorced or separated may all relyat least temporarily on rental housing. Forothers, renting is a semi-permanent statebecause ownership, whether in the ormalor the inormal sector, is unaordable .

Rental housing also provides many peoplewith a major source o income. While thereare undoubtedly some rich landlords, mostprivate landlords have incomes similarto those o their tenants and many arethemselves poor. e majority o landlords

are not the villains they are so otenportrayed but ordinary people trying tocope with the diculties o lie. For manyretired people the rent is oten their onlysource o income.

1.2. Governent neglect of rentalhousing

In spite o the act that many people

in the developing world live in rentalaccommodation, ew governments have

ormulated any kind o policy to helpdevelop or regulate this orm o housing.is is surprising since ew would deny thata healthy rental sector should be an integralcomponent o a well-unctioning housingsystem. Instead, the last ew decades haveseen most governments actively promotinghomeownership. ey have encouragedit through a combination o improvinghousing nance systems, to make

ownership more accessible, by giving taxrelie to both owners and builders, byproviding transport and inrastructure tonew suburbs, and generally by constructingan ideology avourable to home ownership.ey have avoured this orm o tenurebecause they believe that building homesis a good way to create jobs, stimulate theeconomy and to oster social and politicalstability. In the process governments have

persuaded millions to become owners.

While ownership has been encouraged,the rental sector has been neglected, evendisparaged. Most landlords exploit poor andvulnerable tenants, only too happy to chargehigh rents or crowded and sub-standardhousing. Eviction is common and rentingis perceived to oer tenants little in the

way o security. Rental housing, particularlyat the lower end o the market, has oten

01RENTAL HOUSING A NEGLECTED POLICYAREA OPTION


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been seen as being shrouded in illegalityand as contributing to inner-city decay. Inshort, whereas homeownership is a sourceo pride, happiness and stability, rentingprovides unsavoury accommodation or the

unsuccessul. However, these are myths thatshould be debunked.

Renting can create social problems but canalso bring benets. Housing tenants increasepopulation densities, reducing urbansprawl and cutting some o the demand

or expensive inrastructure in peri-urbanareas. An adequate supply o reasonablypriced rental accommodation is also likelyto reduce the temptation or poor amiliesto mount land invasions or to buy plots in

illegal subdivisions. A higher incidence orenting is also likely to ease the organisationo public transport given that more peopleare concentrated into a small area and mosttenants choose to live near to bus or trainroutes.

1. Everyone ons in rich countries. There is little relationship between acountrys level o economic development and the incidence o homeownershipand tenancy. Homeownership is actually lower in many wealthy Europeancountries, e.g. Switzerland, where rental markets have developed to satisy theneeds o any income group that preers to rent rather than to own.

2. Everyone ants to be a hoeoner. All over the world, people arebombarded with the message that homeownership is the best and indeed

the only sensible choice o tenure. Yes, there are big advantages rom owningones own home, but renting also oers its own benefts such as mobility,exibility, and reduced fnancial commitments. Yet, many households thatcould aord to own choose not to.

3. Hoeonership offers people a better life. Ownership is oten presentedas a superior tenure to renting. People who own are more responsible citizenswith closer links to their community and neighbourhood. But homeownershiphas its problems: maintenance costs have to be borne by the owner householdalone, and ailure to pay the monthly mortgage payment puts tenure securityat risk. O course, most homeowners were once tenants and perhaps at times

in their lives renting oered them what they needed.4. Nobody invests in rental housing. Investing in rental housing may not be

as attractive to either businesses or governments as it once was. Nevertheless,there are ew cities where the rental housing stock has not increased in size.The paradox is explained by the prolieration o small units produced by largenumbers o small-scale landlords.

5. Renting is inequitable. In the days when most landlords were rich and mosttenants were poor, the rental housing market was indeed inequitable. Today,however, rich landlords tend to rent to rich tenants, and poor landlords to poor

Eight coon yths about rental housing

Box 1


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CHAPTER 1

tenants. The landlord-tenant relationship is oten one o mutual beneft anddependence. The real gul in cities is between rich owners and the poor whocan never aord to buy.

6. Governents should prohibit poor quality rental housing. Many tenantsin Arican, Asian and Latin American cities live in crowded, under-servicedand dilapidated housing, because that is all they can aord. I governmentsrespond by demolishing this housing, it only makes housing problems worseand leads to even greater overcrowding elsewhere. A much better approach isto fnd ways to improve the quality o the existing shelter and to encourage theconstruction o more rental housing.

7. mobility is bad for you. Poor people oten need to move home as their jobsare insecure and they need to go where they can make a living. For some,mobility means survival and the exibility that rental housing oers is highlydesirable.

8. Hoeonership generates political stability. In the USA, tenants werenot allowed to vote until 1860, because home-owners were considered tobe better citizens, better neighbours and even better persons. This kind othinking is still widespread among policymakers today, who see tenants only astransient, poor, unsettled and undesirable characters.

Source: UN-HABITAT 2003

A low-income rental unit in Brazilia, Brazil.Photo Alan Gilbert


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Rental units being built as rootop in Lima, Peru.Photo UN-HABITAT/Claudio Acioly Jr.


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CHAPTER

02CHARACTERISTICS OF RENTAL HOUSING2.1. Rental housing taes

any fors

Whatever the advantages that ownershipmay or may not bring, hundreds omillions o people still rent their homes.Naturally, the orm that renting takes ishighly variable; the rental housing rangesrom penthouses to slums, is let by manydierent kinds o landlord, is privatelyand publicly owned and oers people

everything rom excellent to appallingaccommodation.

At the bottom end o the spectrum, rentalhousing is diverse. It comes in the orm ocheap rental rooms in small owner-managedapartment buildings, fats o various sizesin subsidized public housing blocks, roomsbuilt in sel-help structures or partitionedrooms within dilapidated older buildings.

It can be a room in a tenement or a shackbuilt behind the owners house. It can evenbe space shared with strangers, maybe withonly the right to store ones belongings andsleep there or part o the day.

2.2. Ho any people rent?

In some cities the majority o thepopulation rent, elsewhere it is a minority.Unortunately, rental statistics are otenconusing because ew countries distinguish

accurately between rental housing and other

orms o non-ownership, such as sharing orborrowing someones home. Sometimes thedistinction between renting and sharing ishard to make, especially in countries whereextended amily households are common.Relatives and grown-up children,sometimes with amilies o their own, livein the amily home. Payment can takeseveral orms; sometimes they pay rent,sometimes they contribute to household

costs and sometimes they pay nothing atall.

2.3. Variations in housing tenureithin countries

National rental statistics are an inaccurateguide to local situations because there is somuch variation within countries, between

urban and rural areas and between onecity and another. Renting is generally anurban tenure because in the countrysidepeople own land and a sel-built dwelling,have traditional rights to a home or havetemporary or permanent access to housingthrough their employer. Ownership orree access to housing in rural areas isseldom less than 80 per cent. ere isoten considerable variation. One element

in the variation between cities is the sizeo the city. In general, metropolitan cities


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Country Owned (%) Rented (%) City Owned (%) Rented (%)

Germany 40 60 Berlin 11 89

e Netherlands 53 47 Rotterdam 26 49

USA 66 34 New York 45 55

UK 69 31 London 58 41

Colombia 54 31 Bogot 46 43

Brazil 74 25 So Paulo 70 20

South Arica 77 22 Johannesburg 55 42

Chile 73 20 Santiago 73 21

Bolivia 60 18 La Paz/El Alto 55 23

ailand 87 13 Bangkok 54 41

Mexico 81 11 Mexico City 76 16

Source: UN-HABITAT (2003: 9-11) and recent census gures from Colombia and Mexico.

Where percentages do not add to 100%, it is because the authorities have calculatedother kinds o non-ownership separately.

Housing tenure in selected countries and in their largest city

Rental units under construction in inormal settlements in the periphery o Lima, Peru. Photo Alan Gilbert


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CHAPTER 2

have higher levels o renting than smallercities. is is true in China, Colombia,Indonesia, the Philippines and developedcountries such as the United States andmost countries in Western Europe. e

explanation is because metropolitan areastend to have higher land and propertyprices. However, city size is only one actor

in a much more complicated equation.e proportion o renters in any city alsodepends on the nature o the local landmarket, the proportion o recent migrants,the amount o public employment, and

topography that determines availability oaordable, well located land suitable orresidential purposes.

Tenure variations ithin countries

Colobia: While nationally 31 per cent o the population rented in 2005, thefgure was 37 per cent in urban areas compared with a mere 12 per cent in the

countryside (DANE, 2007).

China: Although around nearly hal o urban households in 1996 owned theirhomes and another 46 per cent rented, there were 18 cities with a rate ohomeownership o less than 25 per cent and also 12 cities with more than 76 percent (Huang and Clark 2002: 16).

Brazil: In major cities the variation in 2000 was less marked but still considerable,varying rom a low o 11 per cent in Manaus to a high o 24 per cent in theFederal District (UNCHS, 2003: 18).

South korea: In 2000, 80 per cent o rural households owned their homecompared with only 50 per cent o urban households (Park, 2007).

Box 2:


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Renting rooms is common in the barriadas o Lima.Photo UN-HABITAT


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CHAPTER

3.1. key factors: constraints intenure choice

A healthy housing market should provide awide range o shelter options at aordableprices. Unortunately, in developing countriesmost housing markets tend to avour oneorm o tenure over another and the poorrarely ace much o a choice. Households are

oten orced to choose between a very limitedrange o unsatisactory options.

In practice, every household is constrainedin its tenure choice. e principalconstraint is their income but according tocircumstance it can also be race, religion,amily size and most importantly thestructure o the local land and housing

03DEMAND AND SUPPLY

Box 3:

The ease of access to land inuences the incidence of renting

The experience o Bogot, Colobia shows how in the absence o land invasions manypoor households had little option but to rent or share. Bogota expanded rapidly in the1950s and 1960s and new land or housing was required or the masses o new migrants.Unlike other Latin American cities, like Lima (Peru), land on the periphery o the city wasvaluable because it could be used or agriculture. It also belonged to a limited number opowerul landowners who did all they could to protect it rom land invasions. The local

answer that emerged was the pirate urbanization. Owners with land close to areas olow-income settlement sold sections o their land to entrepreneurs who subdivided itand sold small plots to poor amilies. The plots were cheap because the settlement hadonly minimal services and because the subdivision lacked planning permission. Clientsmaking a ten per cent deposit were oered mortgages in the orm o a our-year loan.While this solution allowed many poor people to acquire land, the really poor did nothave the savings to put down the deposit. New households, thereore, had the option tolive with their amily or, i they had no amily or wanted to live independently, to rent. Forthis reason a high proportion o poor households in Bogot have always lived in rentedaccommodation, and continue to do so today.

Sources: Gilbert (1981), Losada and Gmez (1976) and Vernez (1973).


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market. Dierent cities oer dierent setso choices, and the proportion o rentersdiers accordingly:

In some cities (see box 3), it is possibleto invade land but in others it is not.Whether or not ree land is availablehelps determine whether some amilieswho would be tenants in one city willtake the inormal ownership option inanother.

Family circumstances are alsoimportant. Some cities are expandingslowly, the housing stock is older andmost people have amily in the city.In such cities, sharing a home oersa real alternative. Other cities areexpanding ast and many o the newmigrants lack a amily support systemand do not have the option to share arelatives home.

Even the choice acing middle-income households is limited by thestructure o the housing market andthe extent to which housing nanceis available. I new or used housing is

very expensive and mortgage nanceis scarce, amilies that would like tobuy or build a home will nd thisimpossible.

3.2. THE SUPPLY SIDE - who arethe landlords?

ere are many kinds o landlord: some arerich while others are poor; many operate in

the ormal sector and even more inormally;both companies and governments may rentout property. Understanding the diversity osupply is a critical element in understandinghow best to devise policy and infuence thehousing situation.

Box 4:

Patterns of residential tenure soeties change rapidly

Governments prooundly inuence housing tenure directly through housing policy andindirectly through wider social programmes. This is demonstrated by the changes thathave taken place over the last sixty years in urban areas, as the ollowing examples show.

Urban China: Change has been particularly rapid in countries that have undamentallychanged their whole development path: Housing tenure in urban China hasexperienced a zig-zag path in the past 50 years because o dramatic changes in ideologyand political economy. It has changed rom mostly private rental housing in the early1950s, to virtually all public rental housing ater the Socialist Transormation (1956-66)

and the Cultural Revolution (1966-76), and then to a mix o increasing homeownershipand decreasing public rental housing since the housing reorm starting in 1988.** Aterthe revolution o 1949, the private rental sector was almost eliminated and the majorityo urban residents were housed in publicly owned shelters. The number o homeownersdeclined steadily between the 1950s and the 1970s and much o the private-rentedsector was transerred to the state. Currently, private homeownership is the mostavoured housing option. However, in 1999 the state began to build housing or thevery poor. Although this has satisfed less than one per cent o housing needs in Chinaslargest cities, the programme is belated recognition that not every amily needs or is ableto own.

Sources: Guowei, 2007; Huang and Clark, 2002: 9-10; Wang and Murie, 2000: 39 .


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CHAPTER 3

3.2.1. Five inds of landlord

1. Small-scale landlords are by ar themost common. e common elementis that most use whatever capital andspace they have or rental purposes, otenbecause they have no other way to makemoney. ey may be ormal or inormal,poor or middle-income earners. e keyelement they share is that the income

rom rental housing helps them to payinstalments on their own land or house, tomeet the expense o repairs, maintenanceor improvements, or even to pay their ownrent. Rental income may serve as a saetynet against unstable employment or whenmoving rom regular salaried work tosel-employment. It may also supplementor even substitute or a pension aterretirement. Sometimes renting begins

accidentally, homeowners have spare roomsavailable because the amily structure haschanged; a partner has let home, relativeshave died, grown up children have movedelsewhere. It may begin because thebreadwinner has changed jobs and cannotcommute to the new workplace. Unableto sell their property because o prevailingmarket conditions, the only alternativemay be to rent out the property. In allthese cases, letting out land, houses or

rooms contributes to a households survivalstrategy. It helps to maintain things as theyare, keeps ood on the table, brings in extracash and makes use o a amilys primaryasset: the home. Some nd that rentingoers a route to better things. ey investmore resources into renting, increasing thesize o their property and renting out morerooms. Some may even buy or constructadditional properties. A ew become

commercial landlords.

2. Commercial landlords operate on alarger scale and act in a more proessionalway. ey will oten rent to middle orhigh-income households rather thanlow-income groups, using written rentalcontracts and ollowing the buildingand saety standards. Many will usemanagement agents. Others operate at the

poorer end o the market and may buildrows o tenements, sometimes o verylow quality and equipped with minimalservices. Some will operate responsibly,others in prooundly dubious ways.Commercial landlords come rom allkinds o background, they may be ormallyconstituted as companies or be ordinarypeople who have made money in anothereld.

mexico City: This rapidly growing mega-city has experienced a consistent shit towardshomeownership over the last sixty years. In 1950, only 25 per cent o the populationowned their home but by 1970 43 per cent were homeowners and, by 2000, 73per cent. The reasons or this shit are clear. First, government policy encouraged themiddle class to buy ormal homes through improving the mortgage system. Second, the

authorities in some parts o the metropolis permitted settlement on un-serviced landon the edge o the city, allowing millions o poor people to obtain a plot o land andbuild their own home. Despite this encouragement or homeownership, the number ohouseholds renting or sharing their home increased dramatically: rom 484,000 in 1950to 3.7 million in 2000. Most o the new rental and shared accommodation was created

in the sel-help suburbs

Sources: Coulomb, 1985; Gilbert, 1993; Ward, 1997


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3. Public sector landlords are lesscommon than they once were but stillsupply large numbers o housing unitsin many cities, particularly in China,India and some transition economies.

e landlords may be central governmentagencies or local governments. Someprovide accommodation only to theiremployees while others rent out subsidizedshelter to the urban poor.

4. Social landlords are non-protmaking organizations which providehousing principally, but not entirely, orthe poor. e institutions may rangerom charities and housing associations

to educational bodies. In recent years,housing associations in many parts oWestern Europe have increasingly takenover the task o providing cheap rentalaccommodation rom governments. Insome places, schools and universitiesprovide accommodation or their students.

5. Employer landlords provideaccommodation or their employees as

an aid to recruitment, usually becauselocal housing markets are too expensiveand they will ace recruitment problemsunless they provide shelter or their sta.Examples o such landlords includehospitals providing rooms or their nurses,universities providing rental housingor aculty members, and the military.Sometimes governments provide housingas a ringe benet to their civil servants

particularly when accommodation isparticularly scarce, as in newly establishedcapital cities.

3.2.2. The decline of public rentalhousing

Public rental housing proved a long-termsuccess in only a handul o countries.**Most governments experienced the

ollowing problems:

Investment costs were too high so thatew governments were able to satisy thehousing need.

Beneciaries were requently chosenon criteria other than need, oten as a

result o nepotism, avouritism basedon party membership or outrightcorruption.

Tenants oten ailed to pay therent, oten because o managerialincompetence, particularly in rentcollection.

Rents were kept too low to permitmaintenance or expansion o the stock.

Housing agencies accumulated large

debts as a result o poor rent collectionand high maintenance costs.

As a result, social problems oten built up inso-called sink estates and most governmentsceased to build or rent. Many attempted tosell o the units to the existing tenants.

Rental housing produced in Colombia.Photo Alan Gilbert


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CHAPTER 3

Political ideology also played a role inthe decline o public housing. In manytransition economies in Europe and theFar East, public housing was sold oand public investment in new housing

was intended or sale. During thetransormation o economic and housingpolicy in the transition economies oCentral and Eastern Europe, most nationaland local governments tried to sell o theirdilapidated rented dwellings. ere is nowrelatively little o such housing let. Newpublic rental housing has been constructedin very ew countries over the last decade.e most notable exceptions are China and

the Republic o Korea. In the latter, onemillion rental housing units are plannedover the 2003-2012 period. As in China,the housing is targeted at the poorest but isintended or eventual sale.

3.2.3. The rise of the salllandlord

Despite the withdrawal o large-scaleinvestors and an increase in investmentor homeownership, ew cities have seenabsolute decline in the numbers o rentalunits. In central areas, many auentresidents moved out to the suburbsand divided their properties into rentalaccommodation. But, increasingly, andcities were growing very rapidly, rentalhousing was created by small-scale

landlords.

Much o the expansion in rental housingoccurred beyond the city centre. Newaccommodation was created in theordinary suburbs and, in poorer cities, inthe sel-help suburbs. As the shantytownsgradually obtained services and theoccupants improved their homes, propertybegan to be used to generate an income.While new shantytowns initially contain

mainly owners, more consolidated sel-help neighbourhoods oten have moretenants than owners.

3.2.4 Landlords and landladies

Whether private landlords are men or womendepends greatly on local circumstances.Where women handle domestic aairs andmen go out to work, the ormer will otendeal with tenants, particularly when theylive in the same premises. O course, insome societies women are not permitted todeal either with strangers or with moneymatters, but that kind o custom is gradually

changing.

Oten, death o a spouse, divorce orseparation turns women into landladies;many widows and divorcees in Latin Americaopt to take in tenants to supplement theirincomes. And, since women tend to livelonger than men, there are many morewidows than widowers. In cities with anageing population, thereore, the numbero women landlords is likely to increase.Again, however, it is essential to understandlocal custom. Inheritance rules are criticalin this respect; or, in countries like Nigeriawhere only the male ospring inheritsproperty, women may be precluded rombecoming landlords.

In most parts o Asia, landlords tend

to be men although landladies are notuncommon in the Philippines andIndonesia. In Arica, men are generallydominant although women oten takeon the role in Botswana and SouthArica. In many Latin American cities,women landlords are common and, asin the Philippines, widows and divorceesrequently provide rental accommodation.


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3.3. THE DEmAND SIDE who arethe tenants?

3.3.1. Reasons for renting

Some people rent because they are not yetin a position to own. Some do not have themoney to own, while others do not wish to,at least or the time being. Many have nochoice but to rent; others choose to rent orone o a variety o reasons:

Mobility: Renting allows people toremain mobile and to move when theirwork place changes or when a better

job becomes available elsewhere. It isparticularly suitable or the young whoare not ready to settle down in oneplace.

Flexibility: Renting gives peopleconsiderable reedom over how theymanage their household budgets,moving to cheaper housing whentimes are hard and to better housing

when their incomes increase. It alsorees up more o their earnings or

essential needs like ood, education andmedical care.

Freedom rom major fnancialcommitment:Renting accommodatespeople who may not want to make the

long-term nancial commitment thatcomes with buying or building a house,or to ace the long term costs involvedin repairing and maintaining their ownhouse.

Remittances: Renting a hometemporarily in the city allows people tosend more o their earnings to relativesin their villages o origin and sometimes

to buy land or build a house there.

3.3.2. Tenants aincharacteristics

Like their landlords, it is dicult togeneralise too much about tenants.However, there are a ew commoncharacteristics, many linked to income,migration, lie cycle, amily structure andgender.

Box 5:

Hoe oners are generally ore afuent than those ho do not on

Housing tenure and income in Bogot in 2003.

Total hoes Incoe group

Owned Rented Other

Total 1,934,828 53.0 39.7 7.3

Loest 768,791 48.4 43.1 8.5

Loer-iddle 829,940 51.9 40.5 7.6

Upper-iddle 191,433 65.5 30.6 3.9

High 140,930 68.2 29.0 2.8

Source: DANE


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CHAPTER 3

Lower-income households: Ownerstend to be more auent than tenants.For example in Indonesia, over 75 percent o renter households have incomesless than the average householdincome. e situation is similar incities as diverse as Bogot, Cairo, Delhi,Kumasi and Quito, although not everytenant is poorer than their landlord(Box 5).

Migrants: New arrivals to a city stayinitially with kin or nd somewhereto rent. Many migrants never buyproperty in the city because they donot intend to stay there. Instead,they oten buy property in their ruralhomelands and continue to rent inthe city. When households are splitbetween town and country, the migrant

may rent and send spare money backto their amily in the village. Only

migrants intending to stay in thecitymove into owner-occupation,especially when they have a amily,

Younger people: Rental housing isoten a eature o the earlier stageso peoples lives. Tenants tend to beyounger than owners and are otensingle: students, simple wage-workers,actory workers, inormal sector

employees and micro entrepreneurs,or proessionals. Couples who renttend to have ewer children thanowners and the birth o children otentriggers the move rom renting toownership. Where extended amiliesremain strong and most o the amilylives and works locally, adult childrentend to live in the amily home. In citieswhere incomes are rising, young adults

increasingly move out o the amilyhome as soon as they can.

Social Rental Housing produced and managed by Dutch Housing Association, Amsterdam, The Netherlands.Photo UN-HABITAT/Claudio Acioly Jr.


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Single-parent households anddivorcees: e consequences odeclining birth-rates, HIV-AIDSand growing rates o separation anddivorce have a big eect on amily

composition and cohesion. Marriagebreak-ups have also become morecommon and recently separated peopleoten move into rental accommodation.

People with dierent priorities:Some households who could aord tobuy a shelter choose not to own but touse their income or other purposes.Many put their savings into setting upa business rather than into buying ahome (Box 6).

Gender: Where men dominatemigrant fows, a high proportion otenants will be men; where women arein the majority, the opposite occurs.In cities where poorer amilies tend

to rent, emale-headed householdspredominate because o their lowincomes. Where women are excludedrom ormal ownership based oninheritance rules or custom, or rominormal ownership because theylack the skills required in sel-helpconstruction, they become tenants.

Box 6:

Investing in business, not in property

In Banda Aceh, beore the tsunami struck in 2005, one Indonesian lady ran a smallbusiness selling Muslim shirts. She rented a two-storey dwelling, operating the shop onthe ground oor and living with her husband and son on the top oor. All her savings

were put back into the business rather than into buying property.

Source: Fitzgerald (2007: 7).


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CHAPTER 3

Rental social housing is a common eature in the Dutch housing landcape.Photo UN-HABITAT/ Claudio Acioly Jr.


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Room or rent (Alquilo Cuarto) in an inormal settlement in the periphery o Lima, Peru.Photo UN-HABITAT/ Claudio Acioly Jr.


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CHAPTER

4.1. Not everyone prefershoeonership

Ask amilies i they want to be homeownersand most o them will say yes. Mostpeoples actions refect the preerencesthey express. ey move rom sharing orrenting to ownership and rarely in theother direction.

Why do people want to own? In manycountries, homeownership is a very sensiblenancial choice in the sense that it allowspeople to make money. Few governmentstax capital gains rom housing and manyactually subsidise the cost o mortgagepayments. I ownership oers a route tonancial gain, o course, people want to beowners. I governments do little or nothingor tenants, then tenants will choose to behomeowners.

But, even given such a distorted seto choices, many people decide not tobecome homeowners immediately. Manydo not do so because they cannot aordto. Many others do not do so becauseownership does not match their immediateneeds. ey are young and they do notwant the burdens o homeownership andparticularly not to build their own house.

ey are single and they want to live near

to where the action is.. ey have childrenand their rental accommodation may becrowded but they do not want to live inan un-serviced settlement distant romschools. ey would like to own but theyneed to put their savings into a business.

In short, the extent to which ordinarypeople desire ownership has beenexaggerated. Insoar as they do want to

be homeowners, the preerence is sensiblebut the choice has been distorted throughgovernment policy. And, even when thepreerence is a deeply elt need, perhapsounded on rural values, many chooseto wait either because the time is not yetright or because the household budget isinsucient.

4.2. Renting is not inequitable

Renting has oten been criticised asinequitable. In most cities in developingcountries, it is not. e vast majority olandlords operate on a small scale. Manylandlords are themselves poor and includemany who have gradually extended theirsel-help housing to accommodate tenants.ese people have similar incomes to their

tenants.

04KEY ISSUES FOR POLICYMAKERS TOCONSIDER


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Box 7:

Today, ew rich landlords rent to the poor;they rent to rich tenants.** Poor landlordsrent to poor tenants and generallycome rom the same income group. Iinequality is considered to be a policy

issue, then it is the inequalities in access tohomeownership that should be addressed,not the inequalities between owners andtheir tenants. When the housing systemencourages and even pays the better o tomake capital gains rom homeownership,while the poor are unable to buy theirown home, then social polarisation isaccentuated.

In act, it is homeownership-biasedhousing policies that are inequitable. Veryew governments have ailed to devisehousing policies that inequitably avourhomeownership. Credit schemes are beingdeveloped across the globe to encouragemore people to enter into homeownership.ere is no problem in encouraginghomeownership providing that this doesnot harm those who do not wish to own.

Unortunately, this is precisely what mosthousing policies do.

4.3. Landlord-tenant relations

Just as not all landlords are devils, notall tenants are angels. Tenants can abuselandlords and (indirectly) their ellowtenants by ailing to pay the rent andnot taking appropriate care o theirapartments (Schill, 2003: 505).

Conventional wisdom decrees thatlandlords dislike tenants and tenants hate

landlords. Undoubtedly, this is sometimestrue. However, too oten the bad imagehas been exaggerated because it has beenbased on anecdotal accounts or on casualconversations with tenants. e sources olandlord-tenant tension are predictable:

Landlords complain that theirtenants dont take good care o the

Too any governents favour hoeoners and ignore tenants

In the United States housing is one o the areas where government handouts (especiallytax relie on mortgage payments) avour wealthier households. In 2003 alone, USD 121billion was spent on tax relie. More than USD 57 billion o this went to householdswith annual incomes above USD 148,000. By contrast, only USD 36 billion was spent on

housing policies designed to help the poor.

Similar policies have been employed in most poor countries, primarily to the beneft o thebetter o, the only households that could aord to buy ormal housing.

More recently, in Chile, Colobia, Costa Rica, Ecuador and South Africa governmentshave attempted to extend homeownership to the poor through the oer o millions otargeted subsidies. While this has helped some tenants to buy their own home, it has nothelped those tenants who are still too poor to obtain credit or who cannot aord eitherthe cost or the running o ormal housing.

Sources: The Economist 2005; Gilbert 2004


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CHAPTER 4

Box 8:

accommodation, pay their monthlyrent late, and dont understand thatrising costs o utilities, maintenanceand repairs make it necessary to raisethe rent.

Tenants complain that their landlordsdont maintain the accommodation,

ail to repair things when they break,charge too much or services, increasethe rent without warning, turn hostilewhen the rent is paid a little late, threatenthem with eviction and/or ail to returnsecurity deposits when they move out.

However, without denying that tensionsexist, relations between most landlords

and tenants are reasonable. In some cases,landlords avoid problems by only accepting

tenants who have been recommended bypeople they know. But in other cases, landlordsuse a dierent strategy. ey actively seekto attract strangers and/or people rom adierent race, nationality or tribe. ey dontwant to be too close to their tenants. Byestablishing a business-like relationship they

hope to encourage the tenants to take careo the property, respect the rental conditionsand leave when they are asked to.

4.4. Eviction of tenants - hen itis rong and hen it is right

Tenants usually express ears abouteviction, while landlords complain aboutthe diculty o evicting problematictenants. Both sides have virtue on their

Resident landlords are often ore sypathetic

Relations are oten better when landlords live on the same property as their tenants.

Rental housing with resident landlords tends to be better-serviced and better-maintained. And, when landlords and tenants share the accommodation, they get toknow one another and sometimes develop mutual bonds o riendship and support.

For example, in Surabaya, young emale migrants working on an industrial estateseem to fnd a great deal o sympathy in their rental accommodation: the landladytenant relationship mostly included eatures o a parentdaughter connection. Thedevelopment o such a relationship between the house owner and the tenant reectsa corresponding elt need o the women industrial workers, as unmarried daughtersar away rom their own amily and the traditions in the village. When the youngwoman starts a new lie in the city, the relationship with her mother gets less close.

While wanting to enjoy reedoms o the city, she also misses her earlier parentdaughter(particularly motherdaughter) intimacy and the saety o the amily environment.Thereore, she tries to fnd someone who can guide her like her mother did in the villageand give her a eeling o saety.

This is well reected in the act that the owner oten calls their renters anak-anak kost[children who rent], and the renters oten call the owner ibu kost [mother who rentsout]. It is also reected in the act that most young women industrial workers preer to

stay in rental rooms o houses in which the owner lives as well.

Source: Arin and Dale; 2005


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Box 9:

side. Satisactory landlord-tenant relationshave to be based on a degree o mutualtrust. I either side deviates rom what isregarded locally to be reasonable behaviour,then a case or or against eviction can bemade. I tenants are abused, they should beprotected; i landlords are victimised theyshould be helped.

ere are many instances o landlordsevicting tenants unairly: landlordswho evict reliable tenants withoutadequate warning, who throw themout ater only a brie lapse in the rentpayments or who eject them becausethe tenant amily is expecting achild. Landlords should be stronglydiscouraged rom taking such action.

Equally, there are many examples otenants abusing the trust o landlords:they do not pay their rent even whenthey have the money, they make lotso noise which upsets the neighbours,

or they damage the property. Suchtenants deserve to be evicted.

A real dilemma comes when tenants cannotpay the rent. Unemployment, sickness orother reasons why a tenant amily has lostits income merit sympathy. But since poorlandlords depend upon the rent to keepthemselves out o poverty, it is not they thatshould bear the cost o non-payment. Richgovernments can solve the problem bysubsidising the poorest tenants. However,this is unrealistic in most poor countriesand governments must accept eviction asan unpleasant consequence o poverty. Itshould also be recalled that owners are

also sometimes thrown out o their homesbecause o their inability to pay (BOX 9).

4.5. Rental housing allos forobility

A well-unctioning housing market shouldallow people to move house when their owncircumstances or the general environmentchanges. e ability to move is a virtueand rental housing generally allows such

Hoe buyers can also be evicted

Americas sub-prime mortgage crisis is likely to claim the homes o two million

amilies according to an inuential congressional committee which warnedtoday that oreclosures pose a grave threat to the US economy. A tidal wave orepossessions could cost a total o $71bn (34.61bn) or homeowners unable tohang on to their properties, plus a knock-on downward eect o $32bn on the valueo neighbouring homes, the joint economic committee o Congress predicted(Clark, 2007).

516,000 oreclosure proceedings began in the frst quarter o 2008, some 2.5% oall mortgage loans. A urther 6.4 o loans were delinquent at the end o the frstquarter, meaning that at least one loan repayment is in deault. The situation isparticularly bad in the states o Caliornia and Florida (MBA, 2008).

Poverty, loss o work and the break up o amily relationships are not solved by homeownership. In the United States, while 54 per cent o tenants are orced to pay toomuch o their income in rent 30 per cent o very low income homeowners alsostruggle to pay their bills. Poverty strikes both home buyers and tenants and bothcan lose their homes, even in the most auent economies (Martinez, 2000: 479).


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CHAPTER 4

movement. It is societys general interest todevelop a housing system that allows peopleto nd accommodation that matches theirneeds at any given point in their lives. Insuch a housing system, the ability to move

rom one home to another, rom one cityto another, rom a small house to a largeone and vice versa, is critical. Mobility isonly a problem when people are orced tomove when they do not wish to.

I too much emphasis is given to givingtenants complete security o tenure, oneo the chie advantages o rental housing islikely to disappear, along with much o the

supply. Under some rent control regimes,e.g. in Mexico City,** tenants havebeen allowed to stay or long periods onminimal rents. ey do not move becauseo the minimal rents and occupy space thatmore needy households would use better.

4.6. Rent levels are not too high poverty levels are

Tenants naturally complain that rentsare too high and landlords that they aretoo low. Over the years there has beenno shortage o examples o landlordsexploiting tenants. Equally, and especiallyater the introduction o rent controls,there are many instances where rents haveclearly been ar too low.

Rental housing specialists suggest thata reasonable monthly return romrenting is about one per cent o themarket sale price o the unit. e actthat rent levels are tied to propertyprices means that rents can go up asland values rise and as economic orcesinfuence property prices. ese marketorces put ormal rental housing out othe reach o most poor households.

I the 1% rule prices out the poor, analternative is the 25% o the budget

rule. Housing is unaordable when aamily spends more than one quartero its monthly income on rent.Unortunately, this guide loses itsmeaning urther down the economic

ladder insoar as one quarter o a verylow income does not provide anylandlord with an adequate return.

Neither rule gets round the very realproblem o inadequate incomes. I alandlord is to provide adequate and well-maintained shelter, a certain level o renthas to be charged. I a tenant is to live indecent accommodation, a certain income

has to be earned. e unortunate eatureo most cities in developing countriesis that too many people earn very lowincomes. In such circumstances rents

Rental unit combined with commercial unit, sel built in

a popular neighbourhood in Lima, Peru.Photo UN-HABITAT/ Claudio Acioly Jr.


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are simultaneously too low and toohigh. Landlords do not receive enoughto provide adequate accommodation orenough to keep their own amilies out opoverty. At the same time, tenants earning

very low incomes are orced to pay a highproportion o their earnings in rent. eproblem lies not in rent levels but withpoverty.

4.7 Quality of rental housing

e living conditions in much o theinormal, rented shacks in ika, as well as

in Nairobi, are revolting. Few householdshave more than a single room and sanitaryacilities are, in many cases, completelyabsent. Maintenance is non-existent andthe owners procedures to collect rent arepitiless (Andreasen, 1996: 362).

Many amilies are prepared to put up withpoor accommodation because they havehigher priorities than housing. e very

poorest have very little choice at all; theylive wherever they can, however bad theconditions. Clearly, no one would denythat this is thoroughly undesirable buti such housing were to be demolishedit would just lead to displacement andhomelessness.

Fortunately, many tenants can aordtolerate accommodation and researchshows that they select their shelter careully.Neighbourhoods with good transport linksor that are close to centres o employmenttend to be popular with tenants. Servicedsettlements are chosen beore those on theun-serviced periphery.

Many owners also live in rudimentaryaccommodation, particularly in newlyormed sel-help settlements. Suchsettlements lack services and initially thequality o the shelter is unsatisactory.Frequently, owner households suer romovercrowding as poorer relations claim

help and move in. is is very commonin parts o West Arica and in many citiessuering rom economic recession.

4.8 One persons rent is anothers

incoe

Tenants clearly resent having to pay rentand sometimes go hungry in order to payit. Nonetheless, that rent oten providesthe main source o income or otherpoor people. Research suggests that mostlandlords are only a little more auentthan their tenants and, sometimes, thetenants are the more prosperous because

both partners are earning and they do notyet have children. Age is a crucial dividebetween tenants and landlords. e youngtypically rent or share and move intohomeownership when they bear children.Sel-help landlords tend to be olderbecause it has taken them time to produceenough accommodation to let out rooms.Other kinds o landlords are oten older

because they have inherited property.

Renting is particularly important or olderpeople with property. Many older couplesand as societies age increasing numberso widows depend upon rents or theirlivelihood. Indeed, some have investedin property as a means to survive in theirold age. Tenants may not like paying rentbut it does put ood on the table or many

impoverished landlords and landladies.


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CHAPTER 4

Backyard rental units in South Arica.Photo Alan Gilbert


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Housing extensions or rental purpose in Limas popular settlements, Peru.Photo UN-HABITAT/ Claudio Acioly Jr.


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CHAPTER

A strategic approach to developing aworkable rental housing policy shouldrst acknowledge the rental arrangementswhich already exist and nd fexible,realistic ways to regulate them. In mostcities, rental housing arrangementscontribute signicantly to local livelihoodsand so measures to govern and promotetheir urther development should beormulated. Local dynamics and housing

market conditions are dierent in everycity, and so there is no single ormulaor how to do this. But the ollowingsuggestions will help policymakers andgovernment ocials to promote rentalhousing in their cities - especially or thepoor.

5.1 Put rental housing on the

urban housing agenda

At present rental housing is virtuallyinvisible in most governments housingpolicy. Since healthy housing marketsneed to oer a range o tenure options, achange in policy is essential. So the rstneed is to stimulate some discussion otenure in government circles. Hopeullygovernment ocials, local politicians and,

at an international level, ocials in aid

agencies and the development banks willnow at least begin to discuss the issue.

5.2 Stop proising universalhoeonership

Too many governments pretend thatthey can achieve homeownership oreveryone. is is neither achievable nordesirable despite the rhetoric that normallyaccompanies policy statements. ereore,rental housing and homeownershipshould not be competing tenure options.Governments should enable the housingmarket to provide people with an eectivechoice o tenure that is aordable andappropriate to their needs. is requires ahousing policy that is tenure neutral.

Tenure neutrality means:

Avoiding avourable tax breaks onlyor owners

Providing subsidies to poor amiliesirrespective o their tenure

Creating prejudice against any tenuregroup

Restricting particular housing sub-markets e.g. through rent control

05POLICY GUIDELINES


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Box 10:

5.3 Avoid rent controls they rarely or ell

In many countries rent controls wereintroduced at the outbreak o war as ameans o preventing infation. Otenthey continued long ater peace had beenrestored and brought many distortions inthe rental housing market. In ew marketeconomies has rent control had a long-term positive eect on rental housing orthe poor. Rent controls should generally beavoided because they are:

Inequitable: avouring some tenantsat the expense o others, particularlysitting tenants against those who wishto become tenants; protecting sometenants who do not need protection

because they are not poor while notprotecting other households who arepoor; avouring tenants at the expenseo landlords, even when the tenantsare better o than the landlords; andoperating in ormal housing marketsbut not in the inormal areas wheremost poor tenants congregate.

Effects of rent control in cities in developing countries

In poor countries generally: It is clear that the negative impact o rent controloutweighs its benefts. It has resulted in a decrease in the production and supplyo both the quantity and quality o rental housing (Kumar, 1996: 768-9). This isexemplifed by the ollowing evidence:

Egypt: Rent control was frst used during the Second World War as a measureto combat ination, and it roze rents at the 1941 rates. This was codifed in1947 (applying to properties built beore 1943). Ater the revolution o 1952,

a series o laws reduced the rental rates or new buildings and existing units.Finally, legislation in 1976 and 1977 incorporated previous legislation, codifedexisting rent levels and established a system or calculating rent levels in newbuildings that avoured the tenants considerably. Despite various attemptsto rationalise the system, many units in ormal urban areas are still rented atextremely low rates that bear no relation to the market. In eect, tenants aresitting on a signifcant asset and the only way an owner can reclaim the unit besides waiting or the death o the tenant and his or her children is to oera sizeable cash incentive (sometimes approaching the market value o the unit)or the tenant to renounce the contract and leave (Soliman, 2002: 194).

Ghana, Rent control was frst introduced in Ghana as a wartime measure...It cast the landlords in the role o exploiter o the poor whose prices must becontrolled or they would pass beyond the reach o common people; problemso housing the urban workorce would ollow close behind (Tipple 1988: 43).From 1963 to the middle 1980s, many rents were kept at extraordinarily lowlevels. The rent control law has proved to be ineective, primarily becauselow rents have discouraged the production o rental housing units (Arku,2006: 349).

Tanzania, The governments objectives o enacting the Rent Restriction Act,No 17 o 1984 as a protective cushion against tenants problems have not been

achieved. (Kabwogi, 1997: chapter 12).


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Box 11:

Inecient: sometimes distortingthe most appropriate use o housing,or example, by encouraging smalltenant households to occupy morespace than they need when largerhouseholds lack shelter; whenmaking renting unprotable, theydiscourage proper maintenance,

particularly when capital values arealling; they sometimes encourageocial corruption.

Counter-productive: discouraginglandlords rom providing moreaccommodation and therebyincreasing the overall cost o renting.In poor countries, encouraging poorhouseholds to look or alternativeshelter solutions, like invading land.

5.4 Provide subsidies for lo-incoe tenants

I keeping rents low does not work,perhaps increasing tenants incomes isa more eective approach to makingshelter aordable to tenants? A commonlyemployed method in some developed

countries has been to introduce a rentsupplement or a rental housing voucher.

Most developed countries** have employedsome variation on this approach at one timeor another and, to a degree, it has worked.ere are, however, several inherentchallenges with this approach particularlywhen introduced in poor countries:

It is very costly and ew governments

are prepared to devote sucient undsto such an approach.

I insucient unds are allocated,many tenants are let out o theprogramme.

It is liable to abuse i governments donot target the subsidies accurately.

It can simply transer public monies tolandlords as tenants are asked to payhigher rents when landlords realise

that the state is paying a subsidy.

5.5 Provide subsidies andnance for private landlordsproviding lo-incoe rentalhousing

I subsidies aimed at tenants oten ndtheir way to landlords, why not oer

subsidies directly to landlords? Such anapproach can stimulate the production

Rental vouchers in the United States

While in many respects rental subsidies or tenants have been successul in the

United States, they suers rom budgetary constraints that limit their eectivenessor low-income renters:

The voucher program, (which) has been in operation or almost 30 years, has beenremarkably ree rom scandal, and has been administered with a high degree ointegrity. I it has a undamental weakness, it is simply that it has never been anentitlement program and that budgetary constraints have prevented it rom serving alarger portion o the low-income renters who need housing assistance

(Khadduri, 2003: 245).


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o rental housing or the poor. Subsidiescan take several orms (Box 12). Subsidiescan be directed to small-scale landlordswho wish to extend their property, tocompanies intending to build housing

or their workers and to social housingagencies and cooperatives. Subsidies cantake the orm o oering small areas o

public land ree or at a subsidised price toinormal or small-scale landlords preparedto create aordable rental units on thisland, thereore increasing the overallsupply o low-income rental housing.

I providing subsidies is deemed tooexpensive, loans can be oered to small-

Box 12:

Helping self-help landlords to build and iprove lo-incoe rentalhousing

Small scale landlords in inormal settlements are a major source o aordable housing

or a growing majority o households living in poverty in the towns and cities odeveloping countries, but there are ew initiatives to assist them (UN-Habitat, 2005:xxiv).

Governments can take several actions to support sel-help landlords improve low-

income rental housing:

Provide subsidies to poor oners ho are illing to provide rentalaccoodation. I landlords are as poor as their tenants, equity considerationsdo not present a problem. Subsidies might come in the orm o income tax relie,although many small landlords will not actually be paying tax, or exemption romvalue added tax on building materials.

Offer sall plots of serviced public land to potential landlords toconstruct for rent. This should be restricted to small-scale operators, oeringrental accommodation to a maximum o say 10 amilies, and be subject to aminimum standard o shelter.

Build rental incentives into upgrading prograes. Planners andmanagers o urban upgrading programmes should take the needs o tenantsinto consideration and encourage homeowners to increase the supply o rentalhousing by, or example, oering credit or subsidies.

Provide icro-credit for self-help landlords. The idea o extending creditto inormal sector landlords is now widely recommended, particularly since theemergence and rapid growth o shelter microfnance during the last decade.

modify planning regulations. House extensions are oten discouraged byplanning regulations. The projected impact o densifcation on the demandor urban services is oten used to justiy why owners should not add spaceor tenants. Except when densifcation is likely to increase risks rom naturalhazards or to overload public service networks, planning regulations should bemodifed to allow housing extensions.

Reassure self-help landlords. Existing and potential landlords oten eelthreatened by government policies that either give tenants the right to claima house that has been rented to them illegally or that dont sufciently protectthem when tenants ail to pay rent. The adoption o rental regulations thatprotect the rights o both landlords and tenants will go a long way in encouraginglandlords to invest more in rental housing.


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scale landlords or them to improvetheir existing rental units and/or buildadditional units, thus increasing thesupply and quality o low-income rentalaccommodation. In lending to landlords,

loans should ollow the micro-enterpriseculture o lending or short periods. InTanzania, one out o three landlordswould preer step loans that have to bepaid back within 3 to 6 months. esame number o landlords would go orstep loans that can be serviced in veryshort intervals o between 1 and 4 weeks(Precht, 2005: 12).

Small housing loans, disbursed throughhousing micronance institutions, aresome o the most promising developmentsin housing nance during the last decade.ey are suitable or extending existingdwellings, building on already servicedland, adding rooms (oten or rentingout), adding acilities such as toiletsand house improvements within in situneighbourhood or slum upgrading. (UN-

HABITAT, 2005: xxv).

5.6 Facilitate settleentupgrading and theiproveent of existing lo-quality rental housing

In terms o dealing with poorly serviced ordilapidated housing occupied by tenantspolicy should harness and improve thequality o such housing. e worst thinggovernments can do is to close down ordemolish inadequate housing withoutoering a viable alternative because all thatdoes is bring displacement and increasehomelessness. Instead, governmentsshould oblige or persuade landlords toimprove services or contribute themselvesby providing sanitary acilities as part o

settlement upgrading operations.

Settlement upgrading - providing poorneighbourhoods with inrastructure andservices, with or without property titles - isa positive step and is superior to eviction. Itis crucial, however, to recognise that mostpoor neighbourhoods contain numeroustenant households and that without

recognising tenant amilies, upgradingprogrammes may drive them out, deprivinglandlords their income and tenants theirhomes. And, i the tenants remain andwere not enumerated beore the upgrading,the authorities are likely to underestimatethe demand or inrastructure and services.ereore it is important to conduct ahousehold survey beore beginning anupgrading programme, ideally involving

the community in the enumeration (seeHuchzermeyer, 2007).

Renting rooms is good business in Latin American Cities.Photo Alan Gilbert


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5.7 Proote security of tenurefor tenants ithoutdiscouraging rental supply

Security o tenure - in this case, a tenantslevel o condence that they will notbe removed rom their rented propertywithout adequate notice is important ortenants wellbeing and eelings o security.O course security or tenants has to beconditional on their behaviour, on thato the landlord and on the general healtho the rental housing sector. I reedomrom eviction were to be guaranteed orlie whatever the tenants did, and was

not dependent upon regular payment othe rent, ew landlords would ever investin rental housing. ereore, tenantssecurity o tenure should be balanced withincentives or landlords to supply rentalhousing.

e key issue in terms o security o tenureor tenants is aordability and what isessential is to guarantee that there is a

plentiul supply o rental housing at everylevel o income. I tenants have the ability

to move into better property and othersinto poorer property, they do not needguarantees o security beyond basic rights.Such basic rights include being givenadequate notice, not being orced out

physically and not being ejected outsidethe terms o any contract that has beenestablished with the landlord.

Hartman and Robinson (2003: 493) oersensible advice when they argue that:

e most eective way to avoid orcedevictions (at least those linked to rent-and utility-paying problems, whichalmost certainly are responsible or thevast majority o such actions) would beto increase the supply o decent, modestlypriced units and/or to increase tenantsincomes through social policies suchas a higher minimum wage, so-calledliving wage ordinances, and increasedemployment opportunities.

Box 13:

Arbitration and Conciliation

In Bogot, Colombia, the Chamber o Commerce began to establish a mechanismor revolving commercial conicts in 1983. It both provides education programmeson how to avoid conict and has set up two concrete mechanisms by which disputescan be resolved. The frst is a service under which parties in conict can meet in thecompany o a conciliator to try to resolve their dispute. The second is an arbitrationpanel which decides the rights and wrongs o an issue. A large number o the casesdealt with concern arguments between landlords and tenants.

The organisation charges or the service and as such most o the cases heard arebetween landlords and tenants with ormal contracts. More cases also tend to bebrought by landlords than by tenants (Barreto and Peran, 2000). But the conceptcould easily be copied by the authorities and used to speed up resolution o minor

conicts between in the small-scale, inormal sector.

See http://camara.ccb.org.co/contenido/categoria.aspx?catID=104


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5.8 Develop and prooteechaniss for rittencontracts, conciliation andarbitration

e rights and obligations o landlords andtenants should be assured through the legalsystem. Unortunately, the court o law inmost countries do not help the majority olandlords or tenants because they simplydo not work eectively, are too expensive,and take too long to resolve disputes.ereore, when disputes occur going tothe courts or resolution is rarely possibleand so some alternative orm o arbitration

is required. Here, traditional orms oconciliation, like community councils,

might be appropriate. Alternatively, localgovernments or business organisations,like Chambers o Commerce, might beencouraged to set up cheap orms oarbitration as in Bolivia, Colombia and

Ireland. e establishment o tenancytribunals can be another way or tenantsand landlords to resolve conficts withoutresorting to lengthy and expensiveproceedings in a court o law.

Written agreements should be promoted.I simple standard contract orms wereavailable in local shops or market-placesdierences over what was agreed verbally,

possibly many years earlier, might beavoided. Similarly, it would remind both

Box 14:

Do Dont

Recognise that many urban households live inrental and shared housing

Ignore non-owners and assume that theyall wish to become homeowners now

Consider renting to be one o the various waysto improve housing conditions

Neglect rental option and ocus only onhome ownership

Estimate how many rental households andlandlords there are

Attack landlords as a class; large numbersare just as poor as their tenants

Evaluate whether regulatory rameworks orrental housing are unctioning properly andproducing desirable results

Assume that poor households beneft romrent controls; poor landlords most certainlydo not, nor do tenants and potentialtenants who are not covered by thosecontrols

Count the tenant amilies that live insettlements beore beginning a settlementupgrading project and recognise their specialneeds

Demolish or close down poor quality rentalaccommodation unless it is dangerous tothe inhabitants

Produce simple rental contract templates thatcan be bought in local stores

Assume that long contracts are desirableor every kind o tenant

Set up a cheap arbitration and conciliationservice or landlords and tenants that worksquickly

Assume that the court system providesadequate protection or either poortenants or poor landlords

Provide credit acilities or subsidise or poorlandlords who wish to extend or improve their

accommodation

Subsidise only new home buyers

Dos and Donts for Governent Policy


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parties to agree on certain basic issues atthe start o the tenancy: or instance whopays or the services and who is responsibleor repairing the roo. Notarising thecontract is not necessary, merely providing

a copy or each signatory is enough.

5.9 Proote rental housing inaid agency and developentban assistance projects*

In general, national and international aidagencies and the main development bankshave shown little interest in rental housing.In recent years market reorms, banking

reorm and encouragement or homepurchase through mortgage nance have

been the principal ocus o interest withsupport or settlement upgrading wherenecessary. While individuals within thoseorganisations have occasionally showninterest (see Fay, 2005), institutionally

there has been apathy. e disinterest omost governments and most internationalagencies towards renting has beenmutually reinorcing. Policymakers atlocal and national levels should ensurethat the promotion o rental housing isincluded in projects and programmesunded by international aid agencies anddevelopment banks.

Rooms or Rent in South Arica.Photo Alan Gilbert


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CHAPTER 5

Rootop rental units in the periphery o Lima is a common eature.

Photo UN-HABITAT/ Alvaro Uribe.


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Housing expansion or building rental units can support household budget.Photo UN-HABITAT/ Claudio Acioly Jr.


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CHAPTER

A healthy housing system oers urbanhouseholds the ollowing advantages:

A choice between tenures;

e ability to change the location,size and quality o accommodationwhen amily circumstances change;and

A means through which poor and

middle-income landlords, includingwomen and the old, can increasetheir incomes.

It provides the urban authorities with:

A way in which cities can reduce thequantitative housing decit;

A wider range o housing options; An opportunity to increase

residential densities and to makemore ecient use o inrastructureand services.

Governments are encouraged to:

Recognise that renting is an essentialcomponent o a balanced housingsystem;

Avoid policies that avour onlyhomeownership;

Help those poor amilies whose onlyshelter option comes in the orm orental housing;

Help poor landlords and landladieswho live on the income derived romrenting.

06EPILOGUE

Building rental units require creativity in plotoccupation and construction.

Photo Alan Gilbert


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Some home owners are renting out their fats in order to pay or their mortgage inEthiopias Intergrated Housing Development Programme.

Photo UN-HABITAT/ Claudio Acioly Jr.


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CHAPTER

Andreasen, J. (1996) Urban tenantsand community involvement, HabitatInternational 20, 359-65.

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DANE (no date) Encuesta de Calidad deVida, 2003

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