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Rental Housing

January 2011

Authors:

Firoz Khan

Stellenbosch University

Louise Scholtz

WWF South Africa

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QUICK

GUIDES

FOR

POLICY

MAKERS

7RENTAL HOUSING:

A MUCH NEGLECTED HOUSING

OPTION FOR THE POOR

Cities Alliance

CITIES WITHOUT SLUMS

Quick Guide 7: Rental Housing

(UN HABITAT), 2011

United Nations Human Settlements Programme (UN-HABITAT)

PO Box 30030, Nairobi, Kenya

Tel: +254 2 621 234

Fax: +254 2 624 266

www.unhabitat.org

DISCLAIMER

The designations employed and the presentation of the material

in this publication do not imply the expression of any opinion

whatsoever on the part of the Secretariat of the United Nations

concerning the legal status of any country, territory, city or area,

or of its authorities, or concerning delimitation of its frontiers

or boundaries, or regarding its economic system or degree of

development.

The analysis, conclusions and recommendations of the report do

not necessarily reﬂect the views of the United Nations Human

Settlements Programme, the Governing Council of the United

Nations Human Settlements Programme or its Member States.

HS Number: HS/193/10E

ISBN Number: (Volume) 978-92-1-132322-1

ISBN Number (Series): 978-92-1-131926-2

Cover photos ©: A Grimard

The publication of the Housing the Poor in African Cities series was

made possible through the ﬁnancial support of Cities Alliance.

Published by

United Nations Human Settlements Programme (UN-HABITAT)

Training and Capacity Building Branch (TCBB)

E-mail: tcbb@unhabitat.org

Printing and Prepress: UNON/Publishing Services Section/Nairobi, ISO 14001:2004-certiﬁed

QUICK GUIDES FOR POLICY MAKERS

Cities Alliance

CITIES WITHOUT SLUMS

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

This series of Quick Guides has been inspired by and prepared on the basis of a similar series on

Housing the Poor in Asian Cities, which was published jointly by UN-HABITAT and UNESCAP in

2009. The series is the adaptation of the Asian version to the realities and contexts of the sub-

Saharan African countries, and will be available in English, French and Portuguese. This has been

made possible through the ﬁnancial contributions of Cities Alliance and UN-HABITAT.

The guides have been written by the team of experts from the African Centre for Cities (ACC)

led by Edgar Pieterse, with the substantive contributions of Karen Press, Kecia Rust and Warren

Smit.

The experts in the team who have contributed to invaluable background reports for the guides

are: Sarah Charlton, Firoz Khan, Caroline Kihato, Michael Kihato, Melinda Silverman and Tanya

Zack. Project management support was provided by Bruce Frayne, and design was ably handled

by Tau Tavengwa. A number of colleagues from UN-HABITAT’s Training and Capacity Building

branch, Shelter branch, and the Regional Ofﬁce for Africa and Arab States, have contributed

to the design, development, and review of the guides. They include Gulelat Kebede, Cynthia

Radert, Claudio Acioly, Jean D’Aragon, Rasmus Precht, Christophe Lalande, Remy Sietchiping

and Alain Grimard. The guides have beneﬁted from the contributions made by a range of ex-

perts who participated in the Expert Group Meeting held in November 2009 in Nairobi, Kenya:

Benjamin Bradlow, Malick Gaye, Serge Allou, Barbra Kohlo, Ardelline Masinde, Esther Kodhek,

Jack Makau, Allain Cain, Sylvia Noagbesenu, Kecia Rust, Babar Mumtaz, Alain Durand Lasserve,

Alan Gilbert and Tarek El-Sheik.

All these contributions have shaped the Quick Guides series, which we hope will contribute to

the daily work of policy makers in the sub-Saharan Africa region in their quest to improve hous-

ing and access to land for the urban poor.

ACKNOWLEDGEMENTS

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

HOUSING IN AFRICAN CITIES: TO OWN IT OR RENT IT? 5

RENTAL HOUSING: HOW PEOPLE EXPERIENCE IT IN CITIES 6

URBAN RENTAL STATISTICS ARE UNRELIABLE 7

FOUR REASONS WHY RENTAL HOUSING IN CITIES TENDS TO BE INVISIBLE 8

HOW DO PEOPLE ACCESS RENTAL HOUSING? 9

EIGHT COMMON MYTHS ABOUT RENTAL HOUSING 10

WHO ARE THE LANDLORDS? 11

WOMEN AS LANDLORDS 12

WHAT MAKES FOR GOOD RENTAL ACCOMMODATION? 13

HOW DO LANDLORDS AND TENANTS WORK OUT THEIR RENTAL ARRANGEMENTS? 17

HOW THE DURATION OF RENTAL AGREEMENTS IS NEGOTIATED 18

LANDLORD-TENANT RELATIONSHIPS 19

WHEN TENANTS ARE THEIR OWN LANDLORDS 20

THE SUPPLY OF RENTAL HOUSING 21

MIGRANTS AND RENTAL ACCOMMODATION 23

HOW MUCH RENT TO CHARGE? 24

RENT CONTROL: IS IT AN OPTION? 25

POLICIES WHICH REGULATE RENTAL HOUSING IN AFRICAN CITIES 26

SIX WAYS TO PROMOTE RENTAL HOUSING THROUGH HOUSING POLICIES 27

REFERENCES 33

SUGGESTED FURTHER READING 34

WEBSITES 35

CONTENTS

CONDITIONS

CONCEPTS

APPROACHES

TOOLS AND GUIDELINES

RESOURCES

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

RENTAL HOUSING: A MUCH NEGLECTED HOUSING

OPTION FOR THE POOR

Millions of people in African cities are tenants. Rental housing may be only a partial answer to

urban housing problems, but it is an important housing option – especially for the urban poor, and

particularly in situations where people are not ready or able to buy or build houses of their own.

Rental housing is an integral part of a well functioning housing market. In spite of this, govern-

ments in Africa have done little to support the improvement of rental housing which already exists

or the expansion of affordable rental housing.

Rental housing markets are inﬂuenced by, and respond to, local economic and political conditions

and regulatory frameworks, and operate very differently from city to city. Landlords and tenants

develop and use rental housing in ﬂexible and inventive ways to maximize the asset value of their

properties and to satisfy their accommodation needs.

It is important that policy makers understand the intricacies of their cities’ rental housing (both for-

mal and informal) and know how to formulate effective, ﬂexible policies to promote and regulate

it. This guide presents the nature of rental housing markets and how they function. The issues of

demand and supply of rental housing are discussed, including the concept of rent-free housing.

The Guide considers the characteristics of good quality rental housing and sound landlord-tenant

rental arrangements, and presents policy options to promote and regulate the expansion of rental

housing – especially for the urban poor.

This Guide is not aimed at specialists, but aims to help build the capacities of national and local

government ofﬁcials and policy makers who need to quickly enhance their understanding of low-

income housing issues.

QUICK GUIDE FOR POLICY MAKERS NUMBER 7

It is a common

misperception that

everyone wants to

own a house. For many

people, rental housing

is a better option at

some stage in their

lives.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONDITIONS

HOUSING IN AFRICAN CITIES:

TO OWN IT OR RENT IT?

In the past few decades, African govern-

ments have actively promoted homeown-

ership through various means: subdividing

new land, extending infrastructure and

transport grids into new areas, making

housing ﬁnance easier to access and more

affordable to more people and smoothing

the way for private sector housing develop-

ers. Expanding a city’s stock of owned hous-

es and apartments creates employment,

stimulates local economies and is seen as

contributing to social and political stability.

In most places, homeownership has come

to be seen as the most secure and most de-

sired housing option and therefore ideal for

Africa’s urban citizens.

At the same time, rental housing suffers

from a negative reputation: landlords are

often perceived as being exploitative and

only too happy to offer crowded and sub-

standard housing at the highest price they

can squeeze from the vulnerable poor.

Rental housing, especially at the lower end

of the market, has also often been seen

as being shrouded in illegality and as con-

tributing to inner-city decay. The frequent

eviction of tenants and their mobility have

likewise been seen as potential sources of

civic unrest.

But even so, great numbers of people who

live in Africa’s cities rent the housing they

live in. In Kisumu, Kenya, 82% of house-

holds were living in rental accommodation

in 1998; in the same year, 60% of house-

holds in Addis Ababa and 57% of those

in Kumasi were also renting their homes.1

Rental housing today makes up a large pro-

portion of the urban housing stock in many

African countries and in many other coun-

tries around the world.

For many people, the decision to rent their housing is a deliberate, reasoned choice. One reason

may be because they can’t afford to buy a house, but there are other, equally important reasons

why they may choose to rent:

s Renting lets people stay mobile and move away when work is available elsewhere, without

being tied down to any particular place or to regular house payments.

s Renting gives people ﬂexibility in how they manage their household budgets, moving to

cheaper housing when times are hard and to better housing, when their incomes increase,

or freeing up more of their earnings for more essential needs like food, education, medical

care or emergencies.

s Renting suits people during transitory periods of their lives, when they are not yet ready to

settle down in one place.

s Renting is convenient for households who may not want to make the long-term ﬁnancial

commitment that comes with buying a house, or to face the long-term costs involved in

repairing and maintaining their own house.

s Renting allows people to send more of their city earnings home to relatives, or to invest in

buying land or building a house or business back in the village.

WHY DO PEOPLE RENT?

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONDITIONS

In a well functioning housing rental market,

people can make rental choices based on

one or more of these reasons, to suit their

current needs and priorities. But where the

rental options in a city are too limited or

inﬂexible, the struggle to ﬁnd affordable

rental housing can lead to great economic

and social hardship for urban dwellers.

RENTAL HOUSING: HOW PEOPLE

EXPERIENCE IT IN CITIES

Rental housing is an important part of the

housing market in all African cities. For

large-scale property developers and inves-

tors, one way to earn money from the prop-

erties they own is to rent them out to short-

term or long-term tenants. Landlords who

operate in this market need to have access

to major sources of ﬁnance for initial pur-

chase of land and construction costs. Ongo-

ing costs such as maintaining the buildings

and paying managing agents are usually

covered by the rentals charged for units in

these properties.

The housing that small-scale landlords sup-

ply may come in the form of cheap rental

rooms, apartments of various sizes, or

rooms built with substandard construction

on illegally subdivided land or partitioned

within dilapidated older buildings. It could

be a shack, a room built in a slum or behind

the owner’s house with shared services. It

could be rented space within a shared room,

or even the right to store one’s belongings

and occupy a certain space within a shared

room for part of the day, according to the

occupants’ working times.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONDITIONS

URBAN RENTAL STATISTICS

ARE UNRELIABLE

It is difﬁcult to collect and compile compara-

ble data on rental housing. Many countries

keep records which do not separate rental

housing from non-rental forms of housing

which are not ownership, such as sharing.

Sometimes the distinction is also hard to

make, especially in some African countries

where extended family households are still

common, in which relatives and grown-up

children with households of their own still

live in the parental home. National rental

statistics can also be misleading, since they

may suggest overall national patterns of

rental housing which hide local realities.

The proportion of rental housing tends to be

much higher in cities than in rural areas, and

also vary greatly between cities within the

same country. Ofﬁcial statistics also do not

capture the numbers of informal rentals in

cities, where landlords make private arrange-

ments with tenants. These arrangements

can be exploitative, as tenants desperate for

accommodation may need to agree to pay

very high rentals for poor quality housing,

and without tenure security. The difﬁcult

situations that these tenants experience are

not recorded in the ofﬁcial picture of rental

accommodation in the city.

Hundreds of millions of people in poor countries rent their homes.2

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONDITIONS

FOUR REASONS WHY RENTAL

HOUSING IN CITIES TENDS TO BE

INVISIBLE

In many parts of West Africa, poor housing conditions are related to social ties and afﬁliations

– many people rely on their relations to provide them with shelter. A homeowner in most West

African societies is expected to accommodate every member of the extended family, rent free in

‘family houses’. In Nigeria, traditionally, it is taboo to sell a family house, or indeed any house,

compound or residential plot, where a head of family was buried. To sell such a property would

be disregarded as a humiliation by members of the extended family.

The big advantage of the system, of course, is that few West Africans are homeless. Migrants

have somewhere to stay when they move to the city. Adult children have somewhere to live

when they grow up and raise their own children. In poor societies, this is a major advantage. As

such, family houses provide accommodation for many of the poor and disadvantaged members

of long-established families at almost no cost to themselves or to the state; they are thus a major

resource in social welfare.

But sometimes the price paid for this is the poor quality of the accommodation. In Ghana,

family houses form part of the “most neglected housing”. However, in general it is recognised

that such non-paying households are relatively well provided for: a higher proportion of people

needing housing obtain it through this form than through commercial rental arrangements.

Policy makers should therefore be mindful of the major contribution which family houses make

in housing those on low incomes, and act to encourage and enable maintenance and provision

of such housing rather than acting as if it is a vestige of a bygone age, of little relevance to the

modern city.3

THE HIDDEN NEED FOR RENTAL HOUSING: ‘FAMILY HOUSES’ IN WEST AFRICA

1. It is often hard to distinguish rental

housing from owner-occupied hous-

ing. Even in large purpose-built rental

complexes, some units may get sold off

to individual owners. There are people

renting in densely built old city quar-

ters, in public housing estates, in hous-

ing schemes for civil servants, in private

sector subdivisions and condominiums.

There are also many renters in slums

and squatter settlements, in peri-urban

land subdivisions and in semi-rural com-

muter settlements.

2. Rental housing is dispersed all over

the city. Rental arrangements exist in

all parts of a city’s housing market. As

housing markets mature and housing

options multiply, the possibilities for

tenancy also multiply. In many cities,

as the supply of rental housing for the

poor increases, the role of exploitative

slumlords tends to diminish.

3. It is hard to distinguish landlords

from their tenants. Many urban land-

lords tend to be small-scale entrepre-

neurs who live on the same premises as

their tenants and who share a similar

social and economic status. Poor land-

lords tend to rent out rooms to poor

tenants, whereas better-off landlords

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONDITIONS

HOW DO PEOPLE ACCESS

RENTAL HOUSING?

rent to better-off tenants. It is often the

case that the tenant earns more than

the landlord, for whom renting out one

or several rooms in his or her house may

be the only source of income.

4. Both landlords and tenants often

keep their rental relationship quiet.

This is to avoid taxes or government

planning or zoning policies which put

restrictions on renting. Because the

rental agreements between landlord

and tenant are personal in nature, the

details are often kept secret from out-

siders or even from other tenants on

the same property.

A well kept secret: Because it is often hard to

tell when housing is actually rental housing, policy

interventions that speciﬁcally target rental housing tend

to be

In some cities, access to rental housing may

be linked to conditions such as income

level, gender or enrolment as a student.

Some public housing, for example, may be

purpose-built for low-income tenants, but

allotted conditionally to speciﬁc groups,

such as slum evictees or shack-dwellers

who have lost their houses through natural

disasters. Some rental housing built by uni-

versities, charities or NGOs may be reserved

for students, for women or for speciﬁc

low-income groups. More generally, urban

rental housing is usually accessed in one of

these ways:

s Housing access based on open mar-

kets: In an open housing market, rental

housing is accessed directly by anybody

who can afford the rent the landlord is

asking, and agrees to abide by what-

ever occupancy conditions the landlord

stipulates.

s Housing access based on relationships:

In many African cities undergoing rapid

urbanization, urban poor households

still have roots in villages, and many

continue to provide temporary, rent-

free (or low-rent) shelter to relatives and

friends coming in from the village. This

kind of arrangement is crucial for sea-

sonal migrants who may stay and work

for only part of the year.

s Housing access based on occupation:

Construction labourers are often provid-

ed with basic housing on the construc-

tion site, domestic workers often stay

with their employers and factory work-

ers are sometimes provided with hous-

ing near the factory. Some government

jobs also come with rental or rent-free

accommodation.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONDITIONS

EIGHT COMMON MYTHS ABOUT

RENTAL HOUSING

1. Everyone owns their homes in rich

countries. There is little relationship be-

tween a country’s economic development

and its levels of homeownership. Hom-

eownership is actually lower in many rich

European countries where well developed

rental markets cater to the needs of all

income groups who prefer to rent rather

than to own.

2. Everyone wants to be a homeowner.

All over the world, people are bombarded

from every direction with the message that

homeownership is the best and the most

desired housing option. There are big ad-

vantages to owning your own home, but

renting also offers its own beneﬁts such as

mobility, ﬂexibility, lower investment and

reduced commitment.

3. Homeownership offers people a bet-

ter life. Ownership is often presented as

more natural than renting — a form of

tenure which makes people legitimate citi-

zens, grounded in their neighbourhoods

and their country’s economic life. Rental

housing, on the other hand, is presented

as exploitative, sub-standard and tempo-

rary places where poorer citizens stay. But

homeownership has its problems, just as

rental housing has its advantages. Good

quality rental housing with secure tenure

agreements can provide the most favour-

able living conditions for many urban citi-

zens.

4. Nobody invests in rental housing. In-

vesting in rental housing may not be as

attractive to private sector businesses and

public sector agencies as it once was. But

at the same time, in many African cities, in-

vestments by individual landlords in small,

scattered, independent rental units have

increased dramatically. Tenants are also

often willing to invest in upgrading their

rental homes, if they know that their ten-

ure agreements are secure.

5. Renting is inequitable. In the days when

most landlords were the rich elites and

most tenants were poor, rental housing

was indeed inequitable. Today, however,

rich landlords tend to rent to rich tenants,

and poor landlords to poor tenants. Espe-

cially among the poor, the landlord-tenant

relationship is often one of mutual depen-

dence. Exploitative landlords do exist, but

it is possible for laws and policies to be

implemented to protect tenants from bad

landlords.

6. Governments should prohibit poor

quality rental housing. Many tenants

live in crowded, under-serviced and di-

lapidated housing, because that is all they

can afford. Often, governments respond

by demolishing this housing, but that only

makes housing problems worse and leads

to even greater overcrowding elsewhere.

A much better approach is to facilitate im-

provement and the expansion of existing

rental housing.

7. Mobility is bad for the poor. Low-in-

come tenants are often people who need

to be free to move from one place to an-

other, to take advantage of job possibili-

ties and better economic conditions that

become available in different places. For

them, mobility means survival, and ﬂexible

rental housing is essential.

8. Homeownership encourages the emer-

gence of a politically stable society. In

the USA, tenants were not allowed to vote

until 1860, because homeowners were

considered to be better citizens, better

neighbours and even better persons. This

kind of thinking inﬂuences many policy

makers as well, who see tenants as people

who are transient, poor, unsettled and un-

desirable, not as valuable workers and citi-

zens who need ﬂexibility and mobility.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONCEPTS

WHO ARE THE LANDLORDS?

Landlords in African countries include com-

panies and individuals, rich and poor per-

sons operating both in the formal and infor-

mal sectors, private sector and public sector

housing agencies, as well as government de-

partments. Private sector landlords include:

investors who build rental units on vacant

land and rent them out; investors who buy

developer-built houses and rent them out;

and owner-occupants who provide rental

units on part of their land or within their

own houses. The only difference between

formal and informal sector landlords is that

formal sector landlords have acquired own-

ership and building rights within the state’s

regulatory framework, whereas informal

sector landlords have not.

Landlords can also be classiﬁed according

to the scale of their operations. Some land-

lords with access to big capital may develop

hundreds of rental units on various pieces

of land, while others may be individual

households or retired persons who oper-

ate on a very small scale, with one or two

rental rooms inside or at the back of their

own house. Small-scale landlords provide a

large proportion of rental housing in Afri-

can cities. Many landlords tend to gradually

make more and more money through their

rental businesses, but shift back and forth

between the various categories described

below, which also describe different invest-

ment scenarios.

Four types of landlords

1. Household landlords may have inher-

ited some vacant land, or have spare

rooms available because the household

separated, relatives died or children

moved elsewhere. Or they may have

left their own house and moved into

employer-provided housing. The income

from rental housing may help them to

meet basic needs, to pay instalments on

their property, or cover the expense of

repairs, maintenance or improvements.

Rental income may serve as a safety net

against their unstable employment. It

may also serve as a substitute pension

after retirement, or as an investment for

the next generation.

2. Commercial landlords are similar to

household landlords, but they oper-

ate in a more professional way. They

have more capital to invest, their rental

business is on a larger scale and they

may employ professional staff to man-

age their rental units. They may target

middle- or high-income tenants rather

than low-income groups, and operate

in a formal way, using written rental

contracts and following the building

and safety standards.

They may use different strategies to

maximize return on their investments

and to minimize their taxes. These are

not necessarily tycoons, but could be

people who want to secure the future

for themselves and their children. Com-

mercial landlords also include the ex-

ploitative “slum lords” operating in in-

formal settlements in Nairobi and other

large African cities.

3. Public sector landlords may include

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONCEPTS

WOMEN AS LANDLORDS

Both men and women act as landlords in

the African context, sometimes in partner-

ship and sometimes on their own. Whether

male or female landlords dominate the rent-

al housing market depends greatly on local

custom and on the demography of the city.

In Nairobi, for example, more men are land-

lords than women, probably because many

more men are found among the political

and administrative class that control land-

lordism in that city. However, “slum landla-

dies” are also a common phenomenon.

Elsewhere, there are often more landla-

dies than landlords. In Botswana, there are

more female than male landlords in ofﬁ-

cial housing projects, and in South Africa

more women rent out accommodation in

the backyards of council houses, mainly be-

cause so many men have died or forsaken

their families.

Where women handle domestic affairs, they

also tend to deal with tenants in small-scale

rental situations, even if a man is the ofﬁcial

owner of the property. Many widows and

separated women also opt to rent out part

of their houses or develop new rental units

to supplement their incomes. Divorce set-

tlements and lines of inheritance can play

government departments and land-

owning agencies, and their rental ar-

rangements may cover purpose-built

social housing for low-income tenants

and institutional housing provided as a

fringe beneﬁt to civil servants in various

government departments.

4. Employer landlords are landlords

whose motive is not proﬁt. They might

include factories and large companies

providing rental rooms for their work-

ers, hospitals providing rental rooms for

their nurses, or universities providing

rental housing for students and faculty

members.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONCEPTS

WHAT MAKES FOR GOOD

RENTAL ACCOMMODATION?

a role here, as does age: because women

tend to live longer than men, they often

rent out the property they inherit.

Small-scale landlordism is sometimes the

only available source of income for women,

either because they have not been able to

acquire the training to take on other in-

come-generating activities, or because they

do not have access to ﬁnance that would

allow them to set up a small business in the

settlement where they live. For women who

need to be at home to take care of children,

elderly or sick members of the family, rent-

ing out part of the property to tenants can

be an economic lifeline, especially where

there is no other income source for the

household.5

Although low-income tenants may choose

not to own their homes, or not be able

to afford to do so, in many other respects

their accommodation needs are the same as

those of homeowners. This section exam-

ines how rental housing needs to respond

to these needs in order to provide good

quality accommodation for tenants.

FACTOR 1: Quality of the rental

housing

s The quality and durability of the build-

ing materials: Most of the rental hous-

ing available to the urban poor is not

of high quality, since the materials that

went into these housing units tend to

be the cheapest available. As a con-

sequence, the rental units are weak,

low-quality and prone to maintenance

problems.

s The level of maintenance: The theory

goes that lack of proper maintenance

makes the quality of rental housing

inferior to owner-occupied housing.

Timely maintenance depends a lot on

where the landlord lives and how good

the landlord-tenant relationship is.

Landlords who live on the premises and

have friendly relations with their tenants

tend to take better care of their rental

units than absentee landlords do. Pub-

lic sector social housing managers, for

example, tend to be slower to react to

maintenance needs than private estate

managers.

s The level of crowding: It is common

that low-income rental units (whether

single rooms, apartments or houses)

have many persons squeezed into small

spaces. High rents often mean that poor

tenants can only afford accommodation

by crowding more people into a small

space and sharing the rent. Different

cultures have different conceptions of

what constitutes crowding. In some

cultures, living with many family mem-

bers is preferable to living in small fam-

ily units, or at least tolerated. But it is

clear that overcrowding is often a prob-

lem, especially in situations where ten-

ants have different needs – for example

women with young children having to

live in crowded rental units with other

people.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONCEPTS

FACTOR 2: Access to jobs and public

services

Another attribute of rental housing which

can have a considerable effect on its value is

its proximity to places of employment, trans-

port, schools, health care, markets, places of

worship and other neighbourhood-level so-

cial infrastructure. If residents have to travel

long distances to earn money or to resolve

other essential household needs, it means

time lost and extra money spent. And that

can easily unbalance precarious household

expenditure and seriously compromise a

household’s ability to survive.

Public services and neighbourhood ame-

nities are usually more accessible and in

greater variety in inner-city locations. That

is why the rent for units in central areas of

the city is usually higher than in peripheral

areas where jobs and public services are

farther away. Investors and property devel-

opers understand very well the importance

of location in determining the value of and

demand for housing. For the urban poor,

as well, location is probably the single most

important factor in the choice of housing

— whether it is owner-occupied or rental

housing. The problem is that market pres-

sures on inner-city land make it difﬁcult to

sustain low-income rental housing in city-

centre locations, when more commercial

uses of the same land offer both private and

public landowners the attraction of higher

incomes.

Informal settlements in peripheral areas

tend to be built fairly close to growth cen-

tres where jobs and transport are not too

far away, and other public services are be-

ginning to appear. These pioneering settle-

ments in peripheral areas of the city also

become important sources of rental accom-

modation of various sorts, and as the city

grows over time, the access to public ser-

vices in these settlements — and their rental

units — will improve.

FACTOR 3: Access to basic

infrastructure

The demand for (and consequently the

value of) a rental housing unit can also be

measured by how easy it is for the tenants

to get access to utilities such as electricity,

water and sanitation. Self-contained apart-

ments, rooms and houses tend to have the

easiest access, whereas rooms with shared

access to services do not always do so well.

The popularity of rental housing dimin-

ishes considerably as access to utilities gets

farther away from the room or is not per-

manently available. Rental units in slums,

squatter settlements and illegally subdivided

tenement structures tend to have the great-

est problems of access to basic services.

This is often because accessing municipal

electricity and water supply is contingent

upon having some legal status or house

registration, which many rental units do not

have. In these cases, tenants are likely to be

forced to share utilities and utility areas such

as toilets, washing and cooking spaces with

others, or else pay higher rates for infor-

mal electricity and water connections from

nearby houses and businesses.

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CONCEPTS

Upgrading programmes are themselves an excellent means by which to increase the supply of

rental housing in low-income settlements. The provision of water, electricity and schools, the im-

provement of transport links, and the integration of self-help settlements into the urban fabric

attract tenants and encourage the creation of more rental housing. Studies from many countries

have demonstrated that tenants wish to move into improved neighbourhoods and that own-

ers respond positively to the increased demand for housing. Not only does the upgrading of

informal settlements improve the quality of owners’ lives, it also increases their opportunities for

generating income from letting rooms.

Unfortunately, upgrading projects all too often ignore the effects both on the existing tenant

population and in terms of the opportunities for generating more rental accommodation. Those

who plan, implement, ﬁnance and study urban upgrading programmes frequently fail even to

mention tenants.

What seems essential in future is that managers of urban upgrading programmes be made

aware of the presence of tenants and of the potential for increasing rental accommodation.

They should take tenants into consideration in planning the programme because upgrading

can create tension between owners and tenants. Since tenants are generally less motivated to

join community projects than homeowners, community organizations must be encouraged to

include more members from among the tenants.6

UPGRADING OF INFORMAL SETTLEMENTS OFTEN BYPASSES RENTAL

ACCOMMODATION

FACTOR 4: Location and social

support systems

Uncertain and irregular employment, vary-

ing sources of income and unexpected ex-

penditures can all force poor tenants to rely

extensively on their families and on the infor-

mal support networks in their communities

when crises occur. At the same time, their

low incomes make it important to minimize

unnecessary expenses on utilities, services

or transport, which can also sometimes be

done by staying with or close to their rela-

tives. When all these needs and constraints

are added together, it is clear that the best

place for the poor to live is near their social

support networks. Since most of these rela-

tionships are settlement-based and formed

over time, location is important.

FACTOR 5: Responsiveness to

tenants’ mobility patterns

Besides temporary labourers, seasonal mi-

grants and short-term factory workers, a

lot of poor people who are working in the

city have good reasons to rent their hous-

ing and to avoid being tied down to hom-

eownership at a certain point in their lives,

either because the time is not right to invest

in housing, or because they may wish to

remain mobile, or because they have other

priorities.

Moving in and out of cities has become an

inherent part of life for many Africans – peo-

ple move constantly between the city and

the rural areas, or between different cities.

Whether they come for higher education,

to ﬁnd a job, or to seek health care, most

people will need ﬂexible accommodation in

the city which, most frequently, is provided

in the form of rental housing.

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CONCEPTS

Fresh graduates and young people want-

ing to gain experience are always on the

lookout for new and better-paid jobs and

may ﬁnd it advantageous to change jobs

frequently. Young tenants may base their

housing choices on the possibility of leav-

ing at short notice and with a minimum of

formalities. Single people may want to save

enough money to settle down elsewhere

later. Others may wish to settle down in the

city once they have found stable employ-

ment.

This mobility is a crucial part of many peo-

ple’s lives and an important part of the

country’s economic and human resource

development. As these people come into

cities they all require housing, and rental

housing at the right price and in the right

location is an important option for many.

FACTOR 6: A tenant’s income level

People’s motivation to rent is usually linked

explicitly to their long-term security, as it is

for people who seek homeownership. The

only difference is that because low-income

tenants lack long-term security of income,

they may opt to set aside whatever money

they can for investments other than hous-

ing, such as supporting an extended family

or saving to pay for education. The need to

rent can arise from different priorities, and

for this reason, the affordability of rental ac-

commodation is directly tied to the cost of

meeting these long-term priority needs. The

lower a tenant’s income level, the less he or

she will be able to allocate to rental, relative

to funds set aside for achieving other long-

term goals.

FACTOR 7: A tenant’s stage in the

life cycle

Rental and shared housing is often a feature

of the earlier stages of people’s lives. Ten-

ants tend to be younger than homeown-

ers and are often single — students, recent

migrants, wage-workers, factory workers

or professionals. Couples who rent tend to

have fewer children than owners. Sharers

are similar to renters, but they have friends,

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONCEPTS

fellow employees or relatives who are able

to provide them with accommodation,

whereas tenants may not have such options

to fall back on.

As improvements in medical care lead to

declining mortality rates and increasing life-

spans, households are now commonly span-

ning three or four generations. That means

there are more people to take care of, in-

creasing pressures on households. This may

result in households deciding to rent space

in their house to others, or it may mean that

younger household members move out to

rental accommodation. For young families,

rental housing is often their ﬁrst step into

the housing market, with the eventual goal

of homeownership.

Declining birth rates, HIV and AIDS, and

growing rates of separation and divorce

amongst married couples also have an ef-

fect on household composition and cohe-

sion, and therefore on housing demand.

The increase in female-headed households,

for example, often means more low-income

households, which require ﬂexible, afford-

able rental housing.

HOW DO LANDLORDS AND TENANTS

WORK OUT THEIR RENTAL

ARRANGEMENTS?

The rental amount a landlord charges will

depend on the quality of the accommoda-

tion itself, as well as the quality of the larger

environment, including the unit’s access to

basic infrastructure, public services, neigh-

bourhood amenities and jobs. In most rental

arrangements, the rental rate will be set at a

level which allows the landlord to proﬁt from

the rental unit and to have a return on the in-

vestment, by earning more than the amount

invested in constructing the rental unit and

the maintenance costs. But in cases of subsi-

dized public sector housing, the rental rates

may be lower than what is required to re-

cover the original investment.

Landlords tend to argue that rents are too

low, whereas tenants, and their associa-

tions, argue that they are too high. Part of

the problem about rent levels relates to what

is meant by rents being “too high”. Some-

times, rents make up a very high proportion

of the tenant’s income but are nonetheless

still too low for landlords to make a proﬁt or

even pay for maintenance of the property.

If a tenant household cannot pay the rent

being charged, the market would suggest

that either the rent must fall or the house-

hold must leave, voluntarily or through evic-

tion. If the rent falls, and landlords receive a

smaller income, the danger is that the quality

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONCEPTS

of the housing supply will decline. A further

problem is that when there is a substantial

difference between the level of rent that will

encourage landlords to rent out property and

the ability or willingness of rental households

to pay that level of rent, landlords will stop

investing in rental housing. Similarly, if land-

lords measure rent levels against what is re-

quired to match the returns from other kinds

of investment opportunity and poor tenants

measure the rents against what they are able

to pay, there will often be a mismatch.

How do tenants pay their rent?

Most rental agreements require the tenant

to pay a ﬁxed sum of money to the landlord

on a monthly basis. In addition, the tenant

usually has to deposit “key money” with the

landlord on ﬁrst taking occupation of the

accommodation – an amount equal to one,

two or more months’ rental, to be kept by

the landlord if the tenant defaults on pay-

ments, or damages the property. In some

countries tenants have to pay a very large ad-

vance on rental, to protect the landlord from

losses if they fail to make monthly or weekly

payments; in Ghana, for example, the tenant

may have to pay up to three years’ rental at

the outset, to secure the accommodation.

Low-income tenants face great difﬁculty in

accumulating the lump sums needed to pay

key money or a big advance. Policy makers,

savings collectives and private sector ﬁnance

institutions can help tenants to meet their

rental costs by developing ﬁnancial tools to

protect landlords against loss of rental, while

helping tenants to save money for regu-

lar rental payments. (See Quick Guide 5 on

Housing Finance.)

HOW THE DURATION OF RENTAL

AGREEMENTS IS NEGOTIATED

Another important variable in rental hous-

ing arrangements is the duration of the

rental agreement. A rental contract can be

made for a speciﬁc period of time – such as

a month, a year, ﬁve years or even longer. In

some countries lease periods are limited by

speciﬁc laws, but can be renewed once the

contract period has expired. Rental housing

contracts may be made as verbal agreements

or involve some simple paper lease contract,

which both landlord and tenant sign. Some

types of longer-term rental agreements re-

quire a written contract, sometimes even

with some ofﬁcial registration of the con-

tract. For some landlords and some ten-

ants, a short-term rental agreement may be

the most suitable one.

Landlords may need to generate income

from a vacant room or house for a short

period, before selling the property. Tenants

may not want to commit themselves to stay-

ing in one settlement or city for a long time.

These short-term arrangements are one of

the reasons why rental housing is such a

useful part of the urban housing market.

But short-term agreements can also lead to

a lack of maintenance of the property, as

tenants may feel too insecure with a short-

tenure lease to invest time and money in

keeping the premises in good repair. Secure

long-term tenure, on the other hand, cre-

ates conditions in which tenants are more

willing to take responsibility for keeping

their rental accommodation in good condi-

tion.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

CONCEPTS

LANDLORD-TENANT

RELATIONSHIPS

The relationship between the landlord and

the tenant is based on an agreement. While

their relationship is usually reasonable,

some common problems are experienced in

African cities:

s The landlords complain that their ten-

ants don’t take good care of the rental

housing, pay their rent late, misbehave

in general and don’t understand that

rising costs of utilities, maintenance and

repairs make it necessary to raise the

rent.

s The tenants complain that their land-

lords fail to maintain the housing prop-

erly, don’t repair things when they

break, charge unfairly high fees for utili-

ties, increase the rent without warning,

turn hostile when the rent is paid a little

late, threaten eviction or fail to return

security deposits when they move out.

Many rental agreements between landlords

and tenants are personal and informal in

nature, concluded outside of any govern-

ment regulatory framework or formal legal

system. This informality and lack of ofﬁcial

documentation makes going to court an

extremely impractical way of dealing with

landlord-tenant conﬂicts. In some cases,

landlords will try to avoid problems by only

accepting tenants who have been recom-

mended by people they know. But in other

cases, landlords use a different strategy and

actively seek to attract strangers and outsid-

ers, because they want to avoid being too

close to their tenants to maintain a more

business-like relationship, in the hopes that

the tenants will take care of their rental

unit, respect the rental conditions and leave

when they are asked to.

There can also be a “dark side” to the in-

formal agreements between tenants and

small-scale landlords, where a landlord takes

advantage of the lack of a written contract

to constantly raise the rent, squeeze more

and more tenants into limited space, let

the building deteriorate into slum condi-

tions, or in other ways disregard the needs

of tenants and the terms of their agree-

ment. Where there is a serious shortage of

low-income housing in a city, unscrupulous

landlords will know that tenants have little

option but to put up with exploitative and

often illegal rental conditions, because they

lack the resources to ﬁnd better housing or

challenge the landlord’s actions using the

legal system.

Resident landlords

Relations are often better when landlords

live in the same building or on the same

land as their tenants. To prospective ten-

ants, it may be reassuring to have a resi-

dent landlord, who will be closer at hand

to ensure good services and help discover

the neighbourhood’s social infrastructure.

Rental housing with resident landlords also

has the reputation of being better serviced

and better maintained, which in turn makes

for fewer landlord-tenant tensions.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

APPROACHES

WHEN TENANTS ARE THEIR

OWN LANDLORDS

For the poor, the collective support net-

works of the communities they live in are

an important survival mechanism, which

helps them to meet the needs and resolve

problems they cannot deal with individually.

Cooperative housing is one form of collec-

tive support that offers advantages because

it pools resources to lower individual hous-

ing costs, fosters collective action and self-

help, increases the creditworthiness of low-

income households, and limits or prevents

speculation.7 This experience has not been

widespread in Africa but in recent years

there has been some evidence of tenant co-

operatives emerging in some African cities.

A housing cooperative is an association that

collectively owns and/or rents and governs

their housing on a not-for-proﬁt basis. Ide-

ally, it works on the basis of providing af-

fordable ownership of housing for its mem-

bers. Credit and reference checks are carried

out on all prospective members. They are

required to attend information and training

sessions before they can become members.

Their membership gives them a share in

the housing cooperative and they share the

costs of ﬁnancing and managing it. They

have a right to live in housing owned by the

cooperative, and to sign a Use Agreement

with it. This makes them part-owners and

part-tenants of the cooperative.

Governments’ support for cooperatives var-

ies. At times it is limited to just ﬁnancial sup-

port. In Egypt, until recently, the government

subsidized 40-year loans, at an interest rate

of 5–6%, to lower-income groups through

cooperatives. In Ethiopia, there have been

more substantial forms of support for co-

operative housing at different times in the

country’s post-revolution history. A new ur-

ban housing policy was introduced in 1986,

which included measures such as providing

standard house plans free of charge to co-

operatives, cutting the maximum plot size

from 500 m2 to 250 m2, creating a govern-

ment enterprise to provide building materi-

als to cooperatives at controlled prices, and

reducing bureaucratic delays to legalising

cooperative membership.8 This approach

was subsequently overtaken by the Condo-

minium Housing Programme which lead to

the unintended promotion of private rental

housing because the intended beneﬁciaries

could not service the debts associated with

it and then started to rent it out to higher

income groups.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

APPROACHES

THE SUPPLY OF RENTAL

HOUSING

1. PUBLIC RENTAL HOUSING:

Large-scale government-built housing has

generally been negligible in African coun-

tries. In some African countries, for example

Kenya, Malawi and Tanzania, a good num-

ber of rental housing schemes were cre-

ated to provide subsidized accommodation

within local authority jurisdictions, mostly

through ‘national housing corporations’.

Elsewhere in Africa government rhetoric

greatly outweighed any achievement on the

ground; in Nigeria, for example, although

public housing was warmly embraced by of-

ﬁcial rhetoric very few housing units were

produced even during the height of the oil

boom.

Where governments have attempted at one

time or another to provide housing for por-

tions of their population, one way of do-

ing this was to develop and provide rental

or rent-free housing units to the families

of public sector employees, including the

armed forces, police ofﬁcers, civil servants

or employees of various government agen-

cies. Another way was to develop and deliv-

er public or subsidized housing, which pro-

vided rental units to vulnerable low-income

groups, including migrants, slum evictees or

ﬁre victims. But since the investment cost of

these public housing initiatives was too high

for governments to construct enough units

to satisfy the real housing needs, there were

bound to be problems with allocating those

units that were built. In many cases, formal

selection criteria were not able to avoid in-

stances of nepotism, patronage, favourit-

ism based on party membership or outright

corruption, and as a result, the projects ex-

cluded the households most in need. And,

in spite of generous subsidies, the rents in

many of these public housing projects were

still too high for the poorest households

to afford. Many government agencies also

proved to be rather inefﬁcient landlords,

and quickly ran into ﬁnancial difﬁculties be-

cause rents were often set too low and sel-

dom rose as rapidly as prices. In the end, the

required investment, problems in allocation

and failure to carry out adequate mainte-

nance – resulting in buildings rapidly falling

into disrepair – often made governments

decide to sell off the units to households

outside the original target group.

The growing need for governments to be

“ﬁnancially responsible” quickly discour-

aged further rental housing developments.

In most African countries, from the middle

1980s local authorities stopped investing

in rental housing and, during the 1990s,

almost all government and corporation

houses were sold. The debt crisis of 1982

and the subsequent need for economic re-

structuring meant that few governments in

Africa had money for housing programmes.

When some kind of recovery began in the

1990s, it was generally argued that govern-

ments should stay out of the housing arena

– if they wished to help poor people obtain

housing, the only suitable way was through

providing up-front capital subsidies for the

purchase of low-cost housing in the mar-

ket.9

2. PRIVATE RENTAL HOUSING:

As a result of the problems associated with

public housing production and delivery,

state involvement in housing has been de-

clining in most African countries. And the

private sector (both formal and informal)

has come to be the major producer of most

urban rental housing for upper, moderate

and low-income households, sometimes

supported by the state.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

APPROACHES

Many countries in sub-Saharan Africa have large stocks of government-built houses, which for

various reasons are in poor physical condition or don’t conform to occupants’ expectations. In

many countries, occupants of such housing make unauthorized but quite considerable changes

and extensions to their dwellings for their own use and for renting out. These changes and ex-

tensions are generally known as ‘transformations’, and can offer useful models for future policy

concerning existing housing estates and new developments. A study completed of 398 houses

in Ghana and 335 in Zimbabwe showed how relatively low-income households are capable of

supplying new rooms and services both to improve their own housing conditions and to supply

rental rooms for family members living rent free. In addition, the new construction is often of a

quality at least as good as the original structures and sometimes envelops the original in a new

skin. Thus, transformation can be seen as a means of renewing the housing stock at the same

time as adding accommodation and services.

In both Ghana and Zimbabwe the estates were originally built as subsidized rental housing for

local workers, but dwellings had been sold to the sitting tenants. In Ghana, the main motive

for extending was the need to accommodate growing households, although many did include

rooms for rental. In contrast, about half of the Zimbabwe extensions were motivated by the

possibility of rental income.

One of the beneﬁts of transformations is that they allow more people to live within the currently

built-up area of the city, and so reduce the demand for peripheral development. In this way they

make more efﬁcient use of existing urban space, instead of adding to the inefﬁcient sprawl.

There is a difference between the types of renting rooms built in the two countries. In Zimba-

bwe, renting rooms in the dwelling is a business venture for at least some proﬁt. Seventy per

cent of transformed houses have tenants, and on average there are three households per house.

In Ghana, however, where rents are low and renting rooms to tenants is not normally a busi-

ness venture, only 27% of transformed houses have renters, while 33% of them have rent-free

(family) occupants.

In both instances, occupancy rates improve with transformation, and transformation can be

seen as a process in which households improve their own use of living space and that of other

residents in their houses. This is one of the best arguments in favour of transformations as a

positive way to develop and improve housing quality and supply, and this approach should be

encouraged in countries that have a great need for housing.10

TRANSFORMATIONS IN GHANA AND ZIMBABWE: RESIDENTS CREATE

NEW RENTAL UNITS

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

APPROACHES

MIGRANTS AND RENTAL

ACCOMMODATION

In many urban settings in Africa, complex

letting and subletting arrangements evolve

amongst people living permanently in the

city and migrants arriving from rural areas.

Sharing of rented rooms takes place in Khar-

toum, Lagos and many parts of West Africa.

Sleeping spaces may be rented in the store-

rooms of commercial enterprises or in guest

houses and hostels. In South Africa, hostels

were constructed during the apartheid era

by private companies and the state to ac-

commodate single black men or women for

the duration of their stay as labourers in ur-

ban areas – they were not allowed to bring

their families to settle in the cities. Several

hundred thousand people still live in these

hostels, often in appalling and overcrowded

conditions. It is quite common for up to 7

people to share a room of less than 10 m2

and for up to 16 families to share a toilet.

In Botswana, the failure of formal public

and private organizations to meet the de-

mand for homeownership throughout the

1990s, the progressive stripping away of

subsidies for homeownership, and the de-

cision to sell plots to urban residents has

escalated demand for, and pressure on, al-

ternative forms of tenure such as renting.

Many homeowners in the sites-and-service

areas have therefore built additional, unau-

thorized rooms in their backyards to rent

out. In the more afﬂuent parts of Gabo-

rone where local authorities have provided

“servant’s quarters” for the high-income

estates, such quarters are increasingly being

sublet by tenants to people earning higher

incomes whose housing needs have not

adequately been met by the municipality.

Heightened demand for rentals has resulted

in rent levels rising, with rents in some parts

of the city consuming over 50% of average

income.

In these difﬁcult conditions, tenants have

had to develop a range of strategies to

meet their housing needs, including sharing

with relatives. The shift from being tenants

to sharers has led to a decline in housing

standards, with many people now sleep-

ing in kitchens and sitting rooms with other

sharers and/or their hosts’ children. Another

strategy is to move to peripheral villages and

towns in search of more affordable rental

accommodation or cheaper land. This has

placed high pressures on peri-urban and

village land, and raised transport costs for

those who have to look further and further

aﬁeld. A ﬁnal strategy of tenants is that of

land invasions, which have become com-

mon since the early 1990s.11

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

APPROACHES

HOW MUCH RENT TO

CHARGE?

For commercial landlords, the rents they

charge their tenants are critical in the de-

cision about whether to set up, expand or

discontinue a rental business. If the rent is

too low, it may affect the quality of the ac-

commodation by restricting the amount a

landlord can spend on maintenance, ameni-

ties and repairs. If rents are too high, units

may stay empty or tenants may seek cheap-

er housing elsewhere or have to be evicted

when they can’t pay.

Some commercial landlords are satisﬁed

with fairly low rents because they consider

rental property a long-term investment and

anticipate a value increase of the property.

Since rental payments are closely linked to a

tenant’s real income, landlords stand to lose

if a tenant’s income drops so low that he or

she can’t afford to keep paying the rent, and

the landlord is left with a difﬁcult decision

to either evict the tenant (and forsake the

chance of any income at all) or keep the ten-

ant and hope he or she will be able to pay

the rent arrears later on.

Rental housing specialists suggest that a

reasonable level of monthly income from

a rental unit should be about 1% of the

market sale price of that unit. The fact that

rent levels are tied to property prices means

that rents can go up as land values rise or as

macro-economic forces inﬂuence property

prices. These market forces put formal rental

housing out of reach of most poor house-

holds. That’s why informal rental housing al-

ternatives in slums and squatter settlements

make up such a large portion of most Afri-

can cities’ rental housing stock. When hous-

ing is developed outside the formal system,

it may have all kinds of drawbacks, but the

main point is that it is more affordable.

Small-scale (household) landlords have a dif-

ferent set of factors to consider, when decid-

ing how much rent to charge their tenants.

While afﬂuent property owners may rent

out a second house or a vacant piece of land

they own at the highest possible rental to

high-income tenants, most small-scale land-

lords are found in low-income settlements,

where they rent out part of their own home

to supplement their limited income. Their

tenants are unlikely to be able to pay rentals

at the same levels as higher-income tenants,

and the landlords may be willing to accept

a lower rental than this simply to meet their

own basic needs.

The 25% rule: Some housing specialists sug-

gest that rental housing is affordable if a

household spends no more than 25% of its

monthly income on rent. This rule of thumb

loses its meaning as you go down the eco-

nomic ladder, where the only rule is that the

poorer you are, the greater proportion of

your monthly income you are likely to pay

for housing and basic services.

In South Africa, almost 50% of township

landlords, especially those in informal settle-

ments, the income earned from renting to

tenants is their sole or main income, and

apart from owning property, these landlords

are among the most marginalised groups

in society: poor, aged women with minimal

sources of regular income. Rentals are most-

ly paid in cash, but can also take the form

of, for instance, the purchase of electricity

for the household, or payments in kind such

as undertaking regular chores or prepar-

ing meals. The majority of these landlords

include the service charges for water and

electricity in the rent rather than charging

for them separately.12

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

APPROACHES

RENT CONTROL: IS IT AN

OPTION?

Over the years, some African governments

have tried to achieve housing affordabil-

ity by forcing landlords to keep rents low.

The introduction of such controls some-

times represented a genuine effort to help

tenants, and some governments in newly

independent African countries introduced

rent controls as part of an ideological com-

mitment to socialism. Rent control was seen

to be an effective way of protecting poorer

groups from exploitation by the rich. At

times, governments used socialist rhetoric

and mechanisms such as rent control as part

of a strategy of winning elections.

Arguably, however, many governments

maintained those controls as a façade to hide

the lack of an effective housing programme.

Public housing construction programmes

were expensive, whereas rent controls cost

the state nothing, as they placed the ﬁnan-

cial burden of renting out housing units

at low proﬁt or no proﬁt on the landlords

who owned them. In addition, since tenants

greatly outnumbered landlords, it was not

always that easy to remove rent controls.

However, in recent years, rent controls have

been discredited, as some negative effects

that they have on the rental housing supply

in cities have become evident. Some of the

main problems with rent control are:

s Equity: Rent controls can operate in-

equitably in three ways. Firstly, they

favour some tenants at the expense of

others. In particular, they tend to favour

those who have lived in rental housing

for years against those who wish to be-

come tenants. When rent controls apply

only to sitting tenants, new tenants lose

out. Secondly, there is no guarantee that

those covered by rent controls are actu-

ally poor. For example, if the legislation

only covers sitting tenants and these are

more afﬂuent than new tenants, the

result is to give a rental advantage to

those who need it least. Thirdly, tenants

clearly gain at the expense of landlords.

And in cases where tenants are more

afﬂuent than the landlords, the effects

of rent control are the reverse of what

is intended. For example, artiﬁcially low

rents in Egypt have meant that tenants

are sitting on a signiﬁcant asset and

the only way an owner can reclaim the

unit – besides waiting for the death of

the tenant and his or her children – is

to offer a sizeable cash incentive (some-

times approaching the market value of

the unit) for the tenant to renounce the

contract and leave.

s Efﬁciency: By distorting market values,

rent control often encourages the inefﬁ-

cient use of housing. For example, small

tenant households may occupy housing

that is much larger than they require,

and for which they would not be pre-

pared to pay the market price, limiting

the availability of accommodation to

larger households. More importantly, by

holding down proﬁts, rent controls dis-

courage some landlords from investing

in rental property.

s Maintenance: Where rent control

makes rental housing unproﬁtable, a

regular complaint has been that land-

lords do not maintain the property.

Rent controlled buildings in cities often

deteriorate to slum conditions, for this

reason.13

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

APPROACHES

POLICIES WHICH REGULATE RENTAL

HOUSING IN AFRICAN CITIES

There are four major problems with rental

housing arrangements:

1. Housing policies are often biased in favour

of homeowners and fail to take the needs

of tenants into account. A lack of policies

that protect the rights of tenants can in-

crease the risk of them being exploited by

unscrupulous landlords.

2. When rental housing conditions are poor,

the problem is not usually with the rental

arrangement itself. Rather, it is related to

the state of a city’s overall housing condi-

tions and the complex factors which cause

poor living conditions and poverty in gen-

eral.

3. Because so much of rental housing is in-

formal and largely “invisible”, a lot of it

falls outside the control of government

rules and regulations. This has allowed

for a great diversity and ﬂexibility in rental

housing markets, but at the same time has

made it more difﬁcult to plan policy recom-

mendations and interventions to support

rental housing.

4. Housing policies that don’t include con-

ditions for acceptable rental agreements

lead to situations in which landlords and

tenants must struggle to claim their rights

when an agreement is breached. Absence

of enforceable written contracts and ef-

ﬁcient arbitration systems means that the

cost of going to court to claim unpaid rent,

ﬁght illegal evictions, or force landlords to

do necessary maintenance must be borne

by individual tenants and landlords, who

usually don’t have the resources to do so.

Using policies to promote rental

housing in a city

If national governments can acknowledge

the gaps in their existing housing policies,

and adjust their regulatory frameworks to

give more support to the aspects of ongoing

rental practices that work well, it will help a

lot to tap the enormous potential of both the

formal and informal rental housing markets.

Where there is political will to improve a

city’s housing policies and make them more

“renter-friendly” in the long term, a good

start would be to promote more competition

in housing markets in the short term. Greater

competition would mean more options and

greater ﬂexibility in what kinds of rental units

are available. This could be done in a number

of ways.

On the supply side, policies could be devel-

oped which reduce obstacles to the produc-

tion of more rental housing so the supply and

variety increase. For example, if homeowners

were offered incentives to build one rental

unit on their property, this would lead to a

new supply of units emerging in all parts of

the city, suitable for tenants with different in-

come levels and rental needs. It is important

to make sure that rental supply exists to meet

the needs of middle-income tenants in the

city, so that this income group does not end

up taking over the available supply of hous-

ing designed to be affordable for low-income

households.

On the demand side, policies which can en-

able more households to rent might include

ones that encourage landlords to offer se-

cure long-term tenure to tenants. This would

make it possible for people to see renting

housing as a safe option, and tenants would

be likely to invest more care and resources

in the maintenance of their rental housing if

they knew they would be able to stay there

over the long term.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

TOOLS AND GUIDELINES

SIX WAYS TO PROMOTE RENTAL

HOUSING THROUGH HOUSING

POLICIES

A strategic approach to developing a work-

able rental housing policy should ﬁrst ac-

knowledge the rental arrangements which

already exist and ﬁnd ﬂexible, realistic ways

to regulate them. In most cities rental hous-

ing arrangements contribute enormously to

local livelihoods, and so measures to gov-

ern and promote their further development

should be formulated. Local dynamics and

housing market conditions are different in

every city, and there is no single formula for

how to do this. But the following six sug-

gestions will help policy makers and gov-

ernment agencies to make their cities more

rental housing-friendly — especially for the

poor.

1. Acknowledge and understand ex-

isting rental practices

Civil society organizations, NGOs and com-

munity organizations, as well as some civil

servants and politicians, are all aware of the

rental housing options in their cities. Their

combined understanding represents a valu-

able local resource which can be channelled

into making rental housing practices more

balanced, more inclusive and more effec-

tive. But before rental housing problems

can be solved, local groups need to work

together to create a common understand-

ing amongst different communities about

tenure issues in the city. One way to raise

interest is by making an inventory of the

local rental housing stock. This inventory

should include both formal and informal

arrangements and occupied and unoccu-

pied rental units. Local organizations can

establish this inventory jointly, exchange

perspectives on their local rental markets

and work together to identify and analyze

the problems. The results should be spread

around in the widest possible way, so as

to widen the local debate on housing ten-

ure options and concerns. To keep up the

momentum, data on rental housing should

be updated regularly, and changes in the

housing situation should be closely moni-

tored. This inventory can provide important

baseline information for better planning

and housing interventions.

2. Get rental housing on the larger ur-

ban policy agenda

Once local organizations have collectively

acknowledged the rental situation in their

cities, the next step is to open up the is-

sue to public discussion and to gather more

detailed information on the inner workings

of rental housing, including the larger eco-

nomic, political and social factors which af-

fect rental supply and demand. Identifying

bottlenecks as well as successes in achiev-

ing lasting rental arrangements should be

given special attention. The information

gained in this way could help to identify the

social and political inﬂuences that underlie

rental housing arrangements in a city, so

that these can be incorporated in the de-

bate and balanced where they are working

against a healthy rental housing situation.

At this point, urban policy makers will be

in a better position to estimate how impor-

tant rental housing is in the local context.

While monitoring developments in the

overall housing market, they can put rental

housing on the policy agenda, either as an

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

TOOLS AND GUIDELINES

issue that merely needs to be regulated or

as a priority that needs to be actively pro-

moted.

Supporting and improving on what is al-

ready there: Some of the best policies are

those that support and improve the systems

of rental housing delivery that are in place

and already working well. Policies which

seek to introduce something new often end

up destroying or hindering these already

functioning systems, or forcing them to go

underground.

3. Work out practical, ﬂexible rental

housing policies and regulations

In the policy-making process, it is essential

for decision makers to maintain a constant

and meaningful dialogue with a broad

spectrum of local community organizations,

NGOs and civil society organizations and

other development stakeholders, to ensure

that the rental housing policy framework

they develop matches the speciﬁc realities

and needs of the local context. Existing and

potential landlords often feel threatened

by government policies and regulations

that either give tenants the right to claim

a house that has been rented to them il-

legally, or don’t sufﬁciently protect them

when tenants fail to pay rent. The adop-

tion of rental policies and regulations that

protect the rights of both tenants and

landlords will go some way in encouraging

landlords to invest more in rental housing.

The framework should include means and

incentives that encourage the production,

exchange and consumption of a variety of

rental housing options. It should also in-

clude a system of checks and penalties to

curb mismanagement or abusive practices

within a city’s rental housing market, and

to prevent the deterioration of its rental

housing stock through lack of maintenance

or repairs.

The policy should also address the need

to inform both tenants and landlords of

their legal rights and obligations relating

to the rental contract, and to provide sup-

port where either party needs to take legal

action to assert their rights. Information,

advice and proactive campaigns to increase

awareness of these rental tenure rights

should form part of the ongoing work of

the municipality in relation to urban hous-

ing administration.

It is important that this regulatory frame-

work is simple, practical and easy to apply.

If a specialized administrative unit has to

be set up to implement the rental housing

policy, it probably means the policy is too

complicated to be practical. A better option

would be to integrate the policy into a city’s

existing administrative procedures, such as

issuing building permits and house registra-

tions, measuring water and electricity con-

sumption or collecting rental income taxes.

It is also important that the policy frame-

work is ﬂexible in these three ways:

a. The implementation of measures and

incentives in the policy framework

should be ﬂexible enough to cover a

wide range of tenant target groups (of

all incomes) and rental housing types.

b. The standards that are outlined in the

policy framework can be adjusted as

needed, in order to allow as wide a

range of actors to take part in the city’s

rental housing market, to produce as

wide a variety of rental options, as

possible.

c. The process of approving these adjust-

ments should be kept as simple and

straightforward as possible and should

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

TOOLS AND GUIDELINES

require a minimum of procedures.

d. Ensure that rental housing arrange-

ments are sustainable, especially for

vulnerable groups and women

To ensure that the regulatory framework

encourages a variety of rental housing to

be produced and rented out (especially for

lower-income tenants, vulnerable groups

and women-headed households), the pol-

icy and regulations should:

s Set minimum standards for the manage-

ment and maintenance of rental prop-

erties. These standards need to take

into account existing rental practices

and rental rates, and forecasts of future

housing needs and future increases in

property values. Incorporating rental

housing into upgrading programmes or

encouraging its development may re-

quire modiﬁcations to regulations and

infrastructure capacities. Involving com-

munity organizations in a settlement

in monitoring compliance with these

standards may be necessary, in places

where corruption could lead to housing

inspectors and landlords colluding to

evade regulations.

s Combine efforts to improve the quality

of rental housing, as well as the qual-

ity of basic infrastructural services in

the areas where rental housing exists.

Critical here is to build rental incentives

into upgrading programmes. In order to

support already-existing systems which

provide affordable rental housing in

many cities, the cost and effort of up-

grading should involve the key stake-

holders — community organizations,

community-based savings groups,

NGOs and landlords. To minimize sud-

den rent increases, this settlement up-

grading could be combined with tem-

porary rent control in targeted areas.

s Provide follow-up measures in these up-

graded informal settlements. This could

include introducing a simple rental con-

tract system which stipulates rights and

obligations of both landlords and ten-

ants. In addition, these measures could

establish a housing consumer forum to

settle disputes between landlords and

tenants.

s Enable established communities to take

over the responsibility for upkeep and

repairs, whenever landlords or tenants

fail to fulﬁl their contractual obligations.

The Rental Housing Act implemented in South Africa in 1999 deﬁnes the responsibilities of

government in respect of the rental housing market. It sets out the duties and responsibilities of

both landlords and tenants, and provides for the establishment of rental tribunals, which have

power to make rulings in line with those of a magistrate’s court, thus allowing for a speedy

and cost-effective resolution of disputes between landlords and tenants. However, a negative

consequence of the new legislation is that it has become extremely difﬁcult for landlords to evict

tenants who fail to comply with the rental agreement, or when the landlord wants to regain

use of the property for other purposes, and this may discourage some property owners from

becoming landlords.14

USING LEGISLATION TO PROTECT LANDLORDS AND TENANTS IN SOUTH AFRICA

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

TOOLS AND GUIDELINES

In situations where it is hard for land-

lords and tenants to jointly maintain the

rental housing, an important alterna-

tive to consider is the establishment of

community-based tenant cooperatives.

Landlords could also subcontract build-

ing management and rent collection to

community-based savings groups or to

community committees of renters, or

to larger city-wide networks or federa-

tions of shack-dwellers.

Gender, poverty, rental and

access

The fact that many of the poorest house-

holds in African cities are those headed by

women, means that rental housing is espe-

cially signiﬁcant for women-headed house-

holds. In many countries, women also face

considerable discrimination in terms of their

access to formal housing ﬁnance markets,

and thus rental housing is the only option

available to them. Some women prefer to

rent in central-city tenements which may

offer greater physical security, a wider

range of support networks and community

acceptance of single mothers.

And the pressure on women to perform

domestic and community roles may reduce

the attraction of ownership in poorly ser-

viced peri-urban settlements.15 Policies

and regulations related to rental housing

therefore should pay special attention to

the availability of rental units in locations

and on terms that allow women to provide

safe, stable, affordable accommodation for

their households, with access to the neces-

sary infrastructure and services.

5. Mobilize ﬁnance to improve and ex-

pand rental housing

To be effective, rental housing policies need

to support easy access to ﬁnancial mecha-

nisms, to encourage landlords and tenants

to maintain, repair and improve the qual-

ity of the rental housing that already exists,

and to increase the city’s stock of rental

housing.

The nature of these ﬁnancial mechanisms

depends on the kind of ﬁnancial resources

local authorities have at their disposal, or

can get through central government agen-

cies. Interventions could include:

s Providing subsidies to poor owners, or

poor private landlords, who create living

space for others such as the household

rental grant programme used in South

Africa. This scheme supports the expan-

sion of small-scale rental units in poor

settlements by providing capital grants

to landowning households to build or

renovate housing rental units of a cer-

tain minimum standard on their land.

s Providing microcredit for small-scale

landlords. Governments can also en-

courage banks to move into the low-

income sector and to lend to landlords

wishing to enlarge or improve their

rental properties.

s Mobilizing ﬁnances from locally based

sources and through cross-subsidy poli-

cies. Tapping into these different sourc-

es of income to provide new rental

housing is especially important where

social housing interventions are linked

to urban regeneration/renewal, which

often tends to displace and squeeze

the poor out of well located areas. (See

Quick Guide 5 on Housing Finance.)

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

TOOLS AND GUIDELINES

What to do when cities don’t

have funds for grants and

subsidy programmes

When the local authorities don’t have large

funds available (which is often the case)

they could achieve similar ends by offering

tax incentives to owners to make it worth

their while to develop affordable rental

housing units on their land. These tax in-

centives could take several forms:

s boffering reduced tax rates on income

from rental housing;

s giving tax rebates to low-income land-

lords who invest in improvements to the

quality of their rental housing units;

s granting tax deductions to housing de-

velopers who produce or renew rental

housing which speciﬁcally targets low-

income groups.

Such tax incentives, however, will only have

relevance for those landlords operating in

the formal housing market who already

pay land, property and/or income taxes.

The local authorities therefore need to con-

sider ways to recognize and regularize the

status of informal landlords, and to offer

them incentives to participate in the for-

mal housing systems of the city. Landlords

will be more likely to accept the payment

of taxes on their property if they see that

the authorities are using their tax money

to upgrade the area and provide adequate

services to the settlement where the prop-

erty is located.

6. Encourage large-scale and small-

scale investment in rental housing

Local authorities must look into strate-

gies and incentives that make large-scale

and small-scale investment in low-income

rental housing more attractive and more

sustainable to investors. Besides offering

tax incentives to investors who produce

new rental housing, these measures might

include ways to increase tenants’ “owner-

ship” of a project.

s Diversify rental housing options for the

poor in and across the formal-informal

and the public-private sector divides:

Formal housing projects (in the pub-

lic and private sphere) do not have to

stick to the standard concept of self-

contained rental housing units. Besides

being costly, severely under-utilizing

a scarce commodity (urban land) and

often very badly designed (so-called

sleep cities), such units can enforce

social isolation and cut poor people

off from economic activities and social

support systems they rely on to sur-

vive. One option would be to develop

transitional communal housing (tran-

sitional because this is aimed at entry-

level rentals): houses with single rooms

and shared facilities and communal ar-

eas. Other options could target tenant

groups (rather than individuals) willing

to commit to long-term collective leases

on housing. Or tenure arrangements

could allow tenants to shift from one

type of rental agreement to another

during their rental contract period – for

example they could start as monthly

renters, but decide later to purchase

their unit with a mortgage when they

are ready for this step.

s Promote alternative, participatory forms

of rental housing management: While

the ownership of a large rental housing

block or settlement might still remain

with the public, private, or public-pri-

vate owner, the housing itself can be

leased by a tenant cooperative which

then rents out the individual units to its

members. It is also possible that a rent-

al housing block or group of separate

units could be built originally, or bought

later, by a similar tenant cooperative —

which then becomes an owner cooper-

ative. In all these arrangements, the ad-

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

TOOLS AND GUIDELINES

vantage of cooperative management of

rental housing is that the tenants who

occupy that housing participate central-

ly in maintaining and making decisions

about their housing — collectively. This

approach is not yet widespread but an

important avenue for policy makers to

explore for its relevance and sustainabil-

ity in speciﬁc contexts.

s Get NGOs and CBOs to help: NGOs and

community-based organizations (CBOs)

can help with awareness-raising, train-

ing and organizational support to com-

munities of low-income tenants. NGOs

should advocate for the housing rights

of poor tenants, but they can also sup-

port low-income tenants to develop

their own tools and knowledge to take

greater responsibility in managing, up-

grading and maintaining their rental

housing — individually or as tenant col-

lectives or CBOs. NGOs can also help

poor tenants to form collective organi-

zations (like consumer forums or tenant

cooperatives) and help start selective

savings and loan groups among groups

of poor tenants in the same area or rent-

ing from the same landlord. All these

measures can expand people’s tenure

options, while they integrate rental

needs into people’s more comprehen-

sive process of self-development.

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

RESOURCES

REFERENCES

1. UN-HABITAT (2003) Rental Housing, an Essential Option for the Urban Poor in Developing Coun-

tries. Nairobi: UN-HABITAT

2. UN-HABITAT (2003) Rental Housing, an Essential Option for the Urban Poor in Developing Coun-

tries. Nairobi: UN-HABITAT

3. UN-HABITAT (2003) Rental Housing, an Essential Option for the Urban Poor in Developing Coun-

tries. Nairobi: UN-HABITAT. See also Amole B, Korboe D & Tipple G (1993) The family house in

West Africa. Third World Planning Review 15: 355–372; Tipple AG (1987) The development of

housing policy in Kumasi, Ghana, 1901 to 1981. University of Newcastle-upon-Tyne, Centre for

Architectural Research and Development; Tipple AG & Willis KG (1991) Tenure choice in a West

African city. Third World Planning Review 13: 27–46.

4. Adapted from UN-HABITAT (2003) Rental Housing, an Essential Option for the Urban Poor in

Developing Countries. Nairobi: UN-HABITAT.

5. UN-HABITAT (2003) Rental Housing, an Essential Option for the Urban Poor in Developing Coun-

tries. Nairobi: UN-HABITAT

6. UN-HABITAT (2003) Rental Housing, an Essential Option for the Urban Poor in Developing Coun-

tries. Nairobi: UN-HABITAT

7. UN-HABITAT (2001) Cities in a Globalizing World: Global Report on Human Settlements 2001.

Nairobi: UN-HABITAT

8. UN-HABITAT (1989) Cooperative housing: experiences of mutual self-help. Electronic version

published in 2006.

9. UN-HABITAT (2003) Rental Housing, an Essential Option for the Urban Poor in Developing Coun-

tries. Nairobi: UN-HABITAT

10. Tipple AG, Owusu SE & Pritchard C (2004) User-initiated extensions in government-built estates in

Ghana and Zimbabwe: Unconventional but effective housing supply. Africa Today 51(2): 79–105

11. Khan F (2009) Background paper on rental housing in Africa. Prepared for UN-HABITAT, Nairobi

12. Shisaka Development Management Services & CSIR Built Environment (2006) Resource Report

6: Research into Landlords in Townships. Report produced as part of the Housing Entrepreneurs

Research Project funded by the Finmark Trust, the Social Housing Foundation, Nedbank, and the

National Department of Housing, South Africa

13. UN-HABITAT (2003) Rental Housing, an Essential Option for the Urban Poor in Developing Coun-

tries. Nairobi: UN-HABITAT

14. Social Housing Foundation (2008) Supply and Demand of Rental Accommodation in South Africa.

Johannesburg: Social Housing Foundation

15. Khan F (2009) Background paper on rental housing in Africa. Prepared for UN-HABITAT, Nairobi

QUICK GUIDES FOR POLICY MAKERS 7 RENTAL HOUSING

RESOURCES

Rental Housing

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