Urban Housing: Recognising the Role of the Rental Sector

Tanzania is currently in the process of developing a National Housing Policy. This offers an opportune time to look into a sector that provides housing to many, if not most urban households: that is, rental housing. Rental housing is a vital component in accommodating large number of families, in both developed and developing countries. The proportion of renters is significant even in countries with high GNP per capita. Rental housing has a dominant position in countries with low GNP per capita. For instance, in the city of Kumasi in Ghana about 57 per cent of households are tenants.
In urban cities of Nigeria, renting is a popular tenure choice; about 49 per cent in Lagos and 65 per cent in the city of Benin. According to the National Population and Housing Census in Tanzania conducted in 2002, the majority of urban residents in the country are tenants in housing that is constructed in unplanned areas. A high proportion of urban residents in Tanzanian cities are tenants who rent rooms in privately owned houses in unplanned settlements. However, rental housing gets little or no attention in housing demand and supply policies and in urban land use planning and regulation, as well as in urban management in general.

The demand for rental housing is apparent in both rich and poor nations. Rental accommodation thus is an acceptable form of tenure for both rich and poor households. Yet rental housing seems to be ignored in policy debates, except when it is politically expedient to discuss rent control as a way of protecting poor households, although this approach has been abandoned or greatly modified in most countries. Owner occupation may be seen as a natural and desirable development and many countries in the world have undertaken steps to promote home ownership.

However, given high levels of urban growth in a situation of growing poverty, the proportion of non-owners has shown an increasing trend in many cities of the developing world. There is thus a need for the government to re-examine its approach to rental housing. In particular, it has to review problematic issues in the rental market such as: (1) the general supply of quality rental housing (2) affordability (3) landlord and tenant relationships and (4) management of public rental housing. Given the large demand for rental housing and also given the fact hat housing is a major investment for large and small investors, the government needs to develop a vision on how it will intervene in this sector in such a way that it remains a vibrant one, providing housing that is increasing in quality as time passes by and where landlord and tenant relationships remain cordial.

In the past, governments easily saw landlords as shylocks bent on squeezing the last drop of blood from poor tenants, in the form of exorbitant rents, key money and threats of eviction. The intervention was mainly in the form of rent control legislation. A typical rent control legislation fixed the maximum rent that a landlord would charge, set up a process of determining or reviewing that rent (e.g. through an appointed rent tribunal); forbid the demanding of key money and/or the demanding of rent in advance; forbid eviction and the landlord getting vacant possession except though some set down (and difficult) procedures.

Legislation also required landlords to keep their houses in a good state of repair (even where they received low rents). Land economists do not like rent control for a number of reasons: It stifles the supply of rental housing, creates artificial demand, obstructs labour mobility, engenders low consumption of housing and leads to the dereliction of rental housing. Besides, rent control benefits only those who are currently in rental housing and ignores the nuances in the relationships between landlords and tenants which might be for their mutual benefit. Most rent control legislation has in the past seen the landlord, not as an investor, but as an exploiter. (This has certainly been the case in Tanzania).

That landlords may be as poor or poorer than their tenants, has always been ignored. In his Phd thesis, Juma Kiduanga (“The constraints underpinning the provision of rental housing by low-income landlords in Dar es Salaam”, University of Dar es Salaam 2002), dispelled the view that landlords were always rich. Many were poor pensioners compared to their young and energetic tenants. In another Phd thesis, the late Dr Kabwogi found that rent control was in most cases ignored by both landlords and tenants, (“The Implementation and Impact of Rent Control in Tanzania”, Department of Town and Regional Planning, University of Sheffield., UK, 1997). In most countries, rent control has historically been introduced as a short term measure to prevent unjustified increases in rents in a situation of crisis or shortage.

Once introduced, however, rent control became difficult to remove from the statute books. The first rent Act was introduced in the UK during the First World War in 1915. At that time, some 90 per cent of housing was provided by the private landlords. By the late 1960s private rental housing had fallen to around 15 per cent of total housing supply. In Tanzania, rent control was first introduced in 1941, again during the War. The legislation was meant to regulate the increase in rents and mortgage interests because the war situation adversely affected housing supply. Full rent control was introduced in 1951, but was meant to last for one year unless extended.

As it happened, rent control legislation was extended annually, though with some deregulation measures, until 1959, when rent control was abolished all together. Soon after independence in 1962, rent control was re-introduced on the argument that house rents had gone up dramatically. The Rent Restriction Act 1962 was repealed and re-enacted as Rent Restriction Act 1984. The rent control regime in the country tended to affect adversely property owned by the public sector, particularly those of the National Housing Corporation. Sitting tenants resisted any rent increase and were quick to resort to the courts where litigations would drag on for years. Rent control was finally abandoned altogether in 2005.

In thinking about urban housing policy, rental housing must be considered. Interventions in the form of rent control should not be considered. Instead steps should be taken to encourage more production of good quality rental housing. Such steps include setting aside land for the construction of rental housing; extending micro-finance loans to small-scale landlords to increase the supply and improve rental housing. Since most tenants live in unplanned areas, steps to upgrade such areas should have an agenda to increase the supply of rental housing. The provision of micro-credit for small scale landlords should be high on the policy agenda.

There would be the need to create appropriate planning and rental regulations, not only to increase the supply but also to ensure cordial relationships between landlords and tenants. Planning regulations would include the encouraging of those who have or are allocated land to provide rental housing. Rental regulations would clearly define the responsibilities of both landlords and tenants and put in place simple and easy to execute contracts and dispute resolution arrangements.
Among government actors, private rental tenure is largely seen as an issue between landlords and tenants.

Tanzanian approach to addressing housing focuses more on land for housing than on shelter. This means that house-owners who control land have a more important role in urban planning and policies than tenants have. Upgrading policy focuses on residents’ involvement in upgrading unplanned areas, by organising in Community Based Organisations. This means that owners who live for a longer period in an area benefit more from settlement improvements than tenants. Tenants are relatively mobile and do not take for granted that they will stay in the same house for long.

This raises the question of tenants’ possibilities to influence as well as their rights as citizens, as compared to that of owners. The question of citizens’ rights for dwellers in informal settlements has received increased attention during the last years in international housing policy discussions. There is an evident need to intensify and diversify this discussion. The UN HABITAT’s report published in 2003 on rental tenure in developing countries, states that despite the fact that the organisation’s efforts extending for more than ten years, governments continue to neglect rental tenure. Rental housing is thus invisible to policy makers. This needs to change and the interdependency between unplanned settlements, urban planning and rental tenure needs to inform policy.

Source: http://www.dailynews.co.tz/