Small-scale rental housing: moving from the low to the high road

Abstract

Small-scale rental housing offers wide-ranging public benefits and significant opportunities to spur a post-Covid economic recovery. At the same time, its informal and unregulated character poses health and safety risks, impacts service and infrastructure provision, and inhibits sustainable densification of well-located neighbourhoods. Allowing business as usual risks taking entire areas onto a 'low road' of overcrowding, insecurity and instability. Experts, practitioners and city officials agree that a fundamental change in approach is required. Recent civil-society and private sector initiatives have started to improve the capacity of the sector, but urgent government action is needed to put small-scale rental housing onto a 'high road' scenario. This report offers new insights into the key barriers as well as the regulatory reforms, financial incentives and public support measures required to grow and formalise these investments. Drawing on rich empirical evidence collected in the latter half of 2021, the report highlights the diversity of small-scale developers, their differentiated needs and capabilities to grow and formalise, and the important role of the state in shaping urban development. We distinguish between incremental homeowners, debt-financed homeowners and micro-developers to demonstrate variations in the way township property developers operate.