DEVELOPING LOCAL GOVERNMENT RESPONSES TO BACKYARD RENTAL

1. DEVELOPING LOCAL GOVERNMENT RESPONSES TO BACKYARD RENTAL Institutional Readiness Assessment 13 August 2014 Cricklewood Manor, Pretoria

2. Contents • Background and consultation process (1) • Current situation (1) • Profile of tenants and landlords (1) • Summary of existing municipal responses (2) • Problem statement from a municipal perspective (2) • LG vision for backyarding sub-sector (2) • Principles for intervention (3) • Suggested approach and interventions (8) • Conclusion (1)

3. Background and consultation process to date Background research paper by consultants completed March 2013 • Included14 South African case studies and 4 international case studies on how government has approached the issue of backyard dwellings • Serves as the evidence and analysis base for this SALGA position • First draft of policy proposal completed by July 2013 • Presented to NDHS Strategy and Research Task Team 6 June 2013 • Presented twice to NDHS Policy Task Team (22 Aug 2013; 13 Feb 2014) • Aug-Sept 2013: Consultation workshopsheld in each province for all municipalities and provincial departments of human settlements • Workshops conducted in conjunction with the National Department of Human Settlements • Approved by SALGA National Executive Committee January 2014 • National Stakeholder Meeting at SALGA 27 February 2014

4. Current situation 1.25 million households, or 8.7% of all households, now live in backyarding units or second dwelling units, according to Census 2011. 25% of all households now rent. 43% of all backyard structures are formally constructed (second dwellings and formally constructed rooms)

5. Demand and supply • Backyardingmeets needs of households who are unable or unwilling to access formal accommodation • One and two member households • Don’t qualify for subsidised housing • On the waiting list for subsidised housing • Fall into the ‘Gap’ market • Multi-nodal households • Prefer rental accommodation over ownership • Need temporary or short-term accommodation (including students, traders, contract workers, work seekers) • Two main factors motivating landlords: • Profit/additional income • Social reasons: to provide accommodation for family or friends

6. Summary of existing municipal responses • ‘Laissez-Faire’ (leave alone): Many areas are not controlled in any way, leaving market forces of supply and demand to determine the prevalence, number, type and occupancy of backyard structures. • Disallowing “illegal structures”:Zero tolerance approach to unapproved structures in all areas. May lead to higher rentals. • Building control:Only allow development of conventionally constructed, approved backyard structures, with access to minimum standards of services. (Cosmo City) • Services improvement for municipal stock: Install additional separate connections, shared ablutions, prepaid electricity connections and refuse removal. (Cape Town)

7. Summary of existing municipal responses, cont. • Upgrading of structures and services in informal areas: De-densifyareas to reasonable densities to overcome health and safety concerns, investing in infrastructure upgrades and connections, and regularising ownership and rental arrangements. (Zola and Orlando) • Active encouragement through zoning tools: Implement blanket second dwelling unit policies on a city-wide basis. Relaxed building lines, increased densities, relaxed building norms and standards. (CCT and Joburg) • Inclusion in greenfieldsdevelopment:Include backyarding units for rental by beneficiaries in the primary designs of new developments (Alexandra)

8. Problem statement froma local government perspective • Many structures areillegal and contravene municipal by-laws and/or do not comply with the norms and standards set out in national building regulations • Backyard accommodation may be unsafe and unhealthy, due to too many units on a plot, poorly constructed informal dwellings and insufficient space. • Backyarders may not have access to adequate basic services, which are a constitutional rights and also vital for adequate health and safety.   • Potentialover-burdening of existing infrastructure carrying capacity. • Backyardingis responded to as a negative, rather than potentially a positive urban and housing process.

9. Problem statement, cont. Additional problems encountered by municipalities when designing and implementing interventions into backyard rental • Lack of specific policy or funding framework • Double subsidies to select beneficiaries • Unintended negative outcomes (displacement) • Adequacy of municipal institutional capacity and resources for enforcement

10. LG vision for backyarding • Backyarding is not unique to SA and will always exist to some extent, as part of migration and urbanisation process • People move into cities seeking employment and need transitional and/or affordable accommodation which puts them close to work opportunities. • Serves as primary means for poor households to enter and access the city. • In South Africa is also uniquely part of historical legacy of apartheid • Growth of backyarding also a result of government-subsidised housing policy which has failed to significantly shift these spatial patterns in cities, and has also inadequately addressed the needs of backyard dwellers who do not qualify for subsidies or for whom the available housing options do not fit their needs. • Partly a result of gaps or failures of existing housing policies and programmes - Needs not met by CRU and social housing stock

11. LG vision for backyarding, cont. • Vision: Backyard dwellings would never be fully eradicated but would continue to play a limited and managed role in providing access to our cities. • Provide a temporary option to some residents, but should not be a long-term solution for households. • Local government’s aim, therefore, is to slow the growth of backyard units, and to improve the quality of accommodation for existing tenants, without formalising or over-regulating the sector. • Research and experience: If government interferes with this highly sensitive market, the result will be a loss in social cohesion and a reduction in the supply of available cheap accommodation in well-located areas on the city.  • However illegality of many of current backyard units cannot be ignored. • Responsible local government cannot continue to ignore building code violations and condone wide-scale illegality evidenced in unsafe buildings, unhygienic environments, and lack of services which is unhealthy. • But strict enforcement of current regulations to backyard sectors is also unrealistic, given insufficient capacity, funds and political will at local level.

12. Principles to be followed by LG in responding to backyard dwellings • Backyarding can have potentially negative outcomes (slum-like conditions, high densities that create health and safety concerns, over-burdening of infrastructure). • Despite potentially negative outcomes, backyarding is not simply an illegal or criminal activity which must be eradicated. Municipalities should pro-actively engage with backyarding as a critical and useful, housing delivery submarketfor households not catered for elsewhere. • Backyardingis a multi-billion Rand sub-market of the rental sector which can play a positive role in city-building and the development of sustainable human settlements if municipalities focus their interventions on utilising, guiding and facilitating its positive aspects. • Fuelled by private enterprise, requires little direct intervention by municipalities • Contributes to densification, better use of well-located land

13. Principles, cont. • Must support economic potential in backyarding. Provides small-scale and household landlords with complementary and supplementary income. • Must support social function of backyarding. Allows for social cohesion and mutual support. • Given the unique characteristics of this informal sub-market, misguided or heavy-handed municipal responses can easily negatively rather than positively influence the outcomes achieved through backyarding. • Backyardingis a complex and highly differentiated accommodation sub-market. Therefore no single intervention is appropriate for all areas where backyarders reside. • Must first conduct research to understand the specific make-up and needs of backyarders in their municipality, before selecting or developing an appropriate intervention. • Backyardinginterventions must be area-specific.

14. Principles, cont. • Limited regulation. Primary approach should be to create incentives and facilitate investment by private landlords to lead to better functioning of rental market. • Strict enforcement of regulation as option of last resort. • Use Rental Tribunal and courts for cases of clear exploitation and trespassing of rights. • Double subsidy from government is acceptable in following situations: • When purpose of intervention is to provide poor households who lack basic services with access to those services • Where public investment is creating an increase in overall living conditions for residents of the area.

15. Suggested approach and interventions • Municipalities are not advised to undertake programmes to significantly de-densify backyard rental units or upgrade top structures (with government funds) • This will most likely lead to displacement of households to worse living situations in informal settlements or elsewhere. • Furthermore, displaced households—from state or private land—must be accommodated by the municipality as per legal obligations. • Best approached through: • Increase services to existing backyard tenants • Indirect interventions which create an enabling environment and incentives for landlords to improve living conditions

16. 1. Interventions to improve situation of tenants currently living in backyards 2. Interventions to increase supply of decent, affordable rental units in backyards On State-owned land Government subsidised housing developments On Privately-owned land Non-subsidised private

17. Options for improving existing situation of backyarders staying on state-owned land • Limit intervention to improving access to services • Subsidised construction or improvement of top structures will lead to displacement and/or rent increases • Lobby for change to USDG and MIG conditionsto allow munsto use those funds to: • Upgrade of current bulk and connector services to accommodate the additional service load from densification (backyarders) • Additional refuse removal bins • Install single on-site connection in backyard to provide access to services (water, sanitation, electricity) with separate metering • Benefits of this approach: • Allows direct access by backyarders to FBS from municipality • Backyard tenants still eligible for housing subsidy • Contributes to Outcome 8 goal to provide access to basic services for poor households • Lobby for extension of USDG to additional urban municipalities

18. Options for improving existing situation of backyarders staying on private land • NB: Most problematic area: • Obtaining landlord permission • In government-subsidised developments, public investment is double subsidy to landlord • Question of ongoing role/control of state post-investment • Obtain landlord’s permission to install single on-site connection in backyard (as per state-owned land)—using MIG or USDG funds • Requires change to policy • Pro forma contractual documents could be developed • Motivation would include argument that investment should be written-off and understood as part of broader investment in the area, Outcome 8 • New affordable credit product targeted to landlords—toenable private landlords to improve existing dwellings and/or install services • Indirect state support to create enabling environment for improvement by landlords • Explore this with NDHS and NHFC • Would need to incentivise take-up by linking programme with stricter enforcement from municipality

19. Options for increasing supply of affordable rental in new housing developments on state-owned land • Create settlement layouts which facilitate and enable backyard dwellings • Stand layouts appropriate for subsequent construction of secondary dwellings • House design providing for later extension or addition of second stories • Design service specifications for new developments to include: • Planning for excess (bulk) capacity for informal rental growth, densification • Planning for separate water, electricity and sewerage connections for household tenants • Separate metering for services within multiple rental units and household rental

20. Options for increasing supply of affordable rental in new housing developments on state-owned land, cont. • Include raft foundation and addtl service connection in backyard of subsidised houses • Beneficiary builds top structure with his/her own resources. Or via loan from housing finance institution (repaid by rental income). • Requires change to HSDG policy • Effectively provides two housing opportunities, plus livelihood strategy for beneficiary  • Similar to self-building schemes used in some other countries which aim at providing government assistance to pay for the most critical and expensive elements of the backyard unit, while allowing the tenant or landlord to utilise their own resources for top structures and finishes. • Proposal needs further research and development

21. Options for increasing supply of affordable rental in new housing developments on private land • Indirect govt interventions to provide incentives to landlords and facilitate processes to develop decent, affordable backyard rental units. • Govt housing programmes will never be able to provide rental units at sufficient scale in sufficiently well-located areas to address need • However, by making use of the excess space—where it is available--- on private properties, we further two policy aims: increase supply of affordable rental and densify our urban areas • Facilitate planning and streamline plan approval procedures • Revise current approval processes to make it faster, cheaper and less complicated to approval to construct a permanent second dwelling on existing properties • Provide technical support for product development aimed at rental landlords • Generic product design and development support • Facilitate access to building materials for the construction of rental accommodation • Facilitate construction and marketing of pre-fabricated units • Sub-division and purchase by state

22. General approaches:for improving conditions of existing backyardersand increasing supply of affordable backyard rental • Introduce split-zoning schemeswhich enable informal, non-compliant structures in back (CCT example) – Opportunity from SPLUMA • Relax building code for secondary units, and/or allow for differentiated regulations for informal dwellings • NB: Must be done carefully to ensure minimum safety standards (fire and flood) • DTI and NCRS plan to review those regulations in 2014 to address a number of issues, including the need to consider informal dwellings • Introduce new capital grant for landlords: Suggestion by NDHS to investigate possibility of introducing a new National Housing Programme that provides capital grant to landlord • Based on the principle of equal contribution by the private land owner • For example: Govt grant covers 50% of cost of services and the backyard building; remaining 50% provided through affordable credit repayable by the landlord over specified loan period

25. Thank you!Comments or questions to:Alison TshanganaSpecialist: Human SettlementsSALGA National OfficeCell: 083 280 2759Email: atshangana@salga.org.za