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close this bookSupport Measures to Promote Rental Housing for Low-Income Groups (HABITAT, 1993, 132 p.)
View the document(introduction...)
View the documentFOREWORD
close this folderINTRODUCTION
View the documentA. Rental housing in a global perspective
View the documentB. History of legislative intervention and government policies on rental housing
View the documentC. Basic changes in housing policies in developing countries
View the documentD. Why rental housing should receive more official attention
View the documentA. The nature of owners, tenants and sharers
View the documentB. Preferences for owning, renting or sharing
View the documentC. The choice between different kinds of non-ownership
View the documentD. Who invests in rental housing?
View the documentA. Rent-control legislation
View the documentB. Effectiveness of rental laws in controlling rent levels and evictions
View the documentC. Legislation and the needs of low-income groups
View the documentD. Planning and zoning regulations affecting production of rental housing
View the documentE. Different forms of legislation affecting provision of rental housing in different cities
View the documentA. Profitability of rental investment
View the documentB. Rent levels relative to prices, income and cost of owner-occupation
View the documentC. Taxes on rental property
View the documentD. Government efforts to encourage owner-occupation through incentives to builders
View the documentE. The rationale of small-scale landlords
View the documentA. The public sector
View the documentB. Subsidies, targeting and non-economic rents
View the documentC. Sub-letting of public housing
View the documentD. Encouraging formal sector private investment in rental housing
View the documentE. The roles of employers, community organizations, NGOs and cooperatives
View the documentA. Impact of upgrading and legalization programmes
View the documentB. Impact of legalization programmes
View the documentC. Incentives for encouraging informal sector rental housing
View the documentA. Informal controls on landlord-tenant relationships, joint agenda and the symbiosis of owning and renting
View the documentB. The role of the courts, local tribunals, community arbitrators and local controllers
close this folderVII. FUTURE ACTION
View the documentA. The key tasks
View the documentB. Rent controls
View the documentC. Planning and zoning regulations
View the documentD. Public-sector housing
View the documentE. Encouraging formal-sector private investment in rental housing
View the documentF. Subsidies, targeting and non-economic rents
View the documentG. The role of employers, community organizations, NGOs and cooperatives
View the documentH. Incentives for public and private sector collaboration
View the documentI. Rental housing in the central city
View the documentJ. Incentives for encouraging informal-sector rental housing
View the documentK. Changing the role of the courts, local tribunals, community arbitrators and local controllers
View the documentL. Options for landlord-tenant collaboration
View the documentVIII. CONCLUSION
View the documentBIBLIOGRAPHY
View the documentBACK COVER

D. Who invests in rental housing?

The image of the large-scale landlord does not seem appropriate to the majority of landlords operating in most third-world cities. Of course, many cities contain some large landlords but there are remarkably few examples of landlords controlling a high proportion of the rental housing stock. In Africa, Nairobi seems to have many large landlords (Amis, 1984) but even there it is doubtful whether they dominate the market. As Lee-Smith (1990: 182) points out for two low-income areas of the city: “the majority of landlords were not part of the high-income group”. In the slums of Bangkok, Pornchokchai (1992: 152) notes the presence of some “houselords” who operate on a large-scale and in a business-like way. In Nigeria, too, “in city after city there are a few... wealthy businessmen and retired top civil servants, who own dozens of rental units” (Ozo, 1993: 33).

Generally, however, research is indicating that most third-world landlords operate on a small scale. In Latin America, the situation has changed since the nineteenth and early twentieth centuries when there were many large operators; most commercial landlords have long since departed from the scene. In Santafe BogotBucaramanga, Caracas, Guadalajara, Guatemala City, La Paz, Mexico City, Santa Cruz and Santiago de Chile, the typical landlord is now a former self-help builder (Beijaard, 1992; Coulomb, 1985; Edwards, 1982; Gilbert, 1983, 1993; Gilbert and Varley, 1991; Green, 1988; Rodas and Sugranyes, 1988; van Lindert, 1991). Many reside on the same property as the tenants and few have more than a couple of properties. In the consolidated periphery of Santiago de Chile, seven out of 10 landlords rent only to one tenant household, in Mexico City three quarters, and in Caracas two thirds. Even in the central areas of these cities, most landlords operate on a small scale. In Mexico City, subdivision of property through inheritance has gradually reduced the level of property concentration.

A similar pattern of small-scale ownership seems to hold for African cities such as Blantyre, Cairo, Lagos, Lilongwe and Lusaka (Barnes, 1987; Pennant, 1990; Rakodi, 1987; El Kadi, 1988). Indeed, generalizing across Africa, Lloyd (1990: 294) concludes that

“the rental market has been dominated by the small landlord; rarely, except perhaps in North Africa, have private investors built large block of tenements for the relatively poor.”

The same pattern also seems true for much of Asia, certainly in Bangalore the tenant: landlord ratio is only four to one (Malpezzi and Tiwari). In the self-help areas of Pakistan, most landlords operate on a small scale (Wahab, 1984). In Indonesia and Turkey, most landlords are former self-help consolidators (Hoffman et al., 1990; Turan, 1987). In Delhi, the tenant-landlord ratio is 2.5:1 and few landlords are “professional” operators (Wadhva, 1993: 45-6).

In Benin City, Ozo (1990: 264) claims that “the private rented sector is characterised by small-scale ownership.” Just 62.5 per cent of landlords own just a single property, only 12.5 per cent own two properties and a further 5 per cent own more than two buildings. The majority of the landlords/landladies are residents who occupy two or three rooms while letting the extra rooms to tenants. In a more recent survey, 86 per cent of 50 landlords interviewed own only one property, only one having more than three properties (Ozo, 1993a: 41). On average, these landlords provide accommodation for only 3.4 tenants. Few of these landlords appear to be operating in a professional way. Only two are building new rental premises, and only four are putting their rents into another business; the vast majority are using the rents as income on which they can live. Most of those with more than one property are pensioners. The typical landlord is self-employed and built the accommodation originally for his and his family’s own use.

In Cairo, most landlords are operating on a small scale; 91 per cent of landlords in Serageldin’s (1993) survey live in the building and 76 per cent of surveyed landlords have less than 10 tenants. Admittedly, some 9 per cent of landlords have 15 or more tenants but even the few large landlords earn much from their investment because of the rent controls. Certainly, there is little professional interest in rental housing and even less investment in this static business; indeed only 5 per cent of the landlords had begun renting during the last 10 years.

The characteristics of most landlords in third-world cities seem to be generally rather similar to those of other owners and sometimes even to those of their tenants. In Caracas, Mexico City and Santiago de Chile, while they are generally more affluent than other owners they have similar per capita incomes to those of their tenants. Clearly, landlords, owners and tenants in the consolidated settlements are drawn from the same social class. The main thing that tends to distinguish landlords from the rest of the population is their age. Landlords tend to be older than other owners and much older than most tenants. In Cairo, almost half of the landlords interviewed by Serageldin (1993) have been renting for more than thirty years. Because of their age, landlords are much more likely to be retired, live in larger properties than other families and have lived longer in their current home.