|Support Measures to Promote Rental Housing for Low-Income Groups (HABITAT, 1993, 132 p.)|
|II. THE EFFECTS OF LEGISLATIVE AND POLICY INTERVENTION|
Planning and zoning regulations, including rules covering building standards, infrastructure norms and land use, are frequently criticized for the way in which they restrict the production of housing. The World Bank (1993) suggests that they often make housing unaffordable for low-income groups, restrict the residential land supply, and create bureaucratic bottlenecks that cause delay. Such problems, of course, affect the production of every kind of housing, not just the production of housing for rent. Arguably, therefore, they affect rental-housing production no more forcibly than the production of housing for ownership.
Such regulations are often felt to be particularly inappropriate in less developed countries. They were introduced either under colonial regimes or by indigenous planners trained in the planning schools of the former imperial country. The impact of green belts, zoning regulations, land-use controls and building standards, have introduced a paraphernalia of unnecessary controls into third-world cities. Not only has this increased the bureaucratic hassle for anyone involved in trying to penetrate the maze of regulations, but it has also created opportunities for delay and corruption (de Soto, 1989). A typical view is presented by Baken et al. (1991: 29):
building regulations and codes - being based on European models - have been observed to constrain the development of low income settlements. Apart from the restriction of lot sizes for economic activities, two other factors hamper the economic development of planned settlements: the limited proportion of plots for commercial use, and the regulatory framework which often prohibits mixed residential-commercial land-use.
Of course, the main effect of such regulations is on the so-called formal sector. For, as is well-known, large areas of most third-world cities have developed with little regard for the planning regulations. If houses are being built without services, then it is difficult to believe that their builders are being any more scrupulous in following the regulations that might affect their accommodating tenants. Of course, illegal developers do not ignore all of the rules. In Santafe Bogotfor example, illegal subdividers often adopt some of the regulations in an effort to appear as legal as possible (Carroll, 1980; Gilbert and Ward, 1985). The closer they can approximate to the rules, while maintaining their cost advantage, the less likely they are to be harassed by the authorities. But, in general, market forces in determining the price of land and the general attitude of the government with respect to upholding the law are more important influences on the informal housing supply than the nature of the regulations per se. If the government does not apply any planning regulations in the self-help areas, it matters little what the rules actually say.
Clearly, planning regulations affect formal-sector builders directly but, insofar as few build for rent, there will be little impact on the rental-housing sector. By far the most effect will be felt in the field of owner-occupation. The rental-housing sector will only be influenced when specific planning regulations make the construction of housing more or less difficult. In the case of Mexico City, Connolly (1982: 149) argues that this was precisely the impact of the introduction of more stringent building regulations in the 1940s. The implementation of building regulations modelled on North American and European standards,... clearly made it more difficult to build substandard housing on a legal basis. This reduced the profitability of such investment and therefore the amount of rental housing construction.
The enforcement of safety regulations can also cut the amount of rental accommodation especially when it is linked to slum clearance. Since much decayed housing in central locations is occupied by tenants, slum demolition can lead to vast areas of rental accommodation being destroyed. Unfortunately, although they are less common today, examples of slum demolition on a massive scale have been all too common in third-world cities. In the 1960s and 1970s, inner-city renovation programmes led to the loss of large numbers of homes in Lagos, Rio de Janeiro and Tunis (Marris, 1979; Hardoy and Satterthwaite, 1981; Peil and Sada, 1984; Valladares, 1978). In Delhi, some 700,000 squatters were moved in 1976 from the central areas to the outskirts (Risbud, 1991; World Bank, 1993: 30). In the centre of Mexico City, attempts to resuscitate commercial activity in the central area have destroyed vast numbers of rental homes in the central city. Coulomb and Shez (1991: 40) claim that slum demolition and new road programmes during the 1970s led to the destruction of 50,000 rented rooms in three neighbourhoods alone.
Sometimes, however, attempts to beautify the city and to apply planning controls more rigorously have quite the opposite effect on rental housing. In several Latin American cities, where local governments are trying to conserve the colonial architecture in the central areas, the demolition of old houses has been prohibited. The result is that owners cannot sell the homes and are forced to rent them. Admittedly, this sometimes leads to gentrification and much higher rents but it also leads to the retention of some unimproved rental housing for the poor. The contradictions involved are demonstrated by experience in Quito. As Godard (1988) points out: historic preservation of the colonial city has encouraged landlords to renovate some buildings, the rents for which poor people can no longer afford. However, the overall result of colonial preservation in Quito has been inadvertently to retain more central low-income rental housing than in most Latin American cities... (Klak and Holtzclaw, 1993: 263). Similarly, in Mexico City, the introduction of more stringent planning controls in the central areas in the 1940s made it much more difficult to change land uses. As such, many tenants were not evicted because their landlords could not obtain permission to develop new office or residential blocks. While these landlords may have ceased to maintain their property, something which eventually led to the decay or demolition of many rental housing units, the short-term effect was to sustain rental housing in the central area.
Restrictive planning regulations can also stimulate rental housing production insofar as they limit urban expansion. In cities, such as Seoul, where rural-to-urban land conversion is severely restricted because of rigidly enforced greenbelt regulations and master plan provisions that limit residential development to only 25 per cent of the total land area, the effects can be serious (World Bank, 1993: 83). In Seoul, the restrictions have led to explosive increases in the price of land and housing, severely decreased housing affordability, and persistent housing shortages (ibid., 83). Under such circumstances, it is perhaps not surprising that Seoul has a high percentage of households that rent or share accommodation. Similarly, in Caracas, urban expansion has been limited by a decree to keep development below the 1000 metre contour line. This rigorously applied regulation has encouraged urban development to spread farther along the valley floor into more distant locations. The effect has been to encourage the development of rental housing in the informal sector. The only alternative to renting a room is obtaining a shack in the distant periphery.
In Delhi, the planning regulations have severely discouraged all kinds of housing construction. They have also depressed rental-housing production in a number of ways. First, master plans up to 1990 limited plot sizes to a maximum that could accommodate only two families; even now only three families are permitted to live on a single site (Wadhva, 1993: 29). This prohibition clearly limits the scope for rental housing. Secondly, although rental housing can be developed under the Group Housing Scheme, the densities specified under that scheme are too low to make investment commercially viable (p. 27). Thirdly, planning regulations also make it difficult for owners to adapt their homes to create space for tenants. Renting part of an owners flat is virtually impossible because legally only one kitchen can be built (p. 28). Although all of the above regulations are often flouted they discourage renting because of the bribes that have to be paid to the inspectors. Fortunately, some modifications are being made to the regulations and, in 1990, the third-floor barsati terrace, which had been built and illegally rented out for years, was finally legalized (Wadhva, 1993: 28).
In Benin City, the zoning regulations ostensibly limit the profitable development of rental accommodation by stipulating that houses can only have eight living rooms on a single storey, 12 on two floors and 15 on three, with a maximum occupancy rate of two people per room. However, since few of the planning regulations are actually applied in Benin, the restrictions are likely to have had little effect on rental housing production. The most likely impact of planning rules on formal sector construction comes in the form of the prohibition on any single owner using more than 0.5 hectares of government land on leasehold title. Ozo (1993) claims that this prohibition militates against large-scale development of rental housing (Ozo, 1993).
In Cairo, the urban zoning laws limit the number of houses per plot but Serageldin (1993) believes that this has had little effect on the development of rental housing. Potentially more significant is the legislation introduced in 1940 and 1975 to control urban expansion in agricultural areas; a policy linked to the strategy of building new towns in non-agricultural areas (Feiler, 1990). In practice, planning officials admit that the law has never been effective (Abt Associates, 1982: 36).
The main difficulty in commenting on the impact of planning regulations on rental housing lies in knowing precisely to what extent the rules have been implemented. Since many regulations have been applied fully in one part of a city and not at all in another, it is difficult to be categorical about the overall effects of their application. In general, however, it is probably true that quality standards have encouraged the idea of slum demolition, leading to considerable losses in the low-income rental housing stock. It is also likely that small plot sizes in sites-and-services schemes have discouraged rental housing development (Chant and Ward, 1987:14). In the case of new rental property, complicated rules and regulations have probably helped discourage potential landlords in the formal sector from building for rent. If profits from rental housing can only be generated by building cheaply, then planning regulations which push up physical standards can only discourage investment. Whether this is a good or bad outcome is a moot point.