info@equateafrica.com | +27 (0)12 644 1747 | +27 (0)12 644 1032

FORMALISING BACKYARD RENTALS

As Quantity Surveyor’s it is essential, we get to understand the various financing options in relation to the housing demand which is available to developers, where the developers are informed of the effective demand for a particular product (housing/rental option), at a certain price level in a particular area.  Ultimately what makes a housing development sell or rentable and gives the developer a competitive edge and favourable returns.

The low-income group is considered as unbankable, due to lack of access to credit where the affordability and risk are the main concern.  From the banks’ perspective, their income security and ability to pay regular instalments and lack of collateral in case of default are some of the risks they consider as high. 

That is where the demand for an affordable government-assisted rental option has become an important alternative for the lower-income end of the market.  Many people have come away from seeing the rental option as an alternative for non-qualifiers for mortgage bonds, or due to the long waiting lists for RDP houses. 

These are the current programmes which the government has as rental options:

  • Social housing in restructuring zones
  • An Institutional housing subsidy programme
  • Community Residential Units (CRU)

There is currently, no formal programme or policy for backyard rentals in South Africa, although the Department of Human Settlements has investigated creating subsidies for extra service connection to each stand. It is no secret that backyard rental is a burden to the existing infrastructure does not follow any town planning norms and standards generally do not have the full support of the government as an alternative to the affordable rental market, but it exists, albeit informal in nature, but it supplies an affordable rental option to the average South African and urban migrants who require an accommodation that is close to economic activities and employment.  Backyard accommodation affords the occupants access to services and provides some form of dignity as compared to living in informal (shack) dwellings. 

Backyard rental accommodation need not be burdensome if the following measures can be put in place:

  • Relax town planning norms
  • For new township establishments, the design must accommodate an extra stand layout for a backyard room or units
  • Similarly, engineers must start designing services for higher densities
  • Costing of new developments need to include the additional services connection costs

Recent strides have been done by TUHF where they have seen the potential of backyard accommodation through the new programme called uMastandi.  This is a rental property backyard lending instrument.   Under this initiative property owners are given the opportunity to get access to finance to build backyard accommodation and includes the following services:

  • Mortgage finance, where the finance is backed by the value of the property
  • Training and mentorship to the property entrepreneur
  • Help with the construction, through ensuring the construction of these rental units are on time and within budget

 Rather than shunning the idea of formalising backyard rental, the government must take advantage of the fact that all backyard accommodation is already on residentially zoned land and this can be a solution to the current housing backlog and is assisting the current rental programmes and secondly, develop partnerships with private finance institutions which provide lending facilities to landowners who are either already in the backyard rental space or wish to enter this market.

As construction industry professionals, we must be able to assist with providing flexible, innovative and sustainable options to meet the needs of the standing rental backlog with a more tolerant approach through facilitating the legalisation of the backyard accommodation sector and developing policies which are not rigid in nature.