The Global Urbanist

News and analysis of cities around the world

What's wrong with renting? Home ownership not the only solution for India's slum dwellers

Governments often assume that home ownership is the main policy tool for sustainably housing their urban poor. But this neglects the usefulness of rental arrangements, which is important at all income levels, affords greater flexibility to job seekers, and should be integrated into government policy.

Asako Matsukawa / Beyond Profit

Asako Matsukawa / Beyond Profit

Cities: Delhi

Topics: Housing, Private sector governance, Property and real estate, Poverty and inequality, Informal settlements

Many Indian cities are struggling to accommodate their poor due to the constant inflows of rural migrants. India's 52,000 slums comprise 8 million informal households with millions more living on the streets. To find housing solutions for this population has long been part of the national agenda.

In 2009, the government announced the Rajiv Awas Yojana, a housing scheme that accords property rights to the urban low-income population and slum dwellers. It offers subsidised credit for them to construct and own homes, with the lofty aim to eliminate slums from Indian cities in five years.

The scheme promises basic amenities such as water supply, sewerage, drainage, internal and approach roads, street lighting and social infrastructure facilities in slums and low-income settlements. The scheme received a 700% increase in its budget allocation for the 2010-2011 financial year, showing that the government is increasing its efforts toward equitable urban development and the settlement of slum dwellers.

But the assumption behind this scheme, and many housing policies worldwide, is that home ownership is the best policy tool available. Governments across the world promote home ownership through means such as housing finance, subsidised access to land, improved infrastructure in new areas, and regulations to facilitate private developers entering the market.

However, many schemes need to be revisited to see if they actually meet people's needs. Because what has been largely disregarded are the demand and merits for rental housing. It is hard to assess the rental market in poor urban communities because its temporary, make shift nature, hiding within it a large floating population.

Nevertheless, it is not hard to recognise the importance of the rental housing market; in any country with any economic status, many people need to rent to suit their occupational needs, life cycles and financial situations.

Renting allows people to stay mobile, important for migrant workers who move in search of better work opportunities. It offers flexibility to those with erratic incomes, and the chance for others to improve their housing in line with their income growth. It requires less investment and long-term financial commitment, especially important for residents who send remittances back to their families.

More people now recognise the increasing demand for rental housing. Rakhi Mehra, co-founder of Delhi-based Microhome Solutions, a company offering affordable homes to India's urban poor, confirms this trend. She and her team learned from field study that many of the urban poor do not want to invest in a house because their work makes them unable to settle in one place. But they are more than ready to pay for rental spaces.

One of Microhome Solutions' first endeavours was to offer rental space to migrant workers, and slum and street dwellers. Mehra and her team found abandoned buildings, renovated them, and refurbished them with amenities, providing temporary yet quality accommodation for Delhi's homeless.

According to Mehra, such an effort could become a simple, successful business model for private companies, while making a big, immediate social impact on the target communities.

The problem, Mehra says, is the government's hesitation to charge people even when they are willing to pay for such services. Government officials and policy makers also need to be rid of other myths, such as the belief that people will be better off owning a home, that the relationship between landlord and tenant will be exploitative, or that the rental housing markets thrive illegally. Officials also need to recognise that there is no basis for reasoning that defaulter evictions and tenants' mobility will cause civic unrest.

Instead, the government should move toward developing an adequate stock of good quality rental housing and play a proactive role in regulation and supervision. Given the growing interest among private players for the affordable housing sector, the steadily maturing public-private partnership model has a lot of potential to develop quality, regulated rental housing markets. Mehra is lobbying the government to create a portfolio of housing options ranging from dormitories and shelters to apartments in order to meet the complex and diverse needs of the urban poor.

This article originally appeared in amended form in Beyond Profit, reprinted with permission.