Residential

Backyard rentals require better utility management

Generator / Electricity / Inverter

Rapid urbanisation has placed significant strain on metropole housing requirements. Exacerbated by the effects of Covid-19 in an already contracting economy, the informal housing rental (or backyard rental) sector is transforming as it expands, and utility management is key in the new landlord-tenant relationship.

Michael Franze, Citiq Prepaid Managing Director says that according to a report for the World Bank, more than 13% of urban households in South Africa reside in backyard structures and this number has most certainly grown during this very challenging year.

Better utility management is at the heart of helping landlords as well as tenants. Good utility management also ensures municipalities can collect their dues and therefore ensure better service delivery,” he says.

As government struggles to cope with rapid urbanisation and the provision of affordable housing, the growth of informal rentals is not set to slow as the local economy continues to take a knock. Enterprising landlords, many of them poor themselves and particularly those in peri-urban areas on the outskirts of the big employment centres, are converting part of their properties into rental units.

However, reports show that because this sector is largely operated outside of the usual regulatory framework, both government and traditional financial institutions view this growing rental market as high-risk and therefore ‘inferior’.

Cape Town-based Bitprop has seen the potential in helping homeowners realise new and safe income streams through the financing of developments. According to Bitprop, informal housing comes in many forms, but it has shifted since the Covid-19 lockdown.

Marketing Manager of Bitprop, Dylan Walls says that informal renting or ‘backyarding’ trends could be a spectrum, ranging from informal shacks erected in a backyard to a triple-storey block of flats developed by an entrepreneur.

Pre-lockdown the biggest market demand was for bachelor style units, with en-suite bathrooms. These sorts of developments are taking place predominantly in Cape Town, Johannesburg and Durban, where there is an increasing rate of urban migration and demand for affordable rental accommodation,” he says.

Utilities should help not hinder and financing the unit does not stop at just the construction of the new homes. As informal renting becomes more commonplace and, with the landowners taking a more long-term business outlook at their investment, ensuring effective utilities management has become a must for new developments.

In a low-cost rental environment, the cost of utilities can add up to a sizeable percentage of the rental charge. And, if allowed to slip into arrears, as is so often the case with post-paid scenarios, backyard landlords can be left with crippling unpaid municipal bills – something the municipalities and owners want to avoid.

Prepaid sub-metering provides many advantages for landlords and tenants. It ensures that tenants pay upfront making utilities management significantly easier. Clear and shareable reporting makes it easier for administration while it brings a greater transparency and massively reduces the potential for disputes.

Prepaid sub-metering provides many advantages for landlords and tenants. It ensures that tenants pay upfront making utilities management significantly easier. Clear and shareable reporting makes it easier for administration while it brings a greater transparency and massively reduces the potential for disputes.

Informal renting is going to continue to grow especially as more people flock to cities looking for work. It makes sense to help landlords create safe, durable accommodation and to build sustainable businesses. Using prepaid sub-meters is one of the measures that can assist in this goal” he concludes.