Housing the poor: Mumbai's underground rental market
Rakhi Mehra, Mumbai Guest Contributor
micro Home Solutions
About 80 percent of low-income rental units in India exist in the informal market. These affordable units house Mumbai's working poor and are rented out by makeshift landlords, who are often poor themselves but who capitalize on any extra space they have at home. Often, the rental units are simply partitioned-off areas of slum or resettlement housing which act as secondary sources of income for the "landlords." The spaces for rent are rudimentary but often in central locations, offering a cost-efficient way for Mumbai's laborers to live near their work.
Take Chetan, for example. He is 27 years old, from a village near Kolkota, and one of millions of migrant laborers in Mumbai. He works seven days a week photographing visitors at the Gateway of India — a national landmark — for a small fee, US$0.40 per click. He earns about INR12,000 ($225) a month for his work and pays INR1,800 ($33) for a room he shares with four others, just 15 minutes from the Gateway. His landlord runs a tea stall, lives in the adjoining room, and earns a few thousand rupees more than Chetan.
For migrant laborers, renting makes sense. Many migrants are short-term residents, earning enough during short spurts of work to then return to their home villages. While in the city, their circumstances are precarious, and work opportunities come and go quickly. Renting, as opposed to home ownership — which has dominated the government's policy focus for the urban poor — allows for flexibility and a fluidity that matches the migrants' life and experiences in the city. Chetan, for example, does not pay rent when he returns to his family in his home village for months at a time. While there is certainly a place for home ownership for the urban poor — some of whom have been the fabric of this city for generations — a mixed housing stock is essential for meeting their varying shelter needs.
Is policy stifling the affordable rental market?
If the poor are renting from the poor, then it seems to be a win-win situation. Affordable rooms are being made available in a city with a crisis-level housing shortage, and the entrepreneurial spirit of the poor has shown yet another to way to squeeze water from the stones around them.
Yet the government's approach to renting and supporting this informal market has been less than favorable. In fact, a study by Professor Sunil Kumar at the London School of Economics, who has researched rental policy frameworks in India, says the government's policies are blocking the informal rental market, thereby distorting the only available and affordable rental market for migrants to the city. He cites an example from Surat, a city north of Mumbai in the state of Gujarat, where resettlement housing for former slum dwellers has been limited to a meager 15 square meters with "an implicit aim ... to prevent the construction of rooms for rent."
The Mumbai Metropolitan Regional Development Authority (MMRDA) has set up a poorly designed policy in its rental scheme. Qualifying families, for example, must have a 15-year residency proof and a monthly household income above INR 5,000 ($US93). However, according to the 12th Plan Working Group on Financing Urban Infrastructure, about 90 percent of the housing shortage in the country pertains to people in the Economically Weaker Sections (EWS) who have a monthly income below INR 5,000. Even if the average income in Mumbai is higher than national average, the policy is still blocking out the poorest of the poor — those who need affordable housing the most.
Unsurprisingly, the MMRDA is woefully behind in its ambitious goal set in 2008 to build 500,000 rental units within five years. By the end of 2012, only the first 2,500 units will have been constructed.
Ideas for formalizing underground rentals
Rental markets play a critical role in the efficient functioning of a city. In Mumbai, to promote renting is an important step in the poverty-reduction process. Studies show that those who have early access to stable shelter achieve faster stability of income. For the urban poor ever to improve their circumstances, affordable, stable housing is an essential base. In order to move in this direction, the MMRDA and other city municipalities around the country will need to rethink their approach to designing a diverse housing stock, including rentals that serve both families and individual migrants like Chetan.
In the meantime, Mumbai has a goal to meet: at the end of 2012 — with only one year remaining before the deadline — it will have met just 0.5 percent of its goal of 500,000 affordable rental units. With this process so far behind schedule, perhaps it's time for the city to consider how to incorporate the underground, informal rental market for the poor into its countable stock. The MMRDA could encourage informal private landlords by complementing the housing with basic infrastructure services — water, sewage, and so on — in these neighborhoods and explore the benefits of bringing construction finance and tax incentives for landlords and rent vouchers for tenants. The result of appropriately regulating the informal rental market may be just the boost the city needs to improve housing options. And if innovative incentives are introduced to benefit these "landlords" and their renters, the new approach would be a more inclusive way forward for affordable urban housing.
Rakhi Mehra is founding partner of micro Home Solutions. She started her career as an intern at the Grameen Bank in Bangladesh and worked with Ashoka Fellows in microfinance in India before joining CARE India, where she helped to design the post-tsunami rehabilitation program in Andaman and Nicobar Islands, as a Program Associate. She also spent a year as a consultant with Rabo Bank India in agribusiness and microfinance. Rakhi was born in Delhi, studied at the St. Stephen's College at Delhi University and later read Philosophy, Politics and Economics (P.P.E) at Oxford University on the Rhodes scholarship in 2001. She earned her MBA from Harvard Business School in 2009. She was awarded the HBS Social Enterprise Fellowship in 2011. Rakhi founded mHS with her architect husband, Marco Ferrario. They live in Delhi with their 11-month-old daughter, Nora.
micro Home Solutions is a social housing enterprise with a mission to build inclusive cities based on interdisciplinary principles of community, affordability and design. Founded in 2009, mHS is developing a portfolio of housing solutions that include dormitory shelters, self-construction and incremental housing, rent-to-own models that are viable and scalable.