- Written by Papua New Guinea National Research's Institute Informal Economy Research Program Leader Dr. Elizabeth Kopel and Research Project Officer Lewis Iwong Papua New Guinea National Research's Institute Informal Economy Research Program Leader Dr. Elizabeth Kopel and Research Project Officer Lewis Iwong
Limited land for urban development and housing purposes combined with rapid urbanisation and population growth has led to a huge shortage of affordable houses. This is compounded by the failure of Papua New Guinea’s housing policy approaches which is skewed towards owner occupied housing. The real estate sector caters for high end luxury accommodation which is often not affordable for low-income and middle-income groups. This has created a huge gap in the supply of affordable housing to meet the growing demand for low and medium cost rental housing in major urban centres.
Much of the unmet demand is absorbed by increasing settlements encroaching on to customary lands within the vicinity of towns and cities. Further, informal rentals in suburban housing areas and settlements have also increased tremendously over recent years. This type of housing caters for the needs of those who would like to live in suburb but cannot afford to or prefer not to rent on the formal market.
Factors driving informal rental housing
In a study of of challenges and opportunity of informal rental housing in Ensisi Valley, a planned residential suburb in Port Moresby by Dr. Kopel and Mr. Iwong, they found the following:
- Homeowners, with diverse socio-economic backgrounds are engaged in letting part or all of their homes on rent informally.
- The main driving factor for operating informal rental activities is to earn additional income to compliment household income and sustain livelihoods.
- Informal rental market plays a vital role in housing people in suburban homes, whose needs are not met by government policy on home ownership and are excluded from the formal market by exorbitantly high rentals.
- Landlords prefer tenants who are single, couples or have one or two children as most share their homes with tenants.
Major challenges faced by landlords include the following:
- Tenants not paying rent on the due date is a major concern expressed by landlords. It is worse when accommodating friends and relatives as tenants.
- While the informal nature of arrangements benefits both parties, it also leaves room for abuse and either party is not protected. There is no avenue for redress in situations when things go wrong such as when tenants default or when landlords withhold bond fees without good reason.
- It is hard to identify those who would make good tenants because potential tenants are not required to provide character references or letters of recommendation from previous landlords.
- Increased occupancy in dwellings that were originally planned for nuclear family units creates issues of excessive demand and use of utility services, overcrowding, quick wear and tear; creating constant need for maintenance.
Our findings suggest the following:
- Informal renting is filling the gap created by the absence of state intervention in facilitating the development of a low-cost, affordable rental housing market to address the needs of the increasing urban population.
- Supervision and oversight of informal rental housing is necessary. A minimum level of registration and membership to a mechanism comparable to the PNG Real Estate Association can protect the interest of landlords as well as tenants.
- Setting minimum standards of the quality of housing offered for rent on the informal market, monitoring and supervision of home renovations and extensions to ensure compliance with regulations would help to limit the number of occupants in residential properties and improve housing conditions.
This article was first published in the Post-Courier’s 8 July 2020 edition and on its website’s commentaries and features page.