Analysis of the Rental Market in Informal Settlements Complementing Housing Needs in Cities: The Case of Port Moresby and Lae Citiesin Papua New Guinea

Abstract

This paperanalysesthe rental housing markets in the informal settlementsof the cities of Port Moresby and Lae in PNG, whichare complementing urban dwellers’ housing needs. The main purpose of the study is to investigate the operations and contributions of the rental housing market in informal settlements as submarkets to the mainstream housing market in the country.Purposive sampling technique was used to interview 75 respondents comprising landlords and tenants in the rental housing market in the informal settlements, based on several questionnaire surveys and a representative sample. Descriptive statistics and chi-square test are used for testing the relationship between selected key variables extracted from two research questions, namely: (i) What are the types of informal rental housing that are available in Port Moresby and Lae cities to complement housing in the formal market?, and (ii) How are the rental housing units in the informal settlements in Port Moresby and Lae cities managed and operated for purposes of sustainability? Findings reveal that there is no relationship between therental chargesand types of rental housing and housingstandards (χ² < 2.8=0.48).Findings also indicate that houses in informal areasare usually low-grade, built with scraps from waste, locally sourced materials and hardware materials that are not amenable to conventional housing maintenance and management technology. The median rentper month in the informal settlements was K700 (USD $180) as of 2015 while the median cost of constructing a typical house for rent is about K40, 000 (USD $10,000) for the same year. Furthermore, findings also show that rental houses in the informal settlements are frequently advertised through word of mouth (50%) and local notice boards (60%). There are economic incentives that drive the market for informal rental housing. Government needs to introduce appropriate laws leading to formalisation of informal rental housing to inject life into this dead capital, transform the country’s economy and increase the total housing stock.