Upgrading Informal Settlements in South Africa 2009

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Upgrading Informal Settlements in South Africa: Policy,

Rhetoric and what Residents really Value
a b
Romano Del Mistro & David A. Hensher
a
University of Cape Town, Civil Engineering , Rondebosch, South Africa
b
Institute of Transport and Logistic Studies , University of Sydney, Australia
Published online: 08 May 2009.
To cite this article: Romano Del Mistro & David A. Hensher (2009) Upgrading Informal Settlements in South Africa: Policy,
Rhetoric and what Residents really Value, Housing Studies, 24:3, 333-354, DOI: 10.1080/02673030902869279
To link to this article: http://dx.doi.org/10.1080/02673030902869279
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Housing Studies,
Vol. 24, No. 3, 333–354, May 2009
Upgrading Informal Settlements in

South Africa: Policy, Rhetoric and
what Residents really Value
Downloaded by [University of Birmingham] at 21:12 18 November 2014
ROMANO DEL MISTRO* & DAVID A. HENSHER**

*University of Cape Town, Civil Engineering, Rondebosch, South Africa, **Institute of Transport and Logistic
Studies, University of Sydney, Australia
(Received 12 April 2007; revised March 2009)
ABSTRACT A billion persons live in slums worldwide, and 2 million households live in informal
housing in South Africa. The stated goal of the South African government is to overcome this housing
backlog by 2014; but doubling the budget will achieve this by only 2030. Current policy is to deliver
a choice of housing alternatives; but in practice ‘a house on a fully serviced property with freehold
title’ is seen as the only alternative. This paper describes a model that estimates the value that
residents of an informal settlement place on aspects such as level of municipal engineering services,
location and type of upgrade, and the size of the dwelling. The model was applied to three issues in
the current debate on informal settlement upgrading in South Africa; namely: whether to upgrade by
relocating all residents to a ‘greenfield’ site or upgrading ‘in situ’? Whether to upgrade
incrementally across many settlements or upgrade fully one settlement at a time? Whether to offer
residents more than one upgrade alternative? The stated choice approach provides a method to
develop and test many housing alternatives as part of involving the community in the upgrading of an
informal settlement.
KEY WORDS : Informal settlement upgrading, stated choice, housing choice, housing finance, urban
regeneration
Introduction
It is estimated that 1.1 million households live in informal shelter in the nine major cities
of South Africa (SACN, 2006). These cities account for 40.7 per cent of the population of
South Africa, and 68.7 per cent of the national household income. Twenty-four per cent
of households in these nine cities live below the Minimum Living Level (SACN, 2006).
The housing backlog for the country as a whole is twice that for the nine major cities.
Upgrading informal settlements or slums is not only a challenge for South Africa, but also
for many other countries. It was estimated that 1 billion people in the world are housed in
slums and that this could double in three decades (UN Habitat, 2003).
Correspondence Address: Romano Del Mistro, University of Cape Town, Civil Engineering, Private Bag X03,
Rondebosch, 7701 South Africa. Email: romano.delmistro@uct.ac.za
ISSN 0267-3037 Print/1466-1810 Online/09/030333–22 q 2009 Taylor & Francis
DOI: 10.1080/02673030902869279
334 R. Del Mistro & D. A. Hensher
Memories of Apartheid Housing Interventions

Among the legacies of Apartheid must be the memories of state sponsored housing
interventions. These include the appalling conditions of the hostels for migrant single sex
workers; the forced relocations of families to residential areas classified by race; the sterile
environments of these dormitory towns with row upon row of standardized houses with
inadequate community and commercial facilities; the eradication of communities
(and relocation of families) under the guise of ‘slum clearance’; living without security of
tenure in rental stock provided with the assumption that all blacks would return to their
‘homeland’ when their work contract ended; and the ‘toilets in the veld’ (‘site and
service’) solution in the late 1980s and early 1990s in response to the sudden influx of
people into the cities after the repeal of the Influx Control Act. It is no wonder that the new
government would consider the only housing option to be a fully serviced house
(bigger than the apartheid house) with freehold title.
The RDP Housing Programme

The new government embarked on an ambitious programme to provide 1 million houses
within its first five years in government. The capital subsidy was initially limited to funding
new ‘RDP’ houses, but subsequently could also be used to fund individuals buying already
built houses, the cost of building accommodation for rental by institutions, the upgrading of
the hostels and self help construction on fully serviced sites (referred to as the People’s
Housing Programme). The RDP housing type took up almost all the housing subsidy.
The government has more than met its target, but as Huchzermeyer (2003, p. 595)
wrote, it “has required the relocation of informal settlement households predominantly to
vast, peripherally located standardized dormitory developments”. In the process, existing
structures were demolished, and the social and livelihood networks weakened and
destroyed in the case of relocation to another site. Furthermore, Huchzermeyer (2006)
argues that as a result of the continued support for state delivery development rather than a
people driven development:
The vast majority of subsidised housing developed in South Africa since 1994 has
been project-linked or contractor-driven. This approach encourages individuals to
‘sit back and wait for government to deliver’ . . . The paternalistic development
approach is popular with local politicians, whose support-bases within the
community are defined by the extent to which they are able to broker such
delivery . . . (p. 50)
Development of Sustainable Human Settlements (‘Breaking New Ground’)

In 2004, the housing policy was revised to achieve the following objectives:
. Accelerating the delivery of housing as a key strategy for poverty alleviation.
. Utilizing the provision of housing as a major job creation strategy.
. Leveraging growth in the economy.
. Combating crime, promoting social cohesion and improving quality of life for
the poor.
Upgrading Informal Settlements in South Africa 335
. Supporting the functioning of the entire single residential property market to

reduce duality within the sector by breaking the barrier between the first economy
residential property boom and the second economy slump.
. Utilizing housing as a implement for the development of sustainable human
settlements, in support of urban restructuring. (DOH, 2004, p. 7)
The concept is to “stimulate the supply of a more diverse set of housing environments and
settlement types through greater choice of housing types, densities, location, tenure
options, housing credit and delivery routes” (DOH, 2004, p. 8). The policy has the
intention that informal settlements will be upgraded in situ using a phased approach when
located in desired locations. However, households would need to relocate when

development is not possible or desirable (DOH, 2004, p. 12). The policy also aims to
maintain fragile community networks, minimize disruption and enhance community
participation.
The new plan also emphasizes the role of social housing at medium density on
well-located land. Social housing will enhance flexibility and mobility. It can take the
form of multi-level flats, co-operative group housing, transitional housing, communal
housing and hostels. The programme envisages the development of 110 000 units over
four years (DOH, 2004, p. 18).
Issues in Informal Settlement Upgrading in South Africa

The South African government has set itself the goal of eliminating informal housing by
2014. While national and provincial housing minsters continue to promise the
‘eradication’ of informal settlements by this date, this is unlikely because of a number
of aspects such as the scarcity of affordable and well located land, the complexity and
often incompatibility of regulations and funding mechanisms, increasing community
mistrust of promises made by government, parallel housing initiatives of governments,
and the inadequacy of resources.
Land
Land is a major issue in the upgrading process. Essentially, the current policy aims to
allocate freehold title. This is time consuming and costly. The argument for this approach
is that it gives security of tenure and therefore the opportunity to leverage the property
values as a means of poverty alleviation (De Soto, 2000). It must equally be argued that
encouraging a person to risk his/her only asset is not always a desirable livelihood strategy.
Furthermore, it can also be argued that the ability to use one’s property as collateral
depends on the ease with which the lender can collect any outstanding debt. Housing is a
politically emotive issue and this must have a negative effect on the reality of low-income
housing being able to serve this purpose. Furthermore, experience has shown that low-
income houses are being sold without registering change in ownership. This highlights the
informality that exists in an informal settlement, even after upgrading (Huchzermeyer,
2008b); the value to the first beneficiary of the subsidized house; and the inappropriateness
of the complex process to provide freehold title when upgrading. Another aspect that has
arisen with freehold title is the ‘downward raiding’ of these properties by persons with
higher income, thereby defeating the intentions of the subsidy programme.
Regulations
Government plays a major role in regulating the upgrading of informal settlements. It sets
the rules and mechanisms which govern funding and approval of proposed upgrading
projects. While these might be appropriate in other circumstances, in a country with a
shortage of technical and administrative skills in both government and the private sector,
complex funding schedules, time-consuming environmental assessments, blurred
boundaries between the functions of the three spheres of government, and frequent
changes in personnel severely delay the upgrading process.
Community Mistrust
Many residents of informal settlements have been living under these conditions since
before 1994. The unfulfilled promises are now beginning to be replied to through protest
action.1,2,3 In a review of service delivery protests as an indicator of the potential for
revolution, Hough (2008, p. 6) writes that the “most immediate problem is linked to the
frustration of promises not kept regarding service delivery”. Although wider problems
include crime, the growing gap between rich and poor, and deteriorating conditions in
government departments, “ . . . high degrees of poverty or unemployment, perceptions of
corruption or perceptions of relative inequality are important in explaining service
delivery protests”, . . . “poor communication with communities, lack of transparency, poor
governance, ineffective management and political infighting were . . . some of the main
factors contributing to the protests” as well as “the growing tension between the
expectations and the reality, or perceptions about, service delivery” (Hough, 2008, p. 8).
Misselhorn (2008) adds that the
causes of discontent therefore are not only about lack of housing and service
provision, but also in respect of the perception by residents of informal settlements
that the state does not care . . . that they are somehow inferior . . . due to their
informal or shack status. (p. 3)
The government argues that the protests are orchestrated by a ‘third force’ (Hough, 2008,
p. 7), but Hough (2008, p. 11) concludes that “there is significant potential for political
violence in South Africa”. This view is echoed by Misselhorn (2008, p. 3) who notes that
“the current situation constitutes a political and developmental powder keg”.
Recently the government has stepped up its rhetoric on the eradication and eviction of
slums (Huchzermeyer, 2008a), drafted new legislation on ‘slum clearance’ which has been
met with protests4 and moved residents from informal settlements (e.g. from Joe Slovo
(10 km from the centre of Cape Town) to Delft (20 km from the centre)) having promised
them that they would return when it was upgraded.5
Parallel Initiatives
Another aspect of the land issue is the existence of two systems of property. In the years
preceding 2004, properties in the first economy experienced a boom and those of the
second economy experienced a slump. The government has set itself the objective to
integrate the two property economies. As a way of bridging this duality, it has initiated
a programme to subsidize social housing, which is aimed at a higher-income group than

was intended for subsidized housing. Because it is denser than standalone housing, it
reduces the land required per housing unit6 and hence could use more expensive land,
which would generally be better located. This has socio-economic benefits for the
residents and environmental benefits for the community (i.e. less land take results in less
urban sprawl, less urban sprawl results in lower average travel, and higher density makes
public transport more viable). However, because social housing costs three to four times
the subsidy allocated for each dwelling of an informal settlement upgrade, and because of
the effort invested in this programme (even when it amounts to a fraction of the housing
backlog), it dilutes the resources available for informal settlement upgrading.
Inadequate Resources
The final reason why the housing objective will not be achieved is the lack of financial and
human resources. Indeed, the Housing Policy of the Western Cape includes a graph that
shows that the housing backlog could only be resolved by 2030 if government funding was
doubled (DPLG, undated, p. 24). Dyantyi (2006), the Minister for Housing and Provincial
Government of the Western Cape, is quoted as saying that “the city’s growing housing
backlog was a ‘moving target’ that needed a multi-faceted approach by all levels of
government”. He said “the province’s housing budget of R600-million would provide only
16 000 houses, while the annual demand was for 27 000 houses”. In her review of
informal settlement policies in Ethekwini (Durban), Vermuelin (2006, p. 67) writes that
“ . . . informal growth from 1996 to 2004 was over 9.2 percent per year . . . 16 000 units per
year would put an end to informal settlements by 2022 . . . even with a massive delivery
(more than 16 000) the local authority task will not be easy . . . ”.
Furthermore, there is underlying thinking that the relocation of residents to ‘greenfield’
sites is the best option. This thinking does not pay enough attention to the fact that this type
of upgrade also requires additional land, which is another scare resource.
The Reality of the Housing Situation

It is estimated that in 2007, 1.2 million households in South Africa lived in informal
settlements (i.e. almost 10 per cent of the 12.5 million households). The stated aim of
government is to have no household living in informal conditions by 2014. This is
impossible because of the current level of state funding (i.e. R10 billion/year of which only
R4.1 billion is available for the upgrading of informal settlements, whereas at least R14
billion/year is needed (Misselhorn, 2008, p. 22)); the escalating cost of housing due to
rapidly increasing costs and improved minimum standards for housing (Misselhorn, 2008,
p. 20); the shortage of well located and affordable land; the time taken to deliver housing
due to slow and complex administrative processes and obtaining approval for the
environmental impact; and the high quality of land registration which increases the time
and cost.
Current approaches are ineffective. The country can be considered to be sitting on a
proverbial powder keg since the majority will not be upgraded in the medium term and the
level of discontent will continue to grow, as illustrated by recent protests.
Since expectations are not being met, the most obvious aspect to be reviewed is whether
the resources being provided are adequate. Essentially, this is a question of what
is affordable to the country in respect of funding by national, provincial and local

governments, and to the individual in respect of the contribution to housing that can be
made by the individual. Government’s promise to provide housing reduces the willingness
of individuals to contribute. This unwillingness to contribute is not limited to the capital
cost, but extends into paying for future ongoing costs. This could be due to the culture of
non-payment for municipal services that was a major tool used in the apartheid struggle
and to the notion of equity that is enshrined in the Constitution (RSA, 1996). Since funds
are limited and needs/desires/wants exceed these funds, the allocation of funds needs to be
prioritized. This is a major reason to involve the community in an informal settlement in
determining how the settlement should be upgraded.
There is a need to review the programmes and procedures to improve the conditions of
the people living in informal settlements. In a review of successful upgrading projects,
Mitlin (2001, p. 509) found that diverse strategies will be necessary and that “development
agencies that wish to address the needs of the poor should seek to understand their
individual and collective livelihood struggle”.
The research questions therefore become as follows: first, what aspects do residents of
informal settlements value when their settlement is to be upgraded?; second, how
important are these aspects? and third, how should these values be incorporated into
informal settlement upgrade policy and practice? The remainder of this paper discusses a
study to develop a model of the values that residents of an informal settlements place on
attributes of settlement upgrade and applies the model to discuss how residents value not
having to relocate, incremental upgrading, and a range of housing alternatives.
Informal Settlement Upgrading

Informal settlements can be upgraded using one of two approaches: either total
redevelopment or in situ development. Total redevelopment results in the entire area being
demolished and families being relocated to another ‘greenfield’ site, which in turn destroys
the social networks and adversely affects the economic network because ‘greenfield’ sites
are usually further from urban opportunities than the informal settlement. The alternative
is in situ upgrading which aims to minimize the extent of disruption to social and
economic networks by reducing the number of households that are relocated to another site
or elsewhere on the site.
In situ upgrading represents an incremental or progressive improvement to the delivery
of housing. Choguill et al. (1993) identify three main stages in the progressive
improvement of an informal settlement; namely the provision of:
(1) Primary level services aimed to addressing the basic health needs of a
community;
(2) Intermediate level services which is mostly concerned with socially and
culturally accepted levels of service; and
(3) Ultimate level services for the convenience of the residents.
Furthermore, for a progressive improvement to be successful the community must be
willing to invest its effort in the exercise. There is or will be security of tenure for the
community; the means exist for the developer or provider to recover costs; and community
ownership is developed through community participation at all times during the upgrading
process (Choguill, 1999).
Graham (2003) proposed that the progressive improvement models cannot solely be the
responsibility of the residents, as proposed by Cotton & Franceys (1988), Choguill et al.
(1993, 1994) and Choguill (1996, 1999), but should be the responsibility of both the residents
and the authority. The South African government’s policy is based on the Bill of Rights of
the Constitution of South Africa which states that “Everyone has the right to have access to
adequate housing” and “The state must take reasonable legislative and other measures,
within its available resources, to achieve the progressive realisation of this right” (RSA,
1996). Kamete (2001, p. 34) describes the housing policy shifts in Zimbabwe, which parallel
those in South Africa and probably many other countries as well, as follows:
. . . bachelor type accommodation . . . family type accommodation . . . ( . . . counter

the squalid and atrocious environment . . . ) . . . intended beneficiaries of the houses
could not afford the units . . . phase out the provision of complete housing units . . .
amid the euphoria of independence and majority rule . . . minimum standards were
revised upwards . . . However, the spectre of high costs and affordability continued
to haunt the new government . . . until once again the standards were reduced in the
name of affordability . . . (p. 34)
Study Method
Study Area
Sweet Homes is an informal settlement of over 2000 households on an area of 24 ha, located
18 km to the south east of the Central Business District of Cape Town, South Africa. Prior to
becoming an informal settlement it was used as a dumping site for building rubble
(Caleb Consulting, 2003). The settlement has existed on the site for more than 10 years. While
the initial residents were workers from nearby farms, the majority of current residents are
mainly Xhosa speaking persons that have migrated from other informal settlements in
Cape Town and from the Eastern Cape (F. Ndatlane, community leader, personal
communication, 2005). Some areas of the site are subject to flooding during years of high
rainfall. At the time of the study, the city had provided primary level services to the site
(i.e. communal water and sanitation) and was investigating ways to reduce the risk of flooding.
The study area was selected because it was typical of many informal settlements in the
Cape Town area and because the community leadership was known to the author who had
been involved in student projects in the area prior to this study.
The Modelling Framework

The stated choice (SC) method used in this study is regarded as the state of the art method
for evaluating choices amongst packages of attributes, especially where not all attributes
are currently offered in existing markets and display limited variance in real markets
(Arentze et al., 2003; Hensher, 1994; Louviere et al., 2000). This approach identifies the
contributions of pre-defined attributes in making choices between alternative attribute
packages. Stated choice methods have many applications; e.g. residential choice in
Eindhoven (Molin et al., 1999), evaluating transport mode attributes in Cape Town
(van Zyl & Hugo, 2002), the choice of rental housing in the UK (Walker et al., 2002),
selecting the location of office development (van der Wetering & Del Mistro, 2003), and
estimating willingness to pay for water service quality in Canberra (Hensher et al., 2005).
Like all analytical methods, the method has strengths and weaknesses. These are
summarized in a growing number of sources (see Louviere et al., 2000 and Hensher, 2008
for overviews). Of particular note is the presence of hypothetical bias, formally defined as
the extent to which individuals might behave inconsistently when they do not have to back
up their choices with real commitments. However, when the focus is on choice
experiments of the type used here (in contrast to contingent valuation methods), the
reliability of the overall utility expressions in terms of willingness to pay is increasingly
being shown to be more compliant with reducing hypothetical bias (see Hensher, 2008).
In the current context, real market data are not available and hence the need to undertake a
form of experiment.
The stated choice method focuses on understanding the discrete behavioural responses
of individuals to the actions of business, markets and government when faced with two or
more possible outcomes (or choices). Its theoretical underpinnings are derived from
micro-economic theory of consumer behaviour, such as the formal definition of individual
preferences as inputs into a choice setting as determined by the utility maximization of
agents. Given that an analyst has incomplete knowledge on the information inputs of the
agents being studied, they can only explain a choice outcome up to a probability of it
occurring. This is the basis for the theory of random utility (see Louviere et al., 2000 for a
review of literature).7 While random utility theory has developed from economic theories
of consumer behaviour it can be applied to any unit of analysis (e.g. groups, firms,
planners) where the dependent variable is discrete.8
Like any random utility model of the discrete choice family of models, it is assumed that
a sampled individual (q ¼ 1, . . . ,Q) faces a ‘choice’ amongst i ¼ 1,2, . . . ,I alternatives in
each of T occasions. An individual q is assumed to recognize the full set of alternatives on
offer on occasion t and to choose the alternative with the highest utility. The (relative)
utility associated with each alternative i as evaluated by each individual q in occasion t
is represented in a discrete choice model by a utility expression of the following
general form:
Uitq ¼ ßitq Xitq þ 1itq ð1Þ
Xitq is a vector of explanatory variables that are observed by the analyst (from any source)
and include observed attributes of the alternative outcomes, observed characteristics of the
individual and descriptors of the decision context in occasion t; ßitq and 1itq are not
observed by the analyst and are treated as stochastic influences.
To provide an intuitive explanation of how Equation (1) operates in a choice setting,
think of the task as being one of representing sources of variance that contribute to
explaining a specific outcome. For a specific individual, Equation (1) has variance
potential associated with the coefficient attached to each observed characteristic (i.e. ß), to
each observed characteristic itself (i.e. X) and the unobserved effects term (1). This
equation could be expanded out to reflect these sources of variance for three
characteristics, defining the subscripts ‘0’ as observed and ‘U’ as unobserved, as
(dropping the q and t subscripts):
Ui ¼ ðßo1 Xo1 þ ßu1 Xu1 Þ þ ðßo2 Xo2 þ ßu2 Xu2 Þ þ ðßo3 Xo3 þ ßu3 Xu3 Þ þ 1i ð2Þ
Each characteristic is now represented by a set of observed and unobserved influences.

In addition, each parameter and characteristic can itself be expressed as some function
of other influences, giving more depth in the explanation of sources of variance. As the
function is expanded out, deeper parameters to identify are revealed. In the most restrictive
(or simplistic) versions of the utility expression, all the unobserved sources would be
gathered together and replaced (2) with (3):
Ui ¼ ßo1 Xo1 þ ßo2 Xo2 þ ßo3 Xo3 þ ðßu1 Xu1 þ ßu2 Xu2 þ ßu3 Xu3 þ 1i Þ ð3Þ
and would collapse the unobserved influences into a single unknown by assuming that all
unobserved effects cannot be related in any systematic way with the observed effects:
Ui ¼ ßo1 Xo1 þ ßo2 Xo2 þ ßo3 Xo3 þ 1i ð4Þ
Furthermore, by defining a utility expression of the form in (4) for each alternative
outcome i and imposing a further assumption that the unobserved influences have the
same distribution and are independent across alternatives (IID), the subscript i attached to
1 can be removed. This gives the utility expressions of a multinomial logit (MNL) model,
assumed for illustrative purposes only to be linear additive in the observed
characteristics.9 It is well known that under an extreme value type 1 distribution of the
1, the choice model takes the MNL form (5) estimated using the standard maximum
likelihood method.
Probi ¼ expðUi Þ=1j expðUj Þ ð5Þ
The choice experiment detailed below is an unlabelled binary choice (with generic
parameters) and hence more advanced closed-form models like nested logit are not
appropriate. However, a random parameter (mixed logit) model was investigated, but no
statistical gain was found.
The Attributes and the Levels of Attributes

In a stated choice study, each respondent is required to choose an alternative from two or
more alternatives offered in each choice set. To develop the sets of alternatives, the
researcher will first identify the most relevant attributes; second, specify the levels for each
attribute; and, third, produce packages of combinations of attributes at different levels
using factorial design principles.
Nine attributes were selected for the study. One attribute referred to how choice
pairs were described i.e. either ‘by alternative’ (where the values for all the attributes
for one alternative were described and all those for the other) or ‘by attribute’ method
(where the values for each attribute were described for all the alternatives before
describing the values of all alternatives for the next attribute). The other eight
attributes included four engineering services, house size, method of upgrading, time to
upgrading and two community facilities. The levels of attributes can be described as
follows:
. Water: a communal tap; an on-site tap for the household located on the
property; and when a formal house had been built, the tap could be located
within the house itself.
. Roads: the existing tracks/paths, gravel roads; or paved/tarred roads.
. Sanitation: banks of communal toilets such as those that had recently been
erected in the settlement with up to five households sharing one toilet; a toilet
on-site; and if a house had been erected and water was available on the site,
an in-house flushing toilet.
. Solid waste removal offered as a communal bin/skip to which each household
was to take their refuse; or it was to be collected from the kerbside outside
each home.
. Electricity was not offered as an attribute.
. Housing: the existing shack; a 30 m2 house (referred to as a RDP house); and
a 50 m2 house (referred to as a 4-room house).
. Community services: Community services were introduced to determine
whether respondents would consider communal facilities to be more beneficial
to them than individual facilities. To this end they were offered either open
space (e.g. a play park) or a small community hall.
. Time to delivery: It was felt that reducing the time that respondents would
have to wait for an improvement in living conditions would have a value; 2, 5
or 10 years were offered.
. Upgrading approach: Three upgrading approaches were offered; namely In situ
upgrading, where the infrastructure is constructed around the existing houses,
to minimise the number of households that would need to move or relocate;
Roll-over upgrading, where residents are required to move temporarily from
their current site and return when services had been installed; and Greenfields
where residents are required to move to another area.
Because there was no obvious linear relationship between the levels of each attribute
(i.e. the utility derived from either the communal tap, the on-site tap or the in-house tap
cannot be placed on a numerical continuum, as is possible for a monetary cost) each
attribute was coded as a set of dummy variables (i.e. (1, 0) for the communal tap; (0, 1) for
the on-site tap or (0, 0) for the in-house tap).
Development of the Questionnaire

Given the list of attribute levels, the experimental design had six attributes at three levels
and three attributes at two levels. This produces 5832 combinations (i.e. 36 £ 23). Using
principles of fractional factorial design, 81 alternatives were identified that satisfied
orthogonality amongst the attributes. Since some combinations were not possible for
technical reasons (e.g. Level 2 sanitation without Level 1 housing and Level 1 water, or
Level 2 water with a Level 1 house) the list of 81 alternatives was reduced to 56. This
resulted in a small amount of correlation or what might be described as a ‘near-orthogonal’
design. These alternatives were grouped randomly to produce 19 pairs to be applied by
alternative and 18 pairs to be applied by attribute. Each respondent was presented with no
more than 10 pairs. A total of 69 respondents were recruited to ensure that each pair was
presented at least 13 times in the survey.
Four focus group workshops, each attended by four members of the community, were
held at the Sweet Homes crèche on 20 April 2005 to ensure that the Xhosa wording of the
attributes and levels was generally understood. Pilot surveys were conducted among nine
respondents on 6 May and 13 May 2005. The survey was conducted using interviewer-
administered questionnaires in May 2005. Table 1 shows an example of one choice pair as
used in the questionnaire.
Table 1. An example of a profile pair
Alternative 1 Alternative 2
Time 5 years Time 2 years
Upgrade process In situ Upgrade process Greenfields
Roads Gravel road Roads Paved road
Refuse removal Communal skip Refuse removal Communal skip
Sanitation Own VIP Sanitation Communal VIP
Water In-house water Water In-house water
House 50 m2 House 30 m2
Communal facility Public open space Communal facility Public open space
Characteristics of the Respondents

Table 2 shows the distribution of the respondents by gender, length of stay in Sweet
Homes, origin, family size, whether the respondent was the head of household, age and
income.
Empirical Findings
While software is used to obtain estimates of the parameters of a model, the researcher
needs to decide which attributes to include. For a model to be satisfactory, the signs and
values should be logical (i.e. an improved level of attribute should have a more positive
coefficient), the t-statistic should exceed 1.96 (to indicate that the inclusion of the attribute
has the level of statistically certainty that it is relevant in the model) and the ability of the
model to account for the variance in the data is acceptable (the measure used in MNL
models is r2) (Del Mistro & Arentze, 2002). The overall log-likelihood (LL) is 2 345.83
with an adjusted r2 of 0.2068. The LL value is statistically significant relative
to the base case of no attribute influence for 10 degrees of freedom, based on the
likelihood ratio test: {2 2(LL(0) 2 LL(u)) ¼ 2 2(2 438.025 2 (2 345.832)) ¼ 184.39
(i.e. . (x210 ¼ 18.31))}.
Table 3 shows the coefficients of the attribute levels that were found to be statistically
significant. Three attributes were found not to be statistically significant; namely solid
waste removal, community facility and the method of presentation.
The signs of all the coefficients are intuitively plausible; attributes with a positive
coefficient contribute to increased relative utility and those with a negative coefficient
contribute to a reduced relative utility when compared to the other levels of the same
attribute that are not included in the model. For example, the communal water attribute has
a negative coefficient reflecting a lower utility than an in-yard or in-house water supply.
Similarly, a built house, be it an ‘RDP’ or ‘four roomed’ house, contributes greater relative
utility than a shack, and therefore has a positive coefficient.
Where more than one attribute is included in the model the relative magnitudes of the
coefficients are plausible. For example, the coefficient for dummy variable ‘gravel road’
(2 0.527) is greater than that for tracks (2 0.803) and less than paved road (¼ 0).
The three most statistically significant attributes were ‘in situ’ and ‘roll-over’ upgrading
on site (rather than being relocated to a ‘greenfields’ development off site) and upgrading
from ‘communal’ toilets to ‘in-house’ toilet. The high statistical significance of not being
relocated to another area, and preferably without having to move from the current position
344
Table 2. Characteristics of respondents
Gender: Stay in Sweet Homes (years) Origin: Family size Head

Female ,5 5–9 10 –20 Rural 1 2&3 4 .5 of H/H
R. Del Mistro & D. A. Hensher
% 55.1 34.8 53.6 11.6 18.8 10.1 40.6 23.2 26.1 78.3
Average 7.1 3.7
Household income (R/month) Age of respondent
0– 499 500– 999 1000– 1500 1500 –1999 .2000 , 25 25 – 29 30 – 34 35 – 49 50 – 60

% 18.8 36.2 31.9 4.3 8.7 11.6 17.4 20.3 37.7 13.0
Average 993 38.2
Note: In 2005, 1US$ ¼ R7.
Table 3. The estimated MNL model
Coefficient t-ratio
Communal water tap 20.332 21.965
On site water tap 0
In-house water tap 0
Communal toilet 21.337 25.369
Toilet in the yard 20.853 23.140
In-house toilet 0
Road tracks 20.804 23.839
Gravel roads 20.628 23.863
Tarred road 0
Shack 0
RDP house 0.818 4.280
Four roomed house 0.891 4.788
Delivery in 2 years 0.446 3.475
Delivery in 5 years 0
Delivery in 10 years 0
Greenfields upgrading 0
In-situ upgrading 1.400 7.967
Roll-over upgrading 1.337 7.129
site, supports the recommendations in the literature and the policy of government,
although not in practice. The statistical significance placed on having an ‘in-house’ toilet is
expected considering the appalling conditions of communal toilets and the danger
experienced of using these at night.
There is a statistically significant positive effect in moving from a ‘shack’ to a
‘four-roomed house’ and from a ‘shack’ to a ‘RDP’ house. In terms of housing policy, it is
important to note that the mean parameter estimates for RDP housing and four roomed
houses are very similar, suggesting little utility in increasing the size of formal housing.
The findings suggest the statistically significant role that the house and its size plays
relative to the other attributes. The findings also suggest the statistical significance of
upgrading from ‘road tracks’ and ‘gravel’ roads to ‘tarred’ roads; of moving away from
‘communal’ toilets to ‘on-site’ toilets; delivering improvement within two years rather
than five or 10 years; and the provision of water taps ‘on site’ or ‘in-house’ instead of
‘communal’ taps.
The model suggests potential benefits can be obtained from incrementally upgrading
sanitation and roads and, as mentioned earlier, housing. This supports the literature, which
proposes an incremental approach.
As part of the interview respondents were asked to rank the importance of the attributes.
Figure 1 shows that respondents considered housing, water, roads upgrade method and
toilets to be the most important and cost and community facilities the least important. This
ranking matches that of the stated choice analysis, except that the stated choice model is
able to estimate the utility of the levels of each attribute as well.
Application of the Model

The model can be used to investigate the likely benefits of alternative future housing
policy scenarios; identifying the perceived utility for housing upgrade alternatives with
Cost
Com. Fac
Refuse
Time
Toilets
Upgrade
Roads
Water
Housing
0 1 2 3 4 5 6 7 8 9
Average ranking
Figure 1. Average ranking of attributes by respondents
different combinations of the attributes. This can assist the housing debate to address the
following questions:
(1) Should a housing authority provide a choice of housing solutions?
(2) Which upgrading interventions are most cost effective?
(3) Should incremental or full upgrading be adopted?
Should More than One Housing Alternative be Offered?

The model calculates the probability of an alternative being selected from a set of
alternatives. While housing policy always includes ‘providing choice’, this is seldom
practiced. Table 4 shows four pairs of alternatives and one with three alternatives that were
chosen as examples where the higher cost alternatives achieved a lower relative utility.
For the first pair, 90 per cent of residents would choose the second alternative. However,
in the next three pairs the proportion of residents choosing one of the alternatives is never
less than one-third, and for pair 3, the proportion is almost exactly a half. This indicates
that in practice residents might not all choose the same alternative, and supports the policy
that a housing authority should try to offer more than one upgrading alternative when
upgrading informal settlements. The alternatives that are offered would need to take
account of the practicalities of the service networks, and be subjected to community
participation.
The other point that can be taken from the Table is that because low cost housing in
South Africa is almost totally subsidized, the cost of the alternative itself is not a relevant
attribute in the choice made by the respondent. The resident would be making a choice
based on the package of attributes and not on the cost to the housing authority.
Furthermore, attributes that do not incur a cost were also found to affect relative utility
(namely upgrading type and time to delivery) and utility derived from each attribute is not
directly proportional to cost. This can result in the perceived utility of less expensive
alternatives being greater. This should be taken into account when a housing authority
Table 4. Probabilities of selecting between upgrade alternatives
Water Sanitation Roads Upgrade approach Time Housing Utility Capital cost (R) Probability
Pairs of alternatives
Pair 1 Communal Communal Tracks Greenfields 10 years 4-room 21.582 26 000 0.106
In-yard In-yard Paved In situ 10 years Shack 0.547 7500 0.894
Pair 2 Communal Communal Tracks Rollover 2 years 4-room 0.2 26 000 0.369
In-house In-yard Gravel In situ 10 years RDP 0.738 25 500 0.631
Pair 3 In-house In-house Paved Greenfields 10 years 4-room 0.891 38 500 0.491
In-yard In-yard Paved Rollover 2 years Shack 0.929 7500 0.509
Pair 4 In-house In-house Tracks Greenfields 2 years RDP 0.459 24 500 0.431
In-yard In-yard Gravel In situ 10 years RDP 0.738 23 500 0.569
A set of 3 alternatives
Set 1 Communal Communal Tracks Greenfields 10 years 4-room 21.582 26 000 0.065
In-yard In-yard Paved In situ 10 years Shack 0.547 7500 0.548
Communal Communal Tracks In situ 2 years 4-room 0.2 26 000 0.387
Upgrading Informal Settlements in South Africa
347
is proposing to upgrade all informal settlements using a ‘traditional’ approach and for
which funds are insufficient; as is the case in South Africa.
The model shows that many upgrade alternatives are possible, and that not all residents
will choose the most costly solution. This opens a way of negotiating with residents when
upgrading informal settlements. For example, many sites on which informal settlements
are located are considered undesirable because of geotechnical or stormwater problems.
If government were to apply its policy of community involvement, for those sites that can
be improved through engineering, it could offer residents the choice of remaining on site
with a smaller superstructure or relocating off site with the larger superstructure.
Which Upgrading Interventions are most Cost Effective?

Table 5 shows the capital cost of the utility gained from upgrading each attribute from
level 0 to level 1 and to level 2. It also shows the marginal cost of upgrading each attribute
through one or two levels. Thus upgrading sanitation from a communal toilet to an on-site
toilet achieves the greatest improvement in utility at the lowest cost; followed by
upgrading a communal toilet to an in-house toilet, upgrading a communal water supply to
a yard tap and upgrading tracks to paved roads. The upgrading of shacks to houses is the
most expensive way to obtain utility gains.
An authority with limited financial resources should therefore select interventions that
contribute the highest benefit. It is possible to picture cycles of interventions each with
rates of utility per investment; i.e. pointing towards an incremental upgrading approach.
Since respondents valued attributes that had no cost to them, there are many alternatives
that produce higher utility at lower cost. This concept is shown diagrammatically in
Figure 2 in the plot of utilities derived from a range of alternatives with various
combinations of attribute levels. A housing authority should not ignore the potential to
save budgets by including attributes that do not incur a cost, but yield a utility to the
residents of the upgraded informal settlements.
Should Incremental or Full Upgrading be Adopted?

The literature noted that the goal of housing all the residents of informal settlements by
2014 will not be achieved, that there was growing protest action because of poor delivery,
and that there was potential for this to escalate into civil unrest. It would appear that there
would be political benefit in ensuring that many more residents of informal settlements
experienced the infrastructure that was being improved.
The model can be used to estimate the utility of sequentially upgrading areas to fully
serviced houses or incrementally upgrading all the areas through cycles of improving
service and housing levels. It was assumed that at the end of the programme all the
households would be housed in fully serviced houses. The incremental upgrade approach
used five incremental levels. Table 6 shows the utility, gain in utility, capital cost, the
number of households that can be serviced with R1 000 000 and the utility derived from
this investment for each level.
With limited budgets, the greatest total utility would be gained by implementing the
lowest level for the most number of households, i.e. marginal utility decreases with
investment. Figure 3 compares the total utility derived from the incremental approach
versus the full approach. From this it can be seen that incremental upgrading generates
Table 5. Marginal cost/incremental utility ratio
From Level 0 to 1 or 2 Water Sanitation Roads Upgrade approach Time Housing Solid waste removal Community facility
Level Marginal capital cost (R)
1 1500 1000 4000 0 0 17 000 500 700
2 3500 4000 5000 0 0 26 000 0 0
Level Incremental utility
1 0.332 0.487 0.177 (1) 0 0.818 n/a n/a
2 0.332 1.34 0.804 (1) 0.445 0.891 n/a n/a
Level Marginal capital cost/Marginal utility
1 4518 2053 22 599 n/a n/a 20 782 n/a n/a
2 10 542 2985 6219 n/a n/a 29 181 n/a n/a
Note: Upgrading approaches are not incremental.
349
30 000; 2.664 38 500; 2.737

2
7500; 0.993 20 000; 1.007
1
Utility
0
0 10000 20000 30000 40000

35 700; –0.143
–1
19 700; –0.877 30 000; –0.959

–2
6700; –1.518
–3
Cost (R/month)
Figure 2. Utility versus capital cost (time ¼ 2 years)
at least 5 per cent more utility than full upgrading if the time to complete the upgrading
programme is longer than seven years.
However, the real difference between the cumulative utility of the two upgrading
approaches can be seen over the short and medium term. Figure 4 indicates that
incremental upgrading could have a greater effect in stabilizing the growing public protest
due to poor service delivery than the full upgrade approach: the total utility of an
incremental upgrade can be more than twice that of a full upgrade over the first five years
of a 20-year upgrade programme and over the first nine years of a 40-year programme.
Conclusions
Many countries around the world face the need to upgrade informal settlements.
In South Africa, the policy is to upgrade informal settlements by providing fully serviced
homes. While the policy is to provide a choice of housing solutions, the practice is to roll out
one solution, namely a house on a fully serviced site. Other alternatives of social housing and
higher density housing are so expensive that only households with higher incomes can access
them rather than almost all those currently in informal settlements. After the rhetoric, all that
is left is a single solution—a house on a fully serviced site in a greenfield development.
The literature and the application of the stated choice model suggest that a more nuanced
approach is not only possible but could have cost and utility advantages.
The literature and most governments support the view that the process of upgrading
informal settlement should include public participation. Often public participation is about
process and beneficiary rather than permitting a choice between alternative upgrade
options. This paper describes a method whereby the perceived values of these alternatives
could be assessed.
Table 6. Incremental upgrading: utility* and cost
For an investment
Level of service of R1 000 000:
Added utility Capital cost/
Water Sanitation Roads Housing Utility/unit by upgrading from LOS 0 unit (Rands) Utility/R1000 Households Total utility
Level 0 0 0 0 0 2 2.473 0 0
Full 2 2 2 2 0.891 3.364 38 500 0.0874 26 87
Level 0 0 0 0 0 2 2.473 0 0
Level 1 1 1 0 0 2 1.657 0.816 2500 0.3264 400 326
Level 2 1 1 1 0 2 1.48 0.993 6500 0.1528 154 153
Level 3 1 1 1 1 2 0.662 1.811 23 500 0.0771 43 77
Level 4 2 2 1 1 0.191 2.664 28 500 0.0935 35 93
Full 2 2 2 2 0.891 3.364 38 500 0.0874 26 87
*Note: Excluding utility of upgrade type and time to delivery.
351
1.08
1.07
Incremental / full cum. utility (%)
1.06
1.05
1.04
1.03
1.02
1.01
1.00
0 10 20 30 40
Years to complete delivery
Figure 3. Ratio of cumulative utility of incremental to full upgrade approaches
The stated choice model described in this paper provides an insight into what residents
value when their informal settlement is upgraded. The model showed that not all the
attributes have a monetary cost and that preferences are not necessarily directly
proportional to the cost. The model suggests that it is unlikely that all residents would
choose one upgrade solution if alternatives were offered to them. This finding supports the
need for residents to have a choice, as indicated by the literature and government policy.
A stated choice survey can be used to develop a more informed range of alternatives that
are able to better match the objectives and constraints of both residents and government.
4.0
40 years
3.5
Incremental / full cum. utility
20 years
3.0 10 years
2.5
2.0
1.5
1.0
0 10 20 30 40
Year in delivery programme
Figure 4. Ratio of cumulative utility of incremental to full upgrading approaches during the upgrade
programme
On the basis of perceived utility, the application of the model found that incremental
upgrading is better than the full upgrading if the time to complete the delivery of a
programme is greater than seven years. However, the fact that incremental upgrading
yields much greater utility among more beneficiaries in the short and medium terms can be
even more important in a political scenario of increasing protest action against poor
service delivery.
It needs to be stressed that it cannot be assumed that residents of other informal
settlements will have the same preferences as described in this paper. However, the
methodology to determine the preferences that residents have for attributes of upgrade
alternatives is transferable and can be used to develop alternative upgrade packages and
estimate in advance how these might be accepted.
Acknowledgement
The data on which this paper is based were collected by Ms Chintu Lingomba.
Notes
1
Mail and Guardian (21 April 2008) Lenasia-service delivery protest turns violent. Available at http://
www.mg.co.za/article/2008-04-21 (accessed 17 October 2008).
2
The Mercury (28 July 2008) Ntuzuma residents protest against housing. Available at http://www.
themercury.co.za/?fSectionId¼&f ArticleId¼ nw20080728091105971C573977 (accessed 2008).
3
IOL (12 May 2008) Orange Farm residents barricade road. Available at http://www.int.iol.co.za/index.
php?set_id¼ 1&click_id¼13&art_id¼ nw20080512154233670C917910 (accessed 17 October 2008).
4
Outcry over new Slums Bill. Available at http://www.iol.co.za/index.php?set_id¼ 1&click_id¼ 13&-
art_id¼ vn20070513085035657C939324 (accessed 17 October 2008).
5
Except that the upgrading produced social housing which they cannot afford and therefore have not
returned.
6
At the same time, Berrisford et al. (2008) ask for larger land area to accommodate the rural-urban
transition of immigrants.
7
In the theory of discrete choices, an essential departure from traditional micro-economic theory is the
postulate that utility is derived from the properties or characteristics of things, rather than the goods per
se. Discrete choice theory incorporates the work of the standard Lancaster-Rosen model, but modifies
this approach further by assuming that individuals maximize their utility on the basis of their
perceptions of characteristics, rather than the characteristics per se.
8
Random utility theory (RUT) is a very general theory of how the analyst represents the preferences of
agents, where elements of information (known to the agents) are not observed by the analyst. While
RUT has gained particular recognition within discrete choice theory in recent years, it is not restricted to
choice theory and can be implemented in a wide range of possible decision contexts.
9
IID is potentially restrictive in that it does not allow the error or random component of different
alternative outcomes to have different variances (i.e. degrees of unobserved heterogeneity).
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Upgrading Informal Settlements in South Africa: Policy,

To link to this article: http://dx.doi.org/10.1080/02673030902869279

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Upgrading Informal Settlements in

ROMANO DEL MISTRO* & DAVID A. HENSHER**

(Received 12 April 2007; revised March 2009)

Memories of Apartheid Housing Interventions

The RDP Housing Programme

Development of Sustainable Human Settlements (‘Breaking New Ground’)

. Supporting the functioning of the entire single residential property market to

located in desired locations. However, households would need to relocate when

Issues in Informal Settlement Upgrading in South Africa

a programme to subsidize social housing, which is aimed at a higher-income group than

The Reality of the Housing Situation

is affordable to the country in respect of funding by national, provincial and local

Informal Settlement Upgrading

. . . bachelor type accommodation . . . family type accommodation . . . ( . . . counter

The Modelling Framework

Uitq ¼ ßitq Xitq þ 1itq ð1Þ

Each characteristic is now represented by a set of observed and unobserved influences.

The Attributes and the Levels of Attributes

Development of the Questionnaire

Table 1. An example of a profile pair

Characteristics of the Respondents

Table 2. Characteristics of respondents

Gender: Stay in Sweet Homes (years) Origin: Family size Head

0– 499 500– 999 1000– 1500 1500 –1999 .2000 , 25 25 – 29 30 – 34 35 – 49 50 – 60

Table 3. The estimated MNL model

Application of the Model

Figure 1. Average ranking of attributes by respondents

Should More than One Housing Alternative be Offered?

Table 4. Probabilities of selecting between upgrade alternatives

Which Upgrading Interventions are most Cost Effective?

Should Incremental or Full Upgrading be Adopted?

Table 5. Marginal cost/incremental utility ratio

30 000; 2.664 38 500; 2.737

0 10000 20000 30000 40000

19 700; –0.877 30 000; –0.959

Figure 2. Utility versus capital cost (time ¼ 2 years)

Table 6. Incremental upgrading: utility* and cost

Figure 3. Ratio of cumulative utility of incremental to full upgrade approaches

estimate in advance how these might be accepted.

(New York: Basic Books).

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