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Informal rental housing is growing rapidly in cities of the global South. Changing needs and circumstances of diverse urban populations produce new forms of rental accommodation and landlord–tenant relations. Focusing on the case of backyard renting in South Africa, this paper illustrates how informal rental is undergoing a dynamic process of expansion and upgrading that both reflects and contributes to improved socioeconomic conditions. Commercialization is transforming the material quality and social dynamics of informal rental housing. While there are signs of formalization and professionalization, the government’s neglect of this sector has contributed to the strong persistence of informality, with its associated risks. This paper argues that the informal rental sector deserves more government attention to augment the public benefits and mitigate the costs. The paper ends with suggestions of how a developmental approach by the government could help to convert the negative externalities into a positive dynamic with more equitable and sustainable outcomes.

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Cape Town is widely considered to be South Africa’s most segregated city. The chapter outlines the history of social stratification and spatial segregation, including the coercion of colonial and apartheid governments to divide the population by race. Since 1994, the democratic government has lacked the same resolve and capacity to reverse this legacy and integrate the city. The chapter also analyses the changing socio-economic and residential patterns between 2001 and 2011 in more detail. It shows that the extent of segregation diminished between 2001 and 2011, contrary to expectations. It appears that affluent neighbourhoods became slightly more mixed and people in high-status occupations spread into surrounding areas. Some low-income neighbourhoods also became slightly more mixed by accommodating middle class residents. Further research is required to verify and explain these findings.