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Housing is an important asset of the urban poor. Depending on the ability to manage the asset and on theregulatory framework, households can earn income from renting out rooms and move out of poverty. Thisstudy is on housing transformations in informal settlements, unlike similar earlier research on government-builthousing. Based on empirical investigations in two informal settlements in Dar-es-Salaam, Tanzania,the article explores the effects of housing transformations on urban poverty. Owner households earnsubstantial amounts of income from renting out rooms and from water vending. Grown-up children 'nest'in their parents' homes and use them as working spaces, thus enhancing the stock of social capital inowner households. On the negative side, housing transformation contributes to excessive plot coverage,in-house crowding, occupational health hazards and poor sanitary conditions. Through road encroachment,housing transformation can render settlement structure dysfunctional. The negative externalitiesundermine efforts to increase household income and to promote health in informal settlements, and arelikely to compromise some of the Millennium Development Goals targets in Tanzania. Operationalisingempowerment in informal settlements is one of the most promising ways forward.
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