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Rapid urbanisation in the South has contributed to the growth of informal housing on a large scale. South Africa’s experience is somewhat unusual in that the growth of informality appears to have taken the form of backyard shacks in established townships rather than free-standing shacks in squatter settlements. This is potentially important for household well-being (e.g. better access to services) and for the efficient functioning of urban areas. The paper develops a framework for assessing the impacts and applies it to the country’s leading metropolitan region, Gauteng. It finds that people are slightly better-off in backyards than in shacks elsewhere, although the wider benefits for urban areas are equivocal. In some respects backyard shacks are a stopgap for poor households desperate for somewhere to live. In other respects they represent a kind of prototype solution to the urban housing crisis. The government could do more to improve basic dwelling conditions and to relieve the extra pressure on local services. [ABSTRACT FROM AUTHOR]