Tin shacks and squatter houses, by virtue of their design and construction, are very thermally inefficient. Inhabitants of these dwellings can spend up to 20% of their disposable income on space heating during winter months. Space heating is usually achieved by burning bio-fuels like wood, coal and paraffin. This heating process produces indoor pollution, and the pollution levels in informal low-cost houses are up to 10 times higher than prescribed by the World Health Organisation. The solution to this problem is to make the houses more energy efficient, and studies have shown that the best way to do this, is to insulate the houses. The aim of this study was to develop a low-cost insulating material for this purpose. It was decided that to make the material economically feasible, a waste product of some type should be used. Used tyres were selected as the waste material, processed to produce a granular rubber, and then combined with additives to produce sheet rubber. One hundred and thirty-one experiments were performed to try and optimise the ratio of solvents, fire retardants, foaming agents and colourants. The experiments, and several computer simulations, showed that energy savings in the region of 45% could be realised using the material. This amounts to a saving of US$91.5-million each winter if all the informal low-cost houses in Gauteng alone were to be insulated. The material was developed into a workable form during this study, but work still needs to be done to improve the flammability, toxic gas emissions, and fire retardancy.