Is The Sale Of City Owned Rental Stock A Good Idea? 

Is the City ready to deal with complex inadvertent issues linked to the sale of historical public rental stock?   The City of Cape Town’s Human Settlements Directorate is offering about 9 000 qualifying tenants who are living in Council-owned rental properties the opportunity to purchase their units and to become property owners. These properties include free-standing and semi-detached houses, terraced or row houses and maisonettes that are located across the city in areas such as Gugulethu, Valhalla Park, Mitchells Plain, Heideveld and Nyanga, among others.   DAG acknowledges this initiative as a noble idea that offers many households a footstep on the property ladder. It is not a secret that many households in Cape Town cannot afford to buy a property through bank finance. Given that the City is selling the units at nominal value, we hope that the “nominal value” is reasonably set at prices that take into consideration the fact that many residents have been paying rent for decades and some likely invested their own finances to improve the quality of these residential apartments.   However, the success of such an initiative is largely dependent on the design and implementation of the overall programme. There are several questions and or challenges associated with the proposed initiative that requires serious consideration.

  1. The City is constitutionally obligated to provide access to adequate housing for its residents and it is important for the relevant authorities to shed light on why the City has decided to sell rather than give the houses to the tenants or retain them as crucial affordable rental units.
  2. The notion that housing can be utilised as an asset lifting people out of poverty has proven to be not always the case. For instance, the tenure audit conducted by DAG found that close to 35% of 1,500 BNG housing units surveyed were already sold informally and the beneficiaries had moved back to reside in informal settlements. This is a potential risk that must be carefully examined and mitigated against.
  3. A significant number of units being sold may require serious renovations including infrastructure upgrades for sewage and electricity. The living conditions in many of these rental properties are dire and poses serious health problems to residents. At this stage, there is no clear information about the extent to which the state is going to play an active role in renovating the units. What efforts will the City make to ensure that the units being sold are in an adequate state and what is reasonable contributions expected from prospective owners?
  4. Replacement of rental stock: Public rental stock is a key avenue for the people to find subsidised affordable housing in an urbanising metro. It is critical that the City does not lose sight of providing state supported rental. Will these 9,000 units are replaced with social housing or affordable rental units? If these units are not replaced, the public rental stock gets lost to the market and will ultimately fail to provide essential housing lifeline to people earning between R 3,500-R 15,000.
  5. There are serious concerns around the City’s ability to manage its rental stock, particularly its ability to collect rent from tenants. Because the city is unable to collect rent on these properties, ownership cannot be the solution. Instead, in-depth analysis of the challenges and opportunities with the public management of rental stock must be conducted, based upon which a clear and solid plan to ensure successful implementation must be put in place.
  6. Gentrification or market-led displacement is a real issue that is most likely to threaten the beneficiaries especially their ability to remain homeowners in the near future. A significant proportion of the beneficiaries of this great initiative have intermittent income. Once the tenure security has shifted from rental to ownership, there is no guarantee that these properties are insulated against “down-market raiding” forces and or growing increase in municipal rates and service charges to an extent that they become unaffordable to the beneficiaries, and in consequence priced out of home ownership. In the UK, back in the 1980s, the Thatcher government sold most of its rental stock. To this day, social housing activists and government officials alike consider it a major loss of property to the private market. Surely we should learn from other precedents and not make the same mistakes. It is DAG’s hope that the City of Cape Town has given significant thought to this, and intend to make the necessary mitigations measures required.

In conclusion, while the City’s offer to qualifying tenants of the existing municipal rental stock to become homeowners is a positive step, it should be done in a manner that is fair and just. It is important for the state to provide clarity on the issues highlighted above. There are many lessons in relation to the failure of housing programmes in South Africa, especially the low-cost government subsidised housing ownership programme. It will be important for the City to bear these lessons in mind when rolling out initiatives like the sale of rental stock. Picture: Cape Argus (Itumeleng English/African News Agencies Archives).