Inner City Housing Learning Note 1 (2016) by The Power Is In People

Inner city housing Learning Note March 2016

1. introduction

This research was commissioned by Oxfam in order for itself and its urban-based partner organisations to understand the national and municipal processes that surround providing decent housing to vulnerable groups within the inner-cities of South Africa. This series of research consists of two learning notes. Learning note one is applicable to all South African partners and provides general, high-level information on inner-city housing. Learning note two focusses on housing in the Durban Inner-City in more detail. This learning note, first, provides an overview of the national housing subsidies that are most applicable to inner-cities, who can apply for them and under what conditions. Secondly, it describes the roles and responsibilities of local government with regard to housing i.e. vulnerable groups, building compliance, rates, town planning and by-laws. Lastly, it provides a brief discussion of the major stakeholder groups in the housing sector.

2. National Housing Subsidies The Housing Act of 19971 describes the principles of housing policy in South Africa and it defines the roles, powers and responsibilities of all spheres of government. The Housing Act should be read in conjunction with the National Housing Code2 (2009), which describes the numerous subsidy programs which help give effect to the Act. The National Housing Code defines the mechanisms that are available for the implementation of affordable, subsidised housing projects in South Africa. Essentially, these mechanisms are a range of capital subsidy instruments, including some funding for planning and packaging of potential capital projects. In general, the qualifying criteria for people accessing housing subsidies are as follows:     1 2

Lawfully reside in South Africa; Are legally competent to contract; Neither the applicant nor his or her spouse has previously benefited from government housing assistance; Have not owned fixed residential property; and

Housing Act (1997) Available: http://www.acts.co.za/housing National Housing Code (2009) Available: http://www.dhs.gov.za/content/national-housing-code-2009



Households must earn a monthly income in the prescribed range as per the National Housing Code.

The figure below summarises the subsidy programs that are available for housing in a dense urban or city-centre context, as outlined in the National Housing Code.

Emergency Housing Program

Social Housing Program

Temporary accommodation solutions in the case of emergencies. Applicable to all who satisfy basic criteria, in addition, persons who have previously benefitted, minor headed households and foreign nationals. Municipalities should apply.

Development of affordable rental housing accommodation within restructuring zones (areas of economic empowerment). Usually, pay-slips are required from beneficiaries so those with little to no income, those who are informally employed and some foreign nationals are excluded. Registered Social Housing Institutions should apply.

Institutional Housing Program

Community Residential Unit Program

Development of affordable rental housing accommodation outside of restructuring zones. Usually, pay-slips are required from beneficiaries so those with little to no income, those who are informally employed and some foreign nationals are excluded. All institutions that support vulnerable groups can apply.

Rental accommodation in the form of individual units, but most often has shared kitchen and ablution facilities. Remains in public ownership, cannot be sold or transferred. Tenants must earn less than R3500 per month and can be informally employed. Local government should apply.

Figure 1 Subsidy Programs Outlined in the National Housing Code

The subsidy programs are discussed in more detail below. Detailed reports on all subsidy programs provided by the Department of Human Settlements are available from their website: www.dhs.gov.za, under ‘Housing Code’ (especially useful is the ‘Simplified Guide to the National Housing Code’). 2.1 Emergency Housing Program3 This program envisages that there may be emergency situations during implementation of informal settlement upgrading projects and that, in cases of natural or man-made disasters (e.g. fire), emergency housing assistance may be needed. This program could be applied to dilapidated buildings that require closure, as is often found in South Africa’s inner-cities. The National Disaster Relief Fund4 would be the first port of call, but where temporary housing is required, this program could be applied. Persons who satisfy the basic qualifying criteria are eligible for assistance, but in

3 4

National Housing Code’s Emergency Housing Program (2009) Available: http://goo.gl/pEigv5 National Disaster Management Centre (2016) Available: http://www.ndmc.gov.za/

addition, persons who may have previously benefitted from a subsidy or owned a property, households headed by minors, as well as foreign-nationals could be considered. 2.2 Social Housing Program5 The aim of the social housing program is to provide an affordable rental option to beneficiaries in areas identified by municipalities as having economic opportunities (‘restructuring zones’). Registered Social Housing Institutions (SHIs) are eligible to apply for subsidies. These institutions must be accredited by the Social Housing Regulatory Authority (SHRA).6 The SHRA is a national body whose primary role is the regulation of the social housing sector. Subsidies provide assistance for social housing developments, but SHIs must also raise their own finance as the subsidies cannot cover the full development costs, and must be in a position to cover all ongoing operating and maintenance costs, usually through rentals received. The Social Housing Company (SOHCO) is regarded as one of the most successful social housing institutions in South Africa and although the company is Durban-based, it has successful projects in East London and Cape Town.7 JOSHCO (the Johannesburg Social Housing Company) is the SHI established by the Johannesburg municipality which has a very good track record, particularly in turning around non-compliant buildings.8 Because the viability of the operations of an SHI depends on rental income, qualifying criteria to individual tenants, in addition to the state subsidy qualifying criteria, are usually applied e.g. submission of formal pay-slips. This means that social housing is not generally available to those with little to no income, or to those who are informally employed. Foreign nationals, whose status is uncertain are not usually eligible either. The inclusion of non-subsidised units in social housing developments also helps make these projects feasible, and the quantum of subsidies received by an SHI for a project is on a sliding scale in relation to the number of low income beneficiaries that are accommodated. 2.3 Institutional Housing Program9 This program allows for housing institutions to apply to the MEC for subsidies to develop affordable rental accommodation outside of restructuring zones. The rental units may be sold to beneficiaries after a minimum of 4 years. As with social housing, the housing institution must access its own funding in addition to the subsidies, which cannot cover the full development costs. This program may be applied for by institutions that support vulnerable groups or groups with special needs. Institutions such as universities are eligible to apply for institutional subsidies for student housing. 2.4 Community Residential Unit (CRU) Program10 This program is intended for the provision of affordable rental accommodation for those with little to no income, such as those living in sub-standard, back-yard rentals or over-crowded and unsafe buildings. It also provides a rental option for the informally employed, who would not qualify for 5

See the National Housing Code’s Social Housing Policy (2009) Available: http://goo.gl/GJXXVN Social Housing Regulatory Authority - http://www.shra.org.za/ 7 SOHCO Property Investments (2016) Available: http://www.sohco.co.za/ 8 JOSHCO (2016) Available: http://www.joshco.co.za/ 9 National Housing Code’s Institutional Subsidies (2009) Available: http://goo.gl/8XH7K3 10 National Housing Code’s Community Residential Unit Program (2009) Available: http://goo.gl/Ug6Pss 6

social housing. CRU projects are usually initiated by government, usually a municipality, and the requirement is that housing funded under this program must remain in public ownership on an ongoing basis. Units may never be sold or transferred. Accommodation may be in the form of individual units, but most often there are shared kitchen and ablution facilities. The program provides for capital subsidy, plus assistance with major maintenance costs, but the regular operations must be funded through rental collection. In Durban, this program has mainly been used to upgrade existing hostels11. The National Department of Human Settlement criteria for the prioritisation of CRU projects includes the following:       

Property is in public ownership; Tenants must earn less than R3500 per month (pm); Basic structural and specification standards are met; Operating costs must be covered by rentals; Capital costs must be in the acceptable range; Project must be well located; and Municipality must be positioned to manage the stock.

2.5 Applicability of Housing Codes to Foreign-Nationals The National Housing Code does not guarantee “Immigrants whose residence status is uncertain on the conditions prescribed by the Department of Home Affairs” access to government housing subsidies but says that this will be decided on a “case-by-case basis”12. Furthermore, only South African residents are able to apply for subsidies and even legal foreign nationals can only receive residency status after five years13. This is controversial as human rights activists argue that adequate housing is part of South Africa’s Bill of Rights and extends to everyone living in South Africa, regardless of their official residency status.14 The exclusion of foreign-nationals from such programs and affordable housing schemes, in general, is a barrier to forming sustainable urban communities. It also provides the conditions in which unsafe housing practices grow and become a hazard for all city inhabitants. For these reasons, it is important that government and local officials actively include foreign nationals in their housing policy and planning. 2.6 Development Finance Institutions As well as providing subsidies, the South African Government has developed several financing institutions such as The National Housing Finance Corporation (NHFC)15 whose primary focus is to find sustainable (i.e. non-state funded) models on affordable housing finance for the low- and middle-income target market.

eThekwini Municipality (2013) Available: http://goo.gl/67Tcx0 National Housing Code’s Simplified Guide (2009) Available: http://goo.gl/q1J8Mn 13 Paralegal Advice (Date Unknown) Available: www.paralegaladvice.org.za 14 See the Consortium for Refugees and Migrants in South Africa (CORMSA)’s submission to the South African Human Rights Commission (2009) Available: www.cormsa.org.za 15 National Housing Finance Corporation (founded in 1996) Available: www.nhfc.co.za 12

3. Local Municipality roles and responsibilities

Essentially, the municipality is responsible for the planning and co-ordination of the provision of services and infrastructure and implementing service delivery, as well as for the management and maintenance of such, ensuring basic health and safety for all residents. This role includes: the promotion of the city as an attractive city to live, work, invest in, and play; facilitation of new development in alignment with national, provincial and local policies and priorities; and enforcement of development and planning regulations, building regulations, by-laws and other standards and guidelines.16 The roles and responsibilities relevant to housing are discussed in more detail below. 3.1 National Building Regulations17 One of the key compliance aspects, and a common contravention, relates to whether there are approved building plans for a building. This may not seem like a big issue at face value, but approved plans indicate that the building complies with the National Building Regulations which cover all aspects that affect the health and safety of the occupants, as well as the general public, such as the structural design of a building, the refuse disposal, the space heating and ventilation. 3.2 Municipal By-Laws In addition to the National Building Regulations (NBR), buildings (and occupiers/users) need to comply with the Municipal General By-laws, Building By-laws, and accommodation establishments need to also comply with the specific Accommodation Establishment By-laws. The provision of ablutions, cooking areas, overcrowding, licensing, building condition, waste, water and sanitation, storm water management, and vermin (including mosquitoes), are all regulated through the by-laws. Electrical installations are required to be legal (i.e. a registered metered connection for billing purposes) and separately certified (certificate of compliance issued by a registered electrician). The by-laws dealing with fire protection and control of fire-fighting equipment are also relevant. These are set out in the Metro Fire By-Laws. Fire risk is a major threat in overcrowded buildings, and even where buildings comply with the fire regulations in the NBRs, compliance with the additional fire related by-laws is important. A non-profit organisation called Code4SA (code4sa.org) is in the process of digitising South Africaâ&#x20AC;&#x2122;s by-laws, which, until now, were often only available in hard-copy from the municipality or via scanned images on the web. The movement, called â&#x20AC;&#x2DC;Open By-Lawsâ&#x20AC;&#x2122; is a community effort to make by-laws freely available, easy to read and easy to share. By-laws for Johannesburg and Cape Town Metros are already uploaded and can be accessed at openbylaws.org.za. Code4SA are looking for funding to expand into other metros and then to all municipalities and finally, to national legislation. Criminal activity in buildings, which is a very real problem in many generally non-compliant buildings in urban areas, is handled through the laws of the land and should be enforced by SAPS. A breach of the law is also deemed to be a breach of the by-laws, which are then enforced by Metro Police. A 16

South African Local Government Association (2011) Available: http://goo.gl/Q8UTVh National Building Regulations and Building Standards (Act No. 103 of 1997) Available: http://www.dti.gov.za/business_regulation/acts/building_standards_act.pdf 17

breach is grounds for prosecution as well as grounds for licences, including accommodation establishment certificates, to be withdrawn. 3.3 ‘Bad Buildings’ The term ‘bad buildings’ is used to refer to buildings where owners, landlords, or tenants allow buildings to become overcrowded and dilapidated. Sometimes, this happens without the owners’ knowledge, but not always. Overcrowding exacerbates deterioration, especially of services which cannot cope with the excessive demands. When this happens, the building contravenes many of the National Building Regulations and the Municipal By-Laws, and tenants are left living in unsafe and unsanitary conditions. In some cases, the owner ceases to pay municipal rates, and disappears. When services in a building break down, the effects are visible on the street. Bad buildings contribute to broader urban decay through a ripple effect that results in a loss of investor confidence, and the proliferation of a sense of unmanaged public space in the vicinity.18 In Johannesburg, the municipality often expropriates such buildings and offers them to investors for re-development, usually writing off part or all of the rates arrears as part of the deal. They also sometimes negotiate rates arrears as a means of encouraging existing owners to refurbish, however this still takes a long time.19 In Durban, the owners are fined for non-compliance, buildings may be closed down, and owners charged in court. Buildings that are still functional may be placed under judicial administration, especially sectional title buildings where there may still be some unit owners in residence. This whole process can take years. Usually prosecution is through criminal action, but sometimes civil action is more successful.20 3.4 Rates Policy Setting and implementing a Rates Policy is a key municipal role, and a potentially potent tool for the municipality to use as an incentive/disincentive, with respect to building compliance. The Municipal Rates Policy is updated annually and can be accessed via the municipal website. The Rates By-Laws for eThekwini, Johannesburg and Cape Town are available on openbylaws.org.za. 3.5 Town Planning Scheme Land use zoning and parking requirements are dictated by the Town Planning Scheme. Re-zoning to regularise land use takes a long time, and triggers the need for environmental authorisation as well. There are examples of accommodation conversions done well but without proper zoning, which is problematic, although dysfunctional buildings with the correct zoning can be equally problematic. Compliance notices and fines are the main means of enforcement, with court action as a last resort. 3.6 Vulnerable Groups Several municipalities, such as the cities of Cape Town and eThekwini, have developed vulnerable group policies as they recognise that they are the sphere of government closest to communities and 18

See the Mail & Guardian Exposé ‘When Good Buildings Turn Bad’. Available: http://mg.co.za/article/2015-07-23-when-good-property-turns-bad 19 See Johannesburg’s ‘Draft Strategy for addressing blighted medium and high density residential “bad buildings” in Johannesburg: working document for discussion’ (2009) for an excellent review of the situation and legislation. Available: http://goo.gl/bz2UgQ 20 See eThekwini’s Exco Decision and Report Back on Bad Buildings at http://goo.gl/RrKtgF

therefore have a moral responsibility to protect vulnerable persons.21 This is not to undermine, but to support, the initiatives of other government departments and civil society organisations’ initiatives targeting vulnerable groups. The Housing Code makes provision for an additional subsidy amount for making housing units suitable for people living with disabilities. Addressing homelessness is often seen as a housing issue, but it is not this simple. Many so-called homeless people may have homes in rural or peri-urban areas, but have nowhere to stay in the city (referred to as ‘roofless’). Similarly, dealing with children living on the street is a social, rather than an accommodation issue, and should be treated as such. Appropriate shelter for children living on the street and other homeless persons is only a part of the solution.22

4. stakeholders

In order to understand the urban housing environment, it is useful to try and see it from the different perspectives of the broad categories of players in the space, and to understand their imperatives and constraints.

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4.1 Private and Public Developers and Owners For developers, the availability of suitable properties is key. Targeting bad buildings as a potential source of affordable building stock requires complex and time consuming facilitation, which may include acquisition (e.g. via purchase or expropriation), negotiations with residents and/or evictions, 40% 64% 68% and a range of possible procurement procedures before such properties can actually be redeveloped. Access to finance can also be problematic when developing within the city or in low-income areas. Most financial institutions have guidelines for assessment of development proposals (e.g. Propertuity reports that more than 70% of residential accommodation in a mixed-use development is regarded as high risk and is unlikely to attract finance23). Furthermore, the practice of red-lining (the blanket refusal of loans by finance institutions in areas perceived to be risky) does occur, even though it is prohibited.24 This affects a developer’s ability to make sales and, as in the recent case of Propertuity’s Pixley House development25, forces the developer to adopt a rental, rather than sales, business model. The state makes finance available via subsidies but has also tried various initiatives to reduce financier risk in order to stimulate loans in the affordable market. This has mostly been in the form of loan guarantees or funding soft loans though organisations such as the National Housing Finance Corporation. Both owners and developers are at risk to tenants defaulting on rental payments as the right to housing is protected in the constitution and there are procedures that need to be followed to get an eviction order for defaulting tenants. Even in the event of chronic default, eviction is treated as a last 21

See Cape Town’s (2013) Vulnerable Groups Policy here: https://goo.gl/YhlK3q Human Sciences Research Council (2015). Available: http://goo.gl/Lse5mj 23 Interview with Propertuity (2016) 24 African Union for Housing Finance (2015) Available: http://www.auhf.co.za/publications/newsletters/ 25 Propertuity Development (2016) Available: http://propertuity.co.za/durban/ 22

resort and sometimes leads to illegal evictions. The Prevention of Illegal Evictions Act (PIE), Act 19 of 199826, is particularly onerous for landlords, requiring in principle, that tenants must be offered alternative accommodation first. The South African Local Government Association (SALGA) published a thorough review of court cases on evictions in South Africa with the aim of sharing â&#x20AC;&#x153;information with municipalities on what their obligations are with regard to evictions and to provide some advice on how best to handle these issuesâ&#x20AC;?.27 This document is also critical for NPOs and civil society in order to understand their rights in this regard. For example, in the Blue Moonlight Case (2006-2012), the court held the City of Johannesburg liable, not only to the evictees for new accommodation, but also to the developer for rent lost over the years before the successful eviction. Owners living in sectional title buildings and investment owners are further vulnerable if their body corporates are not functioning well. Many absentee owners, whether they have tenants or not, employ agents to manage their affairs. Property management is challenging, and security is an important issue to guard against overcrowding through sub-letting, as well as building hijacking. 4.2 Tenants Tenants base their selection of accommodation on various individual criteria, but location, affordability and quality are often the primary considerations. Potential landlords may require proof of income, which is sometimes difficult to provide, which results in fewer options being available to these people, and may result in the exploitation of these tenants. Many people living in poor conditions in urban areas have previously lived under worse conditions and their priority often is to send money home, so they are much more tolerant of poor conditions than might be expected. Foreigners, in particular, are vulnerable and are unlikely to draw attention to themselves by protesting. 4.3 Civil Society Civil society is active in many forms in this sector and has a critical role to play in monitoring human rights violations, enhancing transparency in the sector and mobilising stakeholders around critical housing issues. Planact is one such example of an NPO making a difference in the inner-city of Johannesburg through holding stakeholder consultation and conducting baseline research.28 Oxfam and its partners fall into this group of stakeholders, and understand the issues and constraints from their perspective and from their various constituencies. This paper is intended to provide background and context to inform their activities.

Prevention of Illegal Actions Act (1998) Available: http://goo.gl/ul4KLJ SALGA (2014) Available: http://goo.gl/sgM7qg 28 NGO Pulse (2015) Available: http://goo.gl/NKMava 27

5. conclusion Inner-city housing is a complex topic. Jurisprudence is constantly changing and the roles of stakeholders, especially, local government are constantly being redefined. It is the responsibility of municipalities to remain up-to-date with the latest jurisprudence but it is also the role of civil society to monitor human rights violations and hold government accountable. Most jurisprudence is updated due to civil action groups taking housing matters to court on behalf of vulnerable groups. Vulnerable groups particularly affected by inner-city housing problems include foreign nationals, informal workers and those suffering from substance abuse or other psychosocial problems. The municipality must balance the rights of these residents, legal or illegal, with the constitutional responsibility to economically develop the city and provide a safe living environment. This means enforcing building regulations and by-laws and sometimes writing off rates payments, at the municipality’s own expense, in order for developers to have access to building stock in areas that offer immense economic opportunity. National government offers various subsidy tools and financing bodies that are in place to assist local government and civil society with this task that is made so much more difficult when the inner-city has already been allowed to fall into urban-decay, as it has in certain part of the Durban Inner-City. Learning Note 2 takes a closer look at the Durban Inner-City’s current status, problems and resolutions going forward.