The stench inside is so strong that one of the building’s residents likens it to “dog manure simmering in the sun without a breeze to blow it away”.
The building is festooned with laundry and is stained with the white marks of urine and dishwater. Someone has scrawled “It’s a thug’s life” on the wall. Poor families, immigrants, drug dealers and slumlords share rooms; crusty buckets are their only ablution facilities. On the street, bookshops and coffee houses abut butcheries that feature offal as their main commodity.
Johannesburg’s CBD is a bundle of contradictions, all roiling around the problem of how to stem the tide of decrepitude and make the redevelopment of the inner city sustainable.
Social housing development was introduced to Johannesburg in 1996 and was hailed as a way to prevent the city’s degeneration. But seven years later the area is still a seething mass of grinding poverty. Now questions need to be answered if the harsh financial realities facing the inner city are to be balanced with the need to transform it.
Social housing offers an alternative to ownership or rental. The housing units are not for sale on the open market, but are owned or managed by an institution that offers security of tenure for a relatively low monthly rental. Residents take part in managing the building through residential committees and housing supervisors.
The government housing-subsidy scheme recognises rental accommodation as a tenure option for low-income families by giving households earning less than R3 500 a month a once-off subsidy of R20 300.
The inner city has 38 000 buildings, 90% residential, but fewer than 20% have been refurbished since social housing development began in 1996. Most experts feel social housing development is an essential part of a mixed-income community that manages and maintains a hospitable environment for investors.
The Johannesburg Housing Company (JHC) is one of eight social housing institutions in Johannesburg and is responsible for 5% of the redeveloped buildings. The others are Cope, the Johannesburg Transition Housing Trust, Badiri Housing, Connaught Properties, Trafalgar Properties, the Affordable Housing Company and Contax Dienste.
“True urban renewal calls for the ‘thousand actors’ approach,” says Taffy Adler, CEO of JHC. “Regardless of how well thought-out planned inner-city regeneration programmes are, their success hinges on the co-operation of citizens, and the government, non-government and private sectors.”
Cas Coovadia, general manager for transformation at the South African Banking Council, says banks often avoid investing in the inner city because the local council fails to provide commercial and non-commercial incentives. “If the local council fails to collect rates efficiently and allows service charges to balloon … this means once a building has been funded and it defaults in rate payments in the future, the bank would be unable to resell the building as the council would not allow a transfer … banks would rather walk away.”
Banks adopt red-lining policies, refusing to grant loans to home owners in areas where property is devaluing and many of the lenders default on their loans. They want guarantees that their investments will be repaid.
Adler agrees and says the council is the “villain in the piece”.
“The sanction for inner-city renewal lies with councils because they’re the only ones who can insist on payment. Social housing institutions and the private sector can only apply the pressure,” he says.
About 65% of JHC’s tenants fall within the government subsidy range. The other 35% pay a non-subsidised rental “to allow for the growth of mixed-income communities”, says Adler. “In this way we hope to avoid the ‘ghetto of poverty’ syndrome which has bedevilled many social and public housing projects all over the world.”
The average monthly subsidised rent for a one-bedroom flat is R990, which rises to R3 500 for three bedrooms, about 20% less than unsubsidised rates.
Pierre Venter, national adviser for business and development planning at Absa Bank, says: “The success of social housing development will depend on stringent rules against defaulters, insurance policies that protect the cash flows [of the housing institutions] for a limited period and effective monitoring and evaluation systems in terms of debtor and creditor control.
“The enforcement of municipal by-laws and standards alone cannot inculcate a sense of responsibility.”
But enforcing these might have saved the Seven Buildings Company, a R6-million social development housing project, from collapse last year.
Punted by the social housing movement as the mother of development, the company was inaugurated in 1996 when the Gauteng Provincial Housing Board handed over a R6-million institutional housing subsidy, the first of its kind in the country, to the tenants of seven inner-city blocks of flats.
Last year the company was liquidated after the Inner City Housing Upgrade Trust (Ichut), which had lent the company R3,6-million to improve the buildings, filed a claim. Ichut, formed to provide short-term bridging finance to inner-city residents, filed its claim after five of the seven buildings defaulted on their loans.
Venter says that, apart from the management being too complex, “the biggest reason the Seven Buildings project failed was that the residents’ income profiles weren’t factored in”.
The JHC is the only social housing institution to have wooed private investors. In 2000, Absa Bank and JP Morgan granted an R11-million loan with subsidised interest rates for a JHC development. It was the first commercial loan granted to a social housing institution since banks began red-lining the CBD in the early 1990s.
“People said we were mad to get involved in inner-city development,” says Adler. “Eight years later we have invested R94-million into development and hope to be financially independent by the end of the year.
“I attribute our success to a good track record and an offering of acceptable risk. I think if you stick to the basics … people will begin to trust you.”
JHC’s latest development is the R210-million Brickfields rental housing project. Gauteng’s Department of Housing has granted it a R19-million loan and R6-million in subsidies. Anglo American has granted it R3-million, Absa R10-million and the Gauteng Partnership Fund R10-million.
The Gauteng Partnership Fund is the provincial government’s latest effort to attract private-sector cash to the low-income housing market by providing financial guarantees. The plan is similar to that of the National Housing Finance Corporation, established in 1996 to draw banks into the social housing sector through partnerships with the government.
The Gauteng Partnership Fund was created as the national Department of Housing is preparing the Community Reinvestment Bill to force banks to give mortgages to people wanting to buy in the low-income housing market. The Bill stirred controversy among banks last year by proposing to force them to make loans to low-income families. The banks would be fined up to R500 000 for non-compliance.
Though they have committed themselves to providing loans to low-income groups, the furore highlighted the uneasy relationship that still exists between banks and the authorities.
The Bill is under review, but is due to be passed next year to complement the Home Loan and Mortgage Act, which enables the government to monitor banks’ lending trends.
Coovadia says the fears are unfounded because the government would not introduce legislation that “is contrary to everything they talk about”. He believes the legislation will be a happy medium between co-operation and coercion.
Says Adler: “Given the capital-intensive nature of housing development, private-sector financing is the only resource large enough to deliver at the scale required … [But] one of the greatest challenges is breaking the link between low income and low cost in the minds and activities of even the most well-meaning actors in the provision of accommodation to poor people.”