Opinionista Stuart Wilson 23 March 2018

Redistribution: ‘Willing buyer, willing seller’ was never going to cut it

The redistribution of wealth and power and elimination of substantial inequality is the fundamental goal of the post-apartheid project. That goal is not capable of being pursued exclusively, or even primarily, through markets. It is, or should be, the primary purpose of the post-apartheid state. And the state’s recent engagement with expropriation as a way of redistributing land could signal a deeper commitment on its part to challenging markets and inequality.

The use of expropriation is finally becoming a serious policy option in redistributing rights to land and housing in South Africa. “Willing buyer, willing seller” was never going to cut it. The inequality left us by apartheid was too great, and too structurally entrenched, for the market to be able to do much about it. Markets in any event create inequality; they do not ameliorate it.

Much of the potential of expropriation to bring about a more just society depends on how and in whose favour that instrument is wielded. The standard reactionary nightmare scenarios can easily be discounted. It is next to inconceivable that expropriation will be used against individual homeowners. Nor would it be wise, in the first instance, to expropriate land that is currently put to productive or socially beneficial use.

Rather, to play an effective role in the redistribution of land rights, the target of expropriation should be large tracts of land held speculatively and put to no productive use by companies and wealthy individuals. There is a lot of this about. Expropriation is an essential tool to ensure that this land is not banked in the private interest, but is rather put to proper use in the public interest.

What happens after expropriation takes place is equally important. By whom, and on what terms, will expropriated land be held? Who will benefit from the land? Who will have rights to use it?

These questions remain largely unexplored in public debates so far. But in Johannesburg, where expropriation is being loudly touted as a solution to the housing crisis in the inner city, the approach being pushed is not promising.

Johannesburg mayor Herman Mashaba’s vision is to expropriate abandoned or unused properties from private owners who are unwilling to maintain them or put them to productive use. So far, so good.

But the idea is then to hand the buildings over to other private property developers who will be expected to renovate them and let them out as affordable housing.

Here is where the wheels are bound to come off. In the first place, it might be asked why any government that wanted to regenerate the inner city would wrest control of property away from renegade property owners, only to put it right back into private sector hands.

The reason why the inner city degenerated in the first place was widespread abandonment by the private sector as a result of falling property prices in the 1990s. Accepting this, surely the solution is more state ownership of property in the inner city; not a state-funded bonanza for private property developers, who are just as likely as ever to cut their losses if inner city property prices take another dip in future.

Equally difficult to understand is how the City of Johannesburg is going to ensure that private property developers provide affordable housing to the poor. Most of the buildings the City intends to expropriate are full of very poor people who inhabit them precisely because housing on the private rental market is unaffordable. The vast majority live in so-called “bad” buildings for little-to-no rent.

It is inconceivable that private property developers will be able to provide accommodation to these people while at the same time turning a profit. The City has said that it intends to cap rents in at least some of the renovated buildings at R500 per unit. But that is well below what is needed to pay for even the most optimistic estimates of the cost of renovating and maintaining most of the buildings involved.

Even the Johannesburg Social Housing Company – a state-owned entity free of dividend-hungry shareholders, but which must nonetheless break even, and which gets no appreciable rent subsidy – can rarely get rents down lower than R700 per month. Even this requires heavy cross-subsidisation by relatively well-off tenants, because the actual cost of renting out a unit for R600 to R700 per month is in fact R1,300 per month. There is no profit involved.

On the City’s own estimates there are at least 94,000 people living in the inner city who need accommodation at R500 per month or lower. The only ways the City can hope to provide for these people through the market is by giving huge rent subsidies to private property developers to cover their losses, or by strictly limiting the period for which rent-caps will endure. To have any incentive to participate in the City’s schemes, developers would have to be allowed to charge what they want at the end of the rent-capped period.

The first option constitutes an outrageous gift from the state to the private sector in circumstances where the state could provide affordable accommodation directly to those who need it at a fraction of the cost. The second option simply defers the inner city housing crisis into the medium-term future. It does nothing to resolve it.

But there is a deeper problem. The City’s use of expropriation to provide housing is governed by section 9 (3) of the Housing Act 107 of 1997. That provision states that a municipality may expropriate land it needs to implement “any national housing programme”. So section 9 (3) only permits the City to expropriate land if the housing development concerned is part of a specific national housing programme.

There is currently no national housing programme that authorises the kind of giveaway to the private sector that Mayor Mashaba currently appears to favour. Most national housing programmes require the state to assume the role of owner or developer of rental housing projects, or to form a not-for-profit entity that will own and maintain the affordable housing to be provided. Simply handing buildings over to the private sector (unless to individual poor people who become owners of their units) is not permitted.

The upshot may be that, aside from being unworkable, the City of Johannesburg’s expropriation plan might also be illegal.

What is needed in the inner city of Johannesburg, and in other urban areas, is for the state to take a much more extensive role in owning and operating public rental housing for the benefit of poor people: the majority of South Africans who cannot purchase housing on the private market.

Expropriation in itself is not going to ensure this, but it might stimulate a re-appraisal of the state’s role in the provision of housing in urban areas. As Mayor Mashaba’s flawed scheme shows, such a rethink is badly needed. DM

Stuart Wilson is the Executive Director of the Socio-Economic Rights Institute of South Africa (SERI)

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