Neil Fraser
August 16, 2004
LAST week we looked at what progress has been made in the Inner City regeneration process over the past decade in regard to two issues, Safety & Security and Informal Trading. They were two of six critical issues identified at the groundbreaking City Workshop held in November 1991. The third is Residential Accommodation.
The situation in regard to many aspects of residential accommodation was quite critical in 1994. This was a time of major invasion of existing residential and other buildings and a time of great conflict between property owners and tenants. Many property owners took advantage of the lack of of those who had recently moved into the inner city and exploitation took place on a fairly widespread basis.
We once investigated a three-bedroomed house in Bertrams where the tenant, paying a monthly rental of R500 for a building with no water, electricity or toilet facilities, had sub-let the building to 75 persons each paying R200 a month! But gang-lords also used the lack of sophistication of tenants to channel rentals into their own pockets instead of into those of the legitimate owners - this still happens today.
A great deal of lawlessness ensued and ultimately accelerated the degradation of the individual properties and the environments surrounding the buildings. The residential population density of the inner city skyrocketed as many people, who for decades had been denied access to accommodation because of the Group Areas Act and other discriminatory legislation, streamed into the inner city in an attempt to be near their places of employment or job opportunities. The inner-city population (ie including Hillbrow, Berea, etc) rose from probably less than 80 000 persons in 1975 to between 120 000 to 150 000 in 1995 whilst the number of living units marginally decreased in number over that period. There was absolutely no new construction. Red-lining applied to the entire inner-city area and though I know the bankers say there is no such thing, the fact of the matter is that no money was made available by the institutions for purchase or development of residential accommodation within the inner-city - irrespective of the status of would-be borrowers - for a number of years.
The CJP investigated the barriers to investment and growth of residential stock at that time and came to a couple of conclusions. The first was that there was a great desire for ownership of residential accommodation within the inner city amongst those who had been previously denied this opportunity. Later, this proved to be not nearly at the levels we had anticipated. The second was that the traditional mortgage system used in South Africa was a major barrier to achieving increased ownership amongst the previously disadvantaged community.
In order to address both of these issues, the CJP established a Section 21 Company known as the Inner City Housing Upgrading Trust (ICHUT). ICHUT was funded with grant money from USAID, the Regional Services Fund and business contributions. It developed a unique model which, through some extremely clever financial wizardry, reversed the traditional profile of bond repayment so that repayments, subsidised by a cash flow stream generated by ICHUT, started small and affordable by the purchaser, and, as the purchaser's personal wealth improved, grew until they were sufficient to service both the bond and ICHUT repayments. Everyone, except some sceptical financial institutions thought it was brilliant. But it never flew!
At that time, all the ills of the residential accommodation problems were reflected in one project dubbed the Seven Buildings. The project consisted of seven buildings owned by a single owner, who became a slum lord because he was unwilling to maintain his properties and pay rates and service charges. His unwillingness was in no small way influenced by a large proportion of non-paying tenants, who professed an eagerness to purchase their apartments but no bond finance was available.
ICHUT funded the purchases and upgrading of the buildings on the basis that after two years they would be prove a high repayment rate, enabling the financial institutions to omit ICHUT and normalise the process. The experiment failed. Hijacked by various groups within the seven buildings for their own ends - financial and political - the companies owning the buildings eventually had to be liquidated. For me, this was one of the lowest points in the saga of inner city regeneration relative to the provision of residential accommodation.
Another was when Ponte City, which had been allowed to degenerate badly, was actively punted by its owners for redevelopment as an inner-city jail. Can you imagine the damage that would have been done to the city from such an irresponsible move by property owners desperate to get out of their investment at all costs and thought to hell with the resultant reflection on the city! Fortunately, sanity prevailed, and the building was taken over by the Trafalgar Group and is once again a well-managed and sought-after residential address. It illustrates that the key to residential success is totally in the management.
However, it did take a number of years before additional stock was eventually added to the market. Housing organisations started to emerge - Johannesburg Housing Company (JHC) was one of the first of these, COPE Housing was another. The JHC pioneered middle-income residential accommodation for letting in the inner city with such projects as the conversion of the Landdrost Hotel into residential units, the Elangeni project near the ABSA Campus in the south-east and a number of residential projects in and around Newtown including their Brickfields project which is currently under construction and which will ultimately provide about 1 200 units when both phases are complete. The secret of their success is again tight management but with a social conscience that leads to tenant empowerment through appropriate training.
The Council has not stood back. The Bad Buildings Programme was developed some years ago with the aim of identifying buildings in the inner city that were adversely impacting on the fabric of the city. Many of these were existing residential buildings or buildings that were being illegally occupied or inappropriately utilised. Having identified the buildings, the idea was for the Council to pass the buildings onto private developers, who would then guarantee refurbishment and proper management of the renovated building through a particular process. The process became heavily bogged down and little progress was made for a couple of years. The JHC undertook the first of these projects, Lake Success in Hillbrow, but there was little else.
Then the responsibility for the process was moved from the Councils Housing Department to the Johannesburg Property Company, one of the council's agencies. A project manager, Geoff Mendelowitz, was appointed and the processes and procedures were interrogated and adjusted. A new programme emerged as The Better Buildings Programme. With hindsight, this will always be a difficult and time-consuming process but Geoff and his team are making progress. Some 20 odd buildings were advertised for proposal calls by private developers some months ago and a number have been subsequently awarded and are under reconstruction. Funding has been made available within Council to acquire a couple of condemned hotel-type buildings to convert into transitional accommodation whilst others are renovated.
And then, in the last two years, and particularly over the past 12 months, we have seen the return of developers. Maybe it is that the marketplace is now better understood, the huge need identified and the realisation that there are huge opportunities out there. There must now be at least a dozen serious developers who have entered the middle-income residential market, at least 50 buildings that are at some stage of negotiation or reconstruction and there are many hundreds of million rands involved.
I was visited in the last fortnight by a group who have recently bought a nearly R100-million building portfolio and intend putting in serious money to upgrade their purchases. At least twice to three times a week I chat to someone who is in the business or wanting to get into the business. The residential accommodation situation in the inner city is going through an extraordinary period. Of course there are still slum lords and, though I don't believe the city has found an efficient and effective way of dealing with them, hopefully that will come as experience in this area increases.
Of course this recovery is not unique to Johannesburg, nor to South Africa. A recent article in the 'Financial Times' suggests that city centres are becoming much more attractive and convenient places to live leading to a world-wide return of the middle class to cities - BUT at the expense of the working class. Another article in the same publication points out that reviving neighbourhoods is not just about lofts and yuppies.
The most startling proof of residential recovery is in the acquisition of a number of important buildings in the inner city for conversion to upper-income residential. The historic Corner House in Commissioner Street provides a gracious and elegant framework for inner-city living and, according to the signs outside, all the initial 15 units have been sold at a price of R799 000 each. According to new owners Urban Ocean, the majority of the first 65 units on offer at The Franklin - the previous Ernst & Young building in Diagonal Street have been sold for R300 000 to R350 000 each, whilst all 32 units at 1 Rissik Street, the previous Penmore Towers, have been sold at between R290 000 and R350 000. All these prices incidentally are for the shell only. Urban Ocean have evidently bought a number of other buildings for conversion to residential units, including the old Stuttafords Building and the National Bank Building.
Behind all of this exciting stuff, I still have a major concern. I have voiced the opinion previously that the City does not have a coherent policy in its approach to the urban poor. This concern is exacerbated when it comes to residential accommodation. I think it is time to step back and look critically at where we are and where we are going. I think it is time to develop a new model that breaks with apartheid planning because I really don't think we have achieved that. In fact I see little evidence of revolutionary thinking when it comes to housing policy at any level of government. I must sadly concur with Stephen Greenberg in a recent Centre for Civil Society Research Report who says, "In the face of a coldly rational model of planning, the horror of forced removals has not been consigned to history along with apartheid, but remains alive in post-apartheid South Africa."
I'll return to that some time in the future, but for the moment, how have we done over the past decade in addressing the residential accommodation problem in Johannesburg's urban renewal process? I think five out of 10 is a fair score. It reflects important strides that have been made but also the enormity of what must still be done, starting with a new paradigm regarding how we include the urban poor in renewal.
