November 21, 2005
I SPENT last Thursday morning with Paul Jackson and Pressage Nyoni of the Trust for Urban Housing Finance (TUHF), who took me on a tour of housing across the inner city.
Jackson, the chief executive of TUHF, is an economist who has worked in development finance since 1987. Following a stint with the Development Bank, he joined the Johannesburg Housing Company as operations manager and then took up his current appointment in 2003.
Nyoni and I go back many years, to when the Central Johannesburg Partnership was first established. The partnership originally was a tri-lateral organisation with a board drawn from three sectors, business, the City council and the community. Nyoni was one of the community representatives - he was an Actstop member at the time, and it is good to see he has put his considerable knowledge of this market into the supply side.
Another familiar face in the TUHF offices was Nano Makwela, whom I had also not seen for many years. Makwela and I worked closely when he was responsible for the Inner City Housing Upgrading Trust, which has become the TUHF.
But this isn't a reminiscence column, although it is interesting that many of the original players are still doing what set us alight many years ago. So back to the issue at hand.
Refurbishment projects
On Thursday we had a good look at what is happening in the residential accommodation sector in various parts of the inner city, particularly in the CBD, Hillbrow and Berea. We also visited a number of refurbishment projects - many with the large rooms and high ceilings of years gone by; the floors of Rhodesian teak woodblock flooring; the entrance halls with marble and wood paneling.
I must admit to being quite staggered at the underlying quality, as well as the sheer volume of activity that is taking place, and the relatively short space of time within which it has been generated. One can get some idea of this by looking at the TUHF itself.
It was established only two years ago in June 2003, during a time of extended market failure in this sector when no-one was prepared to lend into a market considered by the traditional institutions as a definite no-go area. But the TUHF's lending activated investment, which in turn made the market work again.
Refurbishment led to a rise in property values and better management was attracted into the sector.
And so the cycle turned positive, resulting in a wide range of investors being attracted back into a now functioning market. It is a spectacular achievement when one considers that the TUHF started with an initial lending capacity of just R21-million and has already concluded 107 deals valued at R185-million.
Currently it has R250-million in loan funding available, with an average facility of just under R2-million. It means that 107 residential buildings in the inner city have been cleaned up, some refurbished and all under good management. And that's clearly the start.
Black entrepreneurs
But what I found to be really exciting is that 65 percent of lending is to black entrepreneurs, which has given rise to a new product in equity financing, and, secondly, that they have introduced an innovative programme relative to caretakers.
I am on record as stating that inner city regeneration will not be successful until property ownership starts to reflect our demographics. I firmly believe that this is the last and critical piece in the puzzle that will finally change behaviour in and attitudes towards the inner city.
Until this happens, the inner city will never be "our city" for the vast majority of the population.
You won't achieve this goal by destroying symbols of the past that you may find offensive, as is the approach in the controversial Gauteng provincial government precinct proposals. Nor will you do so by replacing them with more acceptable symbols of earlier communities, as is proposed in the resultant Heritage Square.
You will do so through economic empowerment that will effectively change ownership.
Caretaker to landlord
Now, while I have been espousing this approach for some time, the imponderable has been "how?". The TUHF have been doing just this, quietly under our noses through its "caretaker to landlord" initiative.
As its name implies, the initiative focuses on encouraging caretakers and building managers to become building owners. Paul and Pressage (sounds like a 1960s singing duo) took me to a building where a number of the residential units are owned by Patience Nogcantsi.
Nogcantsi is a qualified radiographer who works in a private practice at night and manages her property portfolio by day. She bought her first flat in Yeoville in 1993 and paid it off in four years. She then bought another unit and now owns 11 of the 20 flats in the block.
She is one of seven "caretakers" empowered by the TUHF to date who has moved from employment into ownership. As these entrepreneurs establish themselves, demonstrating their ability to manage and maintain clean and secure buildings, their access to debt finance is made easier. A positive track record launches you from buying a unit to buying a small block of flats. I find that so exciting.
So what are the major problems the organisation faces? Well, it isn't defaulting on loan repayment - the TUHF currently has no arrears because landlords arrears are well below 5 percent, bad debts never above 1 percent.
Nor is it overcrowding, lack of maintenance or failure to meet council rates and services payments. These are all carefully managed because each loan is individually managed. Firstly, through its lending criteria.
The TUHF seeks out people who know the neighbourhood, have the right property management skills and a network of construction and maintenance service providers, are confident that they will make profits and are concerned with urban regeneration.
Secondly, on a fortnightly basis, every loan is reported on regarding loan repayments, draw-downs against refurbishment budgets, building up-keep, by-law compliance and payments to council for rates and service charges. Buildings are regularly inspected to ensure that they are well managed and maintained.
Challenges
The problems relate to the City council relative to building control (or lack of it), by-law enforcement, services and transfer periods. The last issue has improved but the waiting period is still unacceptably high. It is now down to an average of six-and-a-half months; this is because of the excessive time it takes to get rates and service clearances sorted out, often requiring the TUHF to provide buyers with interim finance.
The former issues - lack of building control, by-law enforcement and services - are visible as one drives around. A TUHF-financed building, recently repainted and refurbished, stands next to a building that has almost no glass in its windows and is filthy, with raw sewage seeping over the pavement into the gutter and accumulated debris everywhere. It is also clearly overcrowded.
No action is taken against the slum lord. The streets through which we drive are incredibly littered. There are not enough rubbish bins nor evidence of cleaning - there is absolutely no sign of any attempt to educate people not to litter.
Through the TUHFs of the world and others - among whom, ironically, is the City council through its Better Buildings Programme - an active market is being re-established, entrepreneurs are being nurtured and some normality is being restored to the streets of areas for so long written off as no-man's land.
But more effort and support must come from the local authority.
Next week I will give an update on the Better Buildings Programme and some thoughts on gentrification and evictions.
Until then, cheers,
Neil
PS Did you know that Saturday 19 November was World Toilet Day? I kid you not. World Toilet Day was declared by the World Toilet Organisation, to be held on 19 November of each year. It seeks to raise awareness of toilet users' rights to a better toilet environment and to increase advocacy efforts worldwide.
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