November 28, 2005
THE Better Buildings Programme began life as the Bad Buildings Programme, but as it was felt that the name projected negative connotations, it was renamed more appropriately
So what is a bad building and what is a better building? A bad building is defined as one or more of the following:
- Where the owners owe large amounts of arrears, often greater than the building value;
- Where residents have stopped paying rents, or are paying rents to illegal collectors;
- Where the owners have abandoned the buildings and are paying no rates or utilities to the City;
- A building that is derelict, overcrowded and in a deplorable state;
- A building that is the subject of numerous complaints from the public;
- A building that is in contravention of various by-laws and other legislation;
- A building that is invaded by illegal squatters; or
- A building that is used for criminal activity
A better building is a bad building that has been transformed into a state where:
- The buildings are renovated, well maintained and properly tenanted;
- There is responsible ownership and management with a long-term commitment to maintaining acceptable standards;
- Council charges are paid;
- Council by-laws are obeyed;
- There is a knock-on effect on areas surrounding the better building being improved, facilitating re-growth and regeneration;
- Overall social and business confidence in the area is restored; and
- The value of the property in the area increases
The Better Buildings Programme is managed by the Johannesburg Property Company (JPC), which is responsible for managing the property affairs of the City of Johannesburg. The JPC, in fact, is a private company whose only shareholder is the City.
Acquiring a bad building
The process begins with the identification of a bad building and checking out its status as far as arrears and market value are concerned. A legal process to acquire the building is then embarked on that ranges from outright expropriation to purchasing the building.
The JPC then identifies possible investors who may be interested in acquiring the building for upgrading and refurbishment. It does this by offering the building to a list of approved investors via a proposal call approach.
Approved investors are those who have been able to satisfy the JPC regarding their ability to upgrade, finance and manage the project both through the refurbishment stage and when completed. An Obligations Agreement is entered into with the successful investor and the JPC then applies to the City's various utility agencies to write off arrears owing and to issue the necessary clearance certificates.
Work is then put in hand and the JPC keeps a watchful eye on each project to ensure that the work proceeds to programme, and that quality standards as well as any other obligations contained in the agreement are met.
In practice the JPC has found that the legal process and the writing off of arrears slows down the process considerably. It, therefore, encourages would-be investors to identify properties and bad buildings themselves and purchase them from liquidators, at auctions or privately.
If there are large arrears, the building can be purchased subject to write-off. There is no guarantee that the City council will, in fact, write off such arrears but, if one submits a coherent detailed plan that is acceptable to the JPC, this can be achieved, provided that an Obligations Agreement is concluded.
Each case is different and treated on its own merits by an adjudication panel after a due diligence check.
How is it doing
So, how is it doing? At the end of September there were 94 buildings in the process valued at R55-million and comprising 8 700 living units. These would require R260-million in arrears to be written off by the council.
The estimated total cost of renovation is approximately R320-million, and when completed, some R6-million a month will be collected in rates and service charges by the City, compared to just about nothing at the moment.
There are 240 registered investors and developers and the number is climbing but stock is quite limited - about 10 buildings are still to be offered on the tender process.
About 34 800 people will be accommodated when all work has been completed. Of the 94 buildings in the process at the moment, 53 have been awarded to an approved investor, 38 of the 53 have already signed Obligation Agreements or Deeds of Sale, 20 have write-offs completed or Clearance Certificates issued, 13 have been transferred to the new owners and two have been completed.
Geoff Mendelowitz, who heads up the programme, says that the upgrading of these buildings has started a ripple effect with at least another 250 privately owned buildings either currently being renovated or already completed.
This bears out my comments last week that, when driving through Hillbrow and Berea, I was quite staggered at the sheer volume of activity that is taking place and the relatively short space of time within which it has been generated.
Precinct approach
The other exciting development is the precinct approach that is developing as an output of all of this building upgrading and refurbishment. This initiative is where upgrading of the public street environment is undertaken and management of the upgraded area is provided.
It is done in a co-operative initiative which brings together all the stakeholders in the street, including owners, residents, caretakers, the council's service providers, the South African Police Service, and so on.
The catalyst for the intervention is the upgrading of specific buildings in the street whether through the Better Buildings Programme or through private upgrading initiatives.
The first such "neighbourhood improvement district" has been pioneered by the Johannesburg Housing Company. Known as an eKhaya project, it is in Pietersen Street, in Hillbrow between Klein and Claim streets.
There are, of course, a number of issues that arise from all of the work being done, including evictions, displacement, gentrification, and so forth, but they are best left for next week.
Till then,
Ciao, Neil
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