Urban land reform, integration and housing delivery in South Africa: A critique of the President’s Panel on Land Reform

Creator: Johnny Miller          Copyright: Mlllefoto – johnnie.miller@gmail.com

 

The revised Expropriation Bill was gazetted on 9 October 2020 signifying an important move towards implementing a key government strategy intended to redress the entrenched obstacles to spatial transformation and land reform. The 2020 Expropriation Bill will replace the Expropriation Act of 1975, and clearly spell out how and when expropriation can take place. The form of the Bill is built upon the work of the Presidential Advisory Panel on Land Reform and Agriculture, formed in 2018. This blog provides a critique of some of the arguments presented in the report, and offers some thoughts on how the Expropriation Bill will affect these issues.

The Final Report by the Presidential Advisory Panel on Land Reform and Agriculture reiterates many of the key issues regarding urban property markets and the continued spatial segregation of cities in South Africa.[1] The report concentrates on rural and agricultural land, focusing largely on the reform programme to address historic injustice and ensure security and equality in land distribution in rural areas. Where it does consider urban land reform, it reviews the current ownership patterns and their effect on the spatial configuration of urban centres. The report states that urban land reform needs to be adopted in a similar manner to rural land reform, and goes on to make several recommendations including:

  • Putting in place appropriate planning legislation in order for land use management to contribute to land distribution;
  • Setting up a fund for land acquisition; and
  • Using public property to develop housing those excluded from the current housing market.

From a brief review of the recommendations coming from the panel, there seems to be limited acknowledgement of interventions which have already been put in place, and of how the urban property markets are currently operating in low income housing delivery. Some comments on these are presented below.

Realising the value of rural vs urban land

The spatial dysfunction and segregation of our cities has been well-recorded and defined in planning policies and strategies and addressing this has formed the crux of new legislation and programmes. The panel proposes several interventions to address these which have already been decided on or in fact implemented; for example, the use of public property for housing, starting with land audits and classification of properties as exempt or non-exempt; amendments to land use management systems which were initiated with SPLUMA (2013) and are now being realised in the new land use schemes of cities and towns; and incentives or requirements for developers and private land owners to deliver affordable housing which is currently forming part of city policies for inclusionary housing (City of Johannesburg, 2018; City of Cape Town, 2019).

The panel’s approach to urban land reform appears to be a similar to its approach to rural land reform, i.e. one which is based on providing access to property as a means to create equality and safety. This is an important premise but may miss the difference between rural and urban property markets and how they can be used to address current inequalities. Whilst the overall intention is the same, i.e. distribution and equal access to land and property, the value derived and the way in which these markets operate differs. It’s unlikely that a household in a rural area will rent out its property or sell it for a higher return, or access mortgage finance, whereas these are common practices on urban properties.

The difference lies in both the ‘value’ and how this can be realized to benefit those currently marginalized from the economy. The location, purpose and opportunity inherent in land defines its value. Properties are an asset that carry the opportunity to realise revenue streams, capital gains, or provide the base for economic and/or social activities. In rural areas property/land provides social security, subsistence, food security and agricultural production. Its value lies primarily in its ability to perform these roles and is only realised when the land is able to provide these. In contrast, in urban areas the value of property lies in its existing and potential role as an asset to households and communities, as an economic opportunity to be used for businesses or access finance for businesses, and as a component part of a critical function of the city and/or as tradable asset.

There are several mechanisms that can shift the market to benefit those marginalized from the core economy or market, such as supporting a more diverse housing market that supplies a wider range of offerings, providing incentives for investments into densification, and facilitating access to financing of small-scale property developments. Furthermore, urban housing markets operate across the board in the form of both formal and informal transactions. Those with access (even when rights are not in place) use properties to leverage economic opportunities. This can take the form of informal trading, using houses as spazas, or providing a range of accommodation offerings. The approach to land reform needs to recognize and consider how these practices allow for greater access to a property market and housing offerings and how best to support them.

Understanding how value is derived is critical to developing an appropriate approach. In the case of agricultural land, potential economic value is directly affected by access to market, water, specific farming infrastructure and good soil conditions; whereas in urban areas, land value is determined by access to economic opportunity, level of infrastructure, conveniences related to social amenities, safety, lifestyle. The difference also lies in the ease with which urban land can derive revenue streams and can be traded. Small investments into urban properties can lead to high returns to the owner vs high and risky investments that need to be made in rural land. In contrast to rural land reform whose primary objective is equity and sustainable livelihoods, the intention of reforming land in urban areas should be driven by the need to make sure cities are relevant economic hubs that are able to address the basic needs of their residents. In the same way, creating strong urban communities and neighbourhoods builds economic and social value and sustainability. This approach differs from a purely housing one where delivery of settlements is seen as the means to integrate cities and address community needs.

The urban land reform process includes how public property can be used to realise integration and greater equality in accessing urban property markets primarily through housing in strategic locations. However there are many instances where housing may not be a priority and where public property can be used for other purposes which are critical to city-building; for example, public parks and open spaces in areas of high congestion,  or spaces for economic activities in areas lacking these.

The panel seems to follow a similar diagnosis of the problem as the National Department of Human Settlements i.e. that the lack of delivery of housing and more specifically integrated delivery is due to the lack of available strategically-located land. This is definitely a substantial issue, but is not the only one, as demonstrated by the fact that where public land is available in strategic locations, delivery has still not occurred in some cases. This may be as a result of the property being an asset on a balance sheet that if sold needs to reflect a revenue (this is particularly important in cash-strapped SOE’s). It may be because the land is highly contested between different government functions, or it may be the result of a lack of capacity to realise the development of housing. Another factor may be because the portion is too small to be developed using the current housing model (except for social housing). The drive for government-led housing programmes, the issue of scale, the bias towards numbers as opposed to functional cities, and the lack of delivery by other departments are all factors that contribute to the lack of  delivering housing that integrates and transforms cities.

How does the Expropriation Bill affect this current context?

The Expropriation Bill gazetted in October 2020 aims to provide for a due process that is ultimately decided by the courts whereby land and property can be obtained by the state without compensation. The bill indicates the specific circumstances where nil compensation may be paid. These include where land is not being developed; where government is the holder of the land which was obtained for free and is not going to be using it for core services; where the owner has abandoned the land; and where the property poses a health or physical risk.

The reason for the introduction of the Bill stems from a strong argument that the willing buyer willing seller format to address land reform was proving to be a stumbling block to acquiring land. In the case of urban land, the argument was made that the property markets prevented land from being obtained which in turn prevented housing from being delivered in strategic parts of the city.

There are many advantages to this Bill that could lead to faster processes of acquisition for the delivery of housing e.g. where properties that are severally degraded pose a risk but which have been difficult to attach or acquire (e.g. slum buildings or properties that house informal settlements); where speculation is preventing housing development; or where it can be proven that land is valued at less than the state subsidy for the land.[2]  In each case this has to be proven to a court, thus putting in place an important mechanism to ensure that public purpose and interest is a determining factor.

It is interesting to note that many countries face the frustrating trend of land speculation. Across the world, there is a practice of ‘banking’ valuable developable land, which creates scarcity in the market that spikes demand and therefore value. However, most countries look to regulatory mechanisms to address this practice, and, by so doing, they prevent or limit the trend. The Expropriation Act can be used in specific cases where the state wishes to acquire specific properties but won’t prevent the general trend. The approach used by the South African government is based on the premise of state-built housing as opposed to finding ways of managing land and property markets.

However, the main issue to consider in the case of urban centres is if this Bill will address the current lack of deliver of affordable housing. Despite the argument that it is lack of land that has restricted state delivery, it is more likely that the lack of large portions of land required for large-scale government housing projects is the obstacle being targeted. The current predominant housing model, i.e. the Integrated Residential Development Programme still promotes scale which requires large portions and which in turn limits opportunities. Urban centres have very few large contiguous portions of land, which means that large-scale projects require a very costly and lengthy exercise of acquiring and consolidating smaller land portions.

If state-led housing delivery remains the primary model used by government to address the housing backlog, the Bill will be of limited value for this purpose. A shift in focus to upgrading and addressing inner city slums, upgrading informal settlements, targeting ‘millions of small’ investments in key nodes for social and low income rental housing, and for supporting the markets that are already providing to the lower income households will have a far greater effect on changing the current landscape.

 

[1] Advisory Panel on Land Reform and Agriculture (4 May 2019). Final Report of the Presidential Advisory Panel on Land Reform and Agriculture for His Excellency the President of South Africa. Accessed at: https://www.gov.za/documents/final-report-presidential-advisory-panel-land-reform-and-agriculture-28-jul-2019-0000

[2] The language in the Expropriation Bill, 2020, is as follows: where the market value of the land is equivalent to, or less than, the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land”. The reference to ‘beneficial capital improvement of the land’ is unclear and may be confusing as capital improvements to land in urban areas are generally greater than the value of the land. Expropriation Bill, 2020 submitted to Parliament for introduction – Bill set to replace Expropriation Act of 1975 that is inconsistent with the Constitution. http://www.gpwonline.co.za/Gazettes/Pages/Published-Separate-Gazettes.aspx

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