Citymark Focus Note: Exploring the impact of metro rates policies on the affordable housing sector

Property rates play a substantial role in the own revenue capacity of metros. The authority of municipalities to set their own annual rates policies provides an opportunity to balance their revenue objectives with efforts to assist low income households as part of their poverty reduction and local economic development mandates.

Alongside monthly bond payments, monthly bills for utility charge and property rates can challenge the affordability of home ownership for low income households. Instruments of rates policies—such as the residential exclusion threshold (RET) and means-tested rates rebates for low income households—are therefore powerful tools for municipalities to stimulate investment in the local residential property market, while also improving the affordability of home ownership for low income households.

Part of our series of Citymark reports on South Africa’s residential property market, this Focus Note first examines the felt and potential impact of COVID-19 on metro rates revenue, and then, using 2019 deeds data obtained from Lightstone Pty Ltd., provides an analysis of the impact of the RET on the affordable housing sector. With better use of valuation and deeds data, metros can more accurately target the RET, and thus improve its accuracy in supporting the affordable housing sector.