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COSATU Submission onThe Rental Housing Bill [ B29-99 ]Presented to the Housing Portfolio Committee, 8 September 1999 |
Table of Contents
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- Summary of Recommendations
A year after the promulgation of the Act, there should be a review of the legislation to assess its impact and to make the necessary adjustment.
The bill should be amended to explicitly recognise a direct role for the state in providing rental housing.
A regulatory framework should be put in place to curb the escalation of rentals in a way that they effectively prohibit access by low-income earners.
It is important that the portfolio committee press for Community Reinvestment legislation to be expedited
There must be an audit of relevant pieces of legislation to synchronise them with the bill and remove uncertainty regarding jurisdiction of enforcement institutions. Subsequently, legislative amendments where appropriate should be effected.
The list of persons who can lodge complaints with the Tribunal should be expanded to allow other stakeholders to lodge complaints with the Tribunal either in the public interest, in their own interest or on behalf of others who cannot act for themselves.
COSATU proposes that all leases should be in writing. Further, a ceiling should be imposed on the level of deposits that landlords can charge.
The Minister, rather than the MEC, should issue regulations. However, MEC’s issue regulation within the national framework taking into account provincial circumstances.
- Introduction
- Areas of Support
- Areas of Concern
Rental housing subsidies;
Building of rental accommodation by the state and the private sector;
Price controls to make rentals affordable and accessible;
Management and improvement of current rental stock. This would also entail the rejuvenation of old buildings.
- Rental Subsidy
- Rent Control
guidelines by the Minister on fair rental, that can be periodically updated to factor in change circumstances;
empowering government to designate areas in which rent control may apply in line with the imperative to ensure the poor have access to housing; and
the guideline should also guide the tribunal when adjudicating disputes regarding fair rentals. However, it should not be left to the tribunal to determine fair rentals, as this is a policy prerogative of government. Currently, the bill leaves it to the tribunal to determine what constitute fair rentals.
- Community Reinvestment
The Jobs Summit adopted a resolution for a Presidential Lead Project to construct 50 000-150 000 houses for rental purposes over a three year period. COSATU supports an expanded emphasis on rental housing, and has also strongly emphasised the need for the state to place a direct role in providing rental housing, for example through the establishment of a housing parastatal.
In our submission on the Housing White Paper, we argued for a paradigm shift in the orientation of housing policy from one that is market-driven to one that is state-driven and assisted by the market. We argued for consideration of and acceptance of the need to elaborate on other tenure options including rental housing. The injunction in the Rental Housing Bill (‘the Bill’) for the "national government to introduce a policy framework on rental housing" is acknowledgement of the policy lacuna in this area.
Our call for rental housing is geared towards accelerating housing delivery in order to meet the housing backlog, particularly for low-income earners. Housing plays an important economic role through its impact in stimulating demand in the economy. There is general acceptance of the role of housing construction in employment creation. Further, housing plays a pivotal social role through its impact on gender relations, addressing the apartheid geography and through its impact on community cohesion, which ultimately impact on nation building.
The following constitutes COSATU’s submission on the bill. We highlight areas of support and areas of concern. This is complemented by proposed legal amendments to address our concerns. We appreciate the opportunity to input on the Bill and hope that our concerns will be addressed.
There are quite a number of issues that require scrutiny in the bill, however our submission only canvasses issues of serious concern to COSATU. For instance, there is no legislative framework to regulate the management of public rental stock including the role of local government and tenants associations. Given the lack of a detailed parliamentary process, there should be a review of the legislation a year after the promulgation of this Act.
At one level it is encouraging that the importance of rental housing is being recognised. Rental housing in conjunction with other housing policy planks should lead to the delivery of housing to the scale envisaged in the RDP. During the late apartheid era the state significantly retreated from providing public rental housing, particularly in former black areas. For a while this led to a thriving of private sector business in housing construction in the former townships and an opening up of rental accommodation in the former white areas. There is evidence, however pointing to a major decline in private sector investment in rental housing1.
The bill should aim at overcoming apartheid geography through creating integrated and compact communities by for instance the construction of accommodation near the workplace and integrated development planning. In this respect, COSATU welcomes section 2(2), which provide guidance on the impact of measures adopted to promote rental housing2. This constitutes a step in the right direction.
We note, however, the absence of mechanisms to enforce or realise these noble intentions. The broad thrust of the bill deals with the relationship between tenants and landlords and the rental housing tribunal. Where the bill stipulates measures it is tentative for instance by introducing a rental housing subsidy programmes. On the other hand, there is a potential conflict between the bill’s objectives and the mechanisms to achieve them. For instance, eliminating rent control may lead to escalation of rents, which de facto contradicts the bill’s objective to provide affordable rental housing.
The bill is urban biased, and section 2(2) needs to be amended to factor in rural development.
Some of the measures in the bill will assist in protecting consumers from unscrupulous landlords who charge exploitative rentals and from unfair discrimination. These include defining the relationship between lessors and lessees, their rights and obligations; the tribunal to adjudicate disputes regarding leases; general principles to guide contents of leases; and the establishment of information offices at local government level3. It will further afford them relief from the actions of such exploitative landlords through the tribunal. To this extent this is welcome.
However, the bill lacks a regulatory framework to ensure affordable rentals. Rent control will effectively be abolished, albeit with a transitional mechanism to protect areas currently covered by the Rental Act for a period of three years. This is compounded by the fact that the Tribunal may determine fair rentals only in extreme cases where landlords and tenants fail to come to any agreement (see point 5 in the memorandum to the bill).
The bill misses the opportunity to implement a paradigm shift from a market-based approach to housing by failing to explicitly recognise the direct role of the state in providing rental housing. The bill has faith in the market and hopes that by providing incentives the private sector will be encouraged to invest in rental housing. The bill gives undue weight to concerns of the private sector and insufficient emphasis on the need for a direct state role in mass affordable rental housing. It is a matter of concern that the development of the bill, in terms of the memorandum, was prompted by complaints from the private sector to abolish the current Rental Control Act (Act No. 80 of 1976).
To date, the private sector has not delivered housing to low-income earners to the scale envisaged in the RDP, in spite of guarantees and incentives from the state. COSATU does not suggest proscribing the private sector’s role in rental housing but emphasises the need for a direct role for the state in providing rental housing. As comrade Mandela stated in his opening address to parliament in early 1998 the "state should intervene where the market fails to provide basic needs". A direct role of the state is not equivalent to reducing or eliminating the market but may significantly crowd in private sector investment through for instance the demand for construction material.
A proactive building programme should go beyond the management of current rental stock but to the construction of new rental stock, which will boost the construction sector and create employment. Such an approach will include a range of policy measures, including but not limited to:
Against this background, we recommend that the bill be amended to explicitly recognise a direct role for the state in providing rental housing (the proposed amendment is elaborated in the annexure). COSATU has proposed a housing parastatal to provide rental housing which should be taken into account. The essence of our proposal is for a co-ordinated and concerted effort by the state to provide rental housing. This will include among others the state availing land for housing construction. Further, the Job Summit resolution on a Presidential Lead Project on rental housing should be factored in.
Having said this, COSATU welcomes the mandate given to government to develop a rental housing policy in terms of section 2(3). Ideally, the policy should have preceded the introduction of the bill in parliament. We hope that through the policy process the nature and form of the state’s direct role in rental housing will be further elaborated. At this stage the principle of a direct state role should be incorporated and entrenched in the bill. Subsequently, legislative amendments should be introduced to give effect to the policy framework. The committee should urge the Minister to expedite the introduction of the policy framework.
In terms of section 3(1) the Minister may "introduce a rental subsidy housing programme, as a national housing programme, as contemplated in section 3(4)(g) of the Housing Act, 1997 (Act No. 107 of 1997), or other assistance measures, to stimulate the supply of rental housing for low income persons." This proposal is consistent with the bill’s orientation towards a market driven housing policy. The opportunity cost of a subsidy compared to direct delivery needs to be evaluated. The role of the state has to move beyond just providing a subsidy to a more direct role by the state. Therefore, in amending the bill it is important that this principle is recognised (refer to the amendments proposed in the annexure).
The bill effectively, abolishes the Rent Control Act of 1976. The underlying motive is the belief that rent controls "curbs or inhibit investment" by the private sector. However, no empirical evidence is provided to indicate the extent to which rent control is curbing or impeding investment. We need a comprehensive investigation on the factors that have led to disinvestment including structural issues such as access to credit by historically disadvantaged communities. COSATU is not convinced that the principle of rent control should be dispensed with.
Notwithstanding, the defect of rental control in the past, a regulatory framework, including an element of rent control, is necessary. COSATU calls for a comprehensive regulatory framework to regulate rents. The removal of rent control may lead to escalation of rentals, which may place rental housing beyond the access of low-income earners. In addition, the need for national standards is made more important by the fact that the tribunal is empowered in terms of 13(4)(c)(iii) to make rulings on among others exploitative rentals4. The generic approach of section 13(5) is not adequate to provide sufficient guidance to the tribunal to determine fair rentals5.
We recommend that a regulatory framework be put in place to facilitate access by low-income earners to rental housing stock. Such a regulatory framework should include:
There is a need for legislative intervention to ensure that banks invest in poor areas or provide loans to the poor in the form of Community Reinvestment Legislation. This will reverse the current trend of disinvestment, running down of existing rental stock and red lining of poor areas by the banks. Government has committed itself to promulgate such legislation. It is important that the portfolio committee press for this legislation to be expedited.
- Relationship with other Laws
- Locus Standi in the Tribunals
- Provisions pertaining to leases
- Regulations
The bill need to articulate with and complement other pieces of legislation including but not limited to the Security of Tenure Act and the forthcoming Promotion of Equality Bill6. In particular, it must avoid or limit the possibility of forum shopping where litigants seek remedies from multiple institutions. For instance, the Rental Housing Tribunal has to adjudicate on matters relating to unfair practice which matters may also be dealt with by institutions to be set up by the Promotion of Equality Bill. Therefore, it is important to clarify matters over which various enforcement institutions have jurisdiction. Currently, the bill focuses on clarifying the relationship between the tribunal and the courts7.
Against this background we recommend an audit of relevant pieces of legislation to synchronise them with the bill and remove uncertainty regarding jurisdiction of enforcement institutions. Subsequently, legislative amendment where appropriate should be effected.
In terms of section 13(1) any tenant or landlord or group of tenant or landlords may lodge a complaint with the Tribunal concerning unfair practice. We recommend that the list be expanded to allow other stake holders to lodge complaints with the Tribunal either in the public interest, in their own interest or on behalf of others who cannot act for themselves. The proposed approach is consistent with section 38 of the Constitution and recognises the fact that anyone can institute a case against an unfair practice8.
Section 5 regulates contents of leases and provides inter alia that a lease between a tenant and a landlord, subject to subsection (2) need not be in writing." COSATU proposes that all leases should be in writing. This will ensure the regulation of leases in the formal or informal sector of the rental housing market. As such, it will improve the conduct of landlords and clarify the relationship between lessors and lessees. A standard form or lease should be appended to the legislation to guide leases. This will take care of concerns of landlords who lack the capacity to develop leases.
However, we are concerned that the bill does not sufficiently factor in the varying capacity between formal sector and the informal sector. For instance, it is doubtful, whether all landlords have the capacity to invest deposits contemplated in subsection (5(3)(c) as demanded by section 5(3)(d). We note that it is not mandatory that deposits be paid but underline the need for a rigorous education programme to educate the lessors and lessees on their obligations and right. In this respect, the role of the Rental Housing Information Officers is pivotal.
Further, it is important that a ceiling is imposed on the level of deposits9. This will avoid unfair deposit requirements being imposed, which ultimately prohibit access to rental housing. We therefore recommend that the Minister set guidelines regarding ceilings.
The bill in terms of section 15 grants the MEC, the power to issue regulations relating to anything that has to be prescribed or regulated in the bill. We recommend the Minister issue national regulations. MEC’s may within national regulations issue provincial regulations taking into account provincial circumstances. A national approach is important to guide provincial regulations, but more importantly to ensure minimum uniform national standards. This also avoids fragmentation and protects the national integrity of government policies.
The Rental Housing Bill accords recognition to the relevance of rental housing. However, the broad thrust deals with relationship between tenants and landlords and the rental housing tribunal. It misses the opportunity to introduce a paradigm shift in housing policy in so far as it focuses on the market to provide rental housing. The experience over the last few years demonstrated that the private sector has failed to deliver to low income-earners. In this, vein we need a new policy framework which recognises a wide range of mechanisms including:
direct provision of public rental housing by the state;
complemented by measures to stimulate private sector provision of rental housing;
price controls to make rental housing affordable and accessible;
improvement of the management of the existing rental stock.
This policy should launch a building programme that moves beyond the current stock to mass rental housing. The construction of new rental housing stock will boost the construction sector and lead to employment creation. Further, it will stimulate demand for other goods and service thus resulting in a ripple effect in the economy.
This submission sought to reinforce the positive elements in the bill and strengthen the areas of weakness. The primary objective was to ensure a framework that recognises a range of measures required to kick-stark the construction of mass rental housing. We hope that the proposed amendments will assist members in their efforts to improve the bill. COSATU is willing to discuss any matter raised in the submission or any related issues.
[ ] = deletion
_ = insertion
| Item | Section | Proposed Amendment(s) | Comment |
| 1. | 2. | Amend section 2(1)(b) as follows: "(b) facilitate the provision of rental housing directly or in partnership with the private sector." |
The insertion of the word directly addresses our concern regarding the need for direct state provision of public rental housing. At this stage, legislation should entrench the principle, and national policy on rental housing should flesh out the nature of direct state role in rental housing, including the role of provincial and local governments. This should also cover the requisite institutions that should be set up to ensure a direct role for the state in a concerted, co-ordinated approach to public rental housing. |
| 2. | 3. | Substitute subsection 3(1) for the following: "3(1) The minister may –
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This is a consequential amendment to broaden the
measures that the minister may introduce to include direct state provision of public
housing. In our view, these measures need to go beyond assistance measures such as rental
subsidy housing programmes. In addition, COSATU is of the view that we need a comprehensive regulatory framework on rentals including the definition of fair rentals. This will assist in ensuring affordable rentals and facilitate access by low-income earners. It is inappropriate to leave such a policy matter to the tribunal. The regulations will also guide the tribunal in deciding disputes on rentals. An element of flexibility must be built in to ensure periodic review of the rental regulations to factor in new circumstances. Section 19(2) empowers the Minister to monitor and assess the impact of rent control on the poor within the specified areas. In addition, the minister can take such action as he or she deems necessary to alleviate hardship that may be suffered by tenants. While this provision steps in the right direction, it is of limited application and does not meet the requirement for a comprehensive regulatory framework on rent control. |
| 3. | 5 | Substitute subsection 5(1) for the following: "5(1) Subject to guidelines issued by the Minister, a lease between a tenant and a landlord must [need not] be in writing.
Omit current subsection 5(2) and renumber accordingly.
Substitute subsection 5(3)(c) for the following: "(c) subject to national guidelines pertaining to ceilings for deposits, the landlord may require a tenant, before moving into dwelling, to pay a deposit which, at the time, may -
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In our view, all leases must be in writing to prevent abuse and remove uncertainties for landlords and tenants. To address the concerns regarding capacity to draw leases, the minister should issue a standard form or lease to be appended to the bill. This is a consequential amendment for it removes the discretion for written
leases to be prompted by tenant’s requests to landlords.
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| 4. | 13. | Substitute subsection 13(1) for the following: ‘13(1) The following, may in the prescribed manner lodge a complaint with the Tribunal concerning an unfair practice –
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The purpose of this amendment is to expand the list of person who may lodge complaints with the Tribunal regarding unfair practices. This is consistent with section 38 of the Constitution |
| 5. | 15. | Amend section 15 as follows Substitute the Minister for the [MEC] in subsection 15(1) and (2). Add new subsection 15(1)(f)(xviii) as follows: "(xviii) exploitative rentals." Insert new subsection 15(3) to read as follows: (3) The MEC may
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To ensure a core minimum national norms and standards we believe that the Minister rather than the MEC should issue regulations. MEC can issue subsidiary regulations to the extent required to take into account provincial circumstances within national regulations. The inclusion of exploitative rentals among matters that must be part of the regulations is consistent with our proposal for a regulatory framework on rentals, which ultimately will guide the tribunal in its effort to settle disputes on unfair practices. |
Footnotes:
See for instance the explanatory memorandum to the original version of the bill: "Over the last few decades, South Africa experienced a decline in investment in rental housing stock which has led to an imbalance in the rental market. Signs that the market is not operating well include high rentals, disputes between tenants and landlords, lack of maintenance to buildings and sometimes abandonment of buildings. Beside the decline in new investment, substantial disinvestment has also occurred…Current housing subsidy policy does not specifically promote the business of providing rental housing…Public sector investment in rental housing is limited mostly to municipal housing schemes established under the previous dispensation, in which rental stock is diminishing owing to sales to promote home ownership amongst tenants."
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Section 2(2) read: "Measures introduced in terms of subsection (1) must –
optimise the use of existing urban municipal and transport infrastructure;
redress and inhibit urban fragmentation or sprawl;
promote higher residential densities in existing urban areas as well as in areas of new or consolidated urban growth; and
mobilise and enhance existing public and private capacity and expertise in the administration or management of rental housing."
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Chapter 3 deals with the relationship between tenants and landlords, chapter 4 deals with the rental housing tribunal; while section 14 empowers local government to establish where appropriate Rental Housing Information Offices
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Section 13(4)© provide that: "Where a Tribunal, at the conclusion of a hearing in terms of paragraph (d) of subsection (2) is of the view that an unfair practice exist, it may –
(c) make any other ruling it may consider just and fair to terminate any unfair practice, including, without detracting from the generality of the aforegoing, a ruling to discontinue –
(iii) exploitative rentals."
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Section 13(5) provides that "A ruling contemplated in subsection (4) may include a determination regarding the amount of rental payable by a tenant, but such determination must be made in a manner that is just and equitable to both tenant and landlord and take cognisance of –
prevailing economic conditions of supple and demand;
the need for a realistic return on investment for investors in rental housing; and
incentives, mechanisms, norms and standards and other measures introduced by the Minister in terms of the policy framework on rental housing referred to in section 2(3)."
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Section 9(4) of the Constitution calls for the enactment of national legislation to prevent or prohibit unfair discrimination. This legislation is about to be introduced in parliament, and in the current draft include prohibition of discrimination in housing..
