Is It Time To Consider Alternative Forms Of Tenure For Low-Income Households?

The following Op-Ed is written by Anneline R. Turpin, Attorney- LRC Land Programme

South Africa has several well-intentioned housing dispensations in place for indigent to low-income beneficiaries that require government’s assistance for housing, but implementation remains a challenge. According to the statistics provided by the Department of Human Settlements the number of housing opportunities and subsidies delivered from 1994-2017 totals 4 629 233. This number includes social rental housing and the provision of serviced sites. Of the housing opportunities, it is reported that 2 975 197 may be attributed to delivery under the Reconstruction and Development Programme. Statistics from South Africa’s Household Survey 2017 record that almost 1.3 million households have no access to piped water, while 297 847 households use bucket toilets, and 748 597 households have no toilets at all. In 2018 the human settlements minister reported that the housing backlog had increased to 2.1 million units, with an expected increase of 178 000 units a year due to population growth.[1]

Security of tenure is understood as a set of relationships relevant to housing and land, established through statutory or customary law or informal or hybrid arrangements, that enables one to live in one’s home in security, peace, and dignity. It is an integral part of the right to adequate housing and a necessary ingredient for the enjoyment of many other civil, cultural, economic, political, and social rights. All persons should possess a degree of security of tenure that guarantees legal protection against forced eviction, harassment, and other threat.[2]  

Urban housing tenure may be secured by a variety of forms and is not limited to ownership of a registered freehold home but may represent one of several appropriate forms of tenure. In research for the Special Rapporteur, Payne and Durand-Lasserve report that it has not been possible to deliver freehold and/or registered leasehold rights to most people in the developing world and that local authority leases ought to be viewed as a viable option.  A primary objective of a pro-poor tenure policy should be to ensure protection for all households from forced eviction, harassment, or other threats.[3] The Legal Resources Centre through its advocacy considers whether the sectional title schemes framework may be the most appropriate form of ownership for indigent and/or low-income households, in view of the prescriptive legislation governing sectional title ownership and the high costs of sectional title ownership. A look at how the United Kingdom and India address tenure rights for low-income families, living in share blocks provides perspectives.

In the United Kingdom, during the 1960’s many local authorities built tall tower blocks, encouraged by subsidies favouring high rise buildings that were designed to stimulate redevelopment of inner-city areas.[4] The council blocks were originally built to provide for social rent to low-income households but was supplemented by the introduction of the statutory Right to Buy (RTB) in 1980, enacted to encourage home ownership by the council tenants. The council tenants are households that renew a periodic lease and pay a social rent weekly or monthly whereas the RTB leaseholder will have paid a premium to purchase an interest in the flat, pays an annual ground rent and is also liable for payment contributions to the building’s upkeep referred to as a service charge. The service charge is an ongoing cost for the maintenance and the refurbishment[5] costs of the building. The RTB leaseholder is offered a lease of up to 125 years, that secures the right to occupation and use of the flat that may be multi-generational. Once this lease expires, the right to determine further occupation and use reverts to the council that owns the structure and the common parts of the building including the land.

The service charges associated with the building are borne by the leaseholders of the council, who have the right to be consulted about the maintenance or service charges if they are expected to pay more than £250 for planned work or £100 per year for work and services lasting more than 12 months. In terms of section 19 of the Landlord and Tenant Act of 1985, costs may only be taken into account for service charges if they are reasonably incurred. If service charges are not paid, the landlord council may approach a Tribunal and should the Tribunal be of the view that the service charges are properly due and reasonable, then the council may commence forfeiture proceedings by serving a formal notice of breach of the lease on the leaseholder and providing the leaseholder with a reasonable period to rectify the breach. If the leaseholder does not comply with this notice the council may apply to Court for forfeiture of the lease.

In England there are currently 4.6 million leasehold homes[6], with some leaseholders having found that their ground rent is so expensive that it has often rendered remortgaging or selling the leasehold on their property nearly impossible. The terms of the ground rent are written into the lease. The Leasehold Reform (Ground Rent) Bill 2021-22 was introduced  on 12 May 2021, to restrict ground rents on newly created long leases of houses and flats to an annual rent of one peppercorn (a token of no financial value).The UK government is currently working to introduce the changes aimed at making it easier to extend the leases  lease and do away with expensive ground rent on new leases.[7] If the Ground Rent Bill is passed into law, the lease will need to  state the amount of the ground rent payable and set out how often and the rate or amount by which the ground rent can increase over the term of the lease. Currently, there is no maximum limit or cap on ground rents.

Leaseholders although provided with a significantly long lease that registers their interest in the property, find that the annual ground rental coupled with the service charges (that may fluctuate depending on the repairs and maintenance needed to be carried out on the buildings), may become unaffordable in continuing with the long lease. Some leaseholders experience financial difficulty and cannot afford to pay the ground rental and service charges, which may eventually lead to the forfeiture of their long lease, leading to eviction. Tenants that are evicted from their council homes may re-apply for council housing, but their application will depend on their level of debt and whether they have agreed to repay it.[8]

Although the UK government has acknowledged and is in the process of trying to regulate the charges around the ground rental, more still may need to be done by the government to assist low-income households in respect of the service charges. An alternative that remains is for the council tenants to continue with the social rental option, where it remains the responsibility of the council to pay the service charges. Security of tenure remains an issue even in developed countries.

The need to provide alternative forms of tenure, remains a priority for many developing   countries given the need to provide tenure to indigent and low-income families. In 2020 the Ministry of Housing and Urban Affairs in India launched the Affordable Rental Housing   Complex Scheme (ARHC). It is a rental scheme that seeks to supply affordable rental units in urban areas through two models: Model 1 repurposes existing, vacant government-funded housing, and Model 2 encourages private and public sector entities, such as landowners and businesses to develop rental housing. The purpose of the ARHC scheme is to prioritize the allocating of units to vulnerable households. In both Model 1 and Model 2, the owner, being the state and/or private public sector entity respectively, is expected to repair and refurbish existing vacant government housing buildings to make them suitable for rent for a minimum of 25 years, this excludes the estimated construction time of 18 months.

In terms of Model 1, existing government funded houses is intended to be used, after a feasibility analysis of utilizing government funded vacant houses in 7 cities from different regions is carried out. To make ARHC attractive to private investors, government estimates that the entity will recover the investments made within a period of 6-9 years on average. In Model 2, the owner contributes their land, develops, and manages the rental housing to benefit from tax rebates from the government and the investment made by the owner will be recovered through rental income during the rental period of 25 years.

The starting rent is estimated to be set at Rs. 6,000 (approximately R1200) per month and a dormitory room is at Rs. 3,000 per month with an 8%, increase respectively after every 2 years.  Water, Electricity, House/ Property Tax, and other user maintenance charges will be paid for by the tenant.

In terms of the ARHC Schemes, government is required the carry out capacity building activities in the form of trainings workshops for various stakeholders, to enhance the implementation of ARHCs. The government also undertakes activities for creating awareness about ARHCs by developing and disseminating information. The budget for the education and capacity building will be funded by the government from the existing Pradhan Mantri Awaas Yojana Urban (PMAY-U) funds, translated to Housing for All.

The Indian Government has recognized that rental housing is a critical pathway for migrants and the urban poor to access, participate in, and contribute to the urban economy. Under the ARHC scheme, urban migrants and low-income groups and students will be beneficiaries.[9] The ARHC scheme seeks to be affordable and well connected to work opportunities.

At this stage the success of the ARHC scheme is difficult to determine given the fact that the scheme was only launched in 2020 but highlights that subsidized rental accommodation represents an alternative form of tenure to house low-income households seeking urban accommodation.  At first glance leasehold agreements provide for unusually long leases over the property, however the UK has acknowledged that the costs associated with such leaseholds requires regulation whilst the basic services charges remain an uncertain cost for low-income households. What remains certain is that in South Africa, the call for equitable implementation of housing for indigent and low-income families has not been answered substantively as security of tenure for indigent and low-income households remains precarious. It may well be time to consider forms of tenure beyond ownership, to accommodate the intersection of spiraling costs of municipal services, maintenance, and upkeep responsibilities that the state has passed on to indigent households to alleviate the rising tensions manifesting in domestic violence and food insecurity that affected households are confronting.

[1] https://africacheck.org/fact-checks/factsheets/local-election-factsheet-housing-south-africa, accessed 13.02.2022.

[2] https://www.ohchr.org/Documents/Issues/Housing/Guide-SecurityTenureGuidelinesEN.pdf

[3] Geoffrey Payne and Alain Durand-Lasserve, “Holding On: Security of Tenure – Types, Policies, Practices and Challenges” prepared for an expert group meeting on Security of Tenure convened by the Special Rapporteur on 22-23 October 2012.

[4] Bright S, Tower block refurbishment, flats, and understanding of ownership, Journal of Law and Society, 2021, 526.

[5]‘The refurbishment works include repairs to the communal structure, over-cladding and additional insulation; replacement of windows; new heating systems; upgrading of communal electrics and fire safety systems and refurbishment of lifts.’-Bright S, Tower block refurbishment, flats, and understanding of ownership, Journal of Law and Society, 2021, 528

[6] https://www.moneysavingexpert.com/mortgages/what-is-a-leasehold/ accessed on 13.02.2022.

[7] https://www.moneysavingexpert.com/mortgages/what-is-a-leasehold/

[8] https://www.leicester.gov.uk/your-council/how-we-work/debt-enforcement/applying-for-housing-when-in-deb

[9] https://economictimes.indiatimes.com/news/india/up-cabinet-approves-scheme-offering-affordable-rental-housing-for-urban-migrants-poor/articleshow/81702729.cms, accessed on 13.02.2022.