Disgruntled former employees are undermining Communicare's projects
GroundUp reported on a group of Communicare tenants, the Ruyterwacht Community Association (RCA), who are opposing the social housing institution in court. Some members of the RCA are asking the court to overturn their looming evictions, but all RCA members are seeking an order to secure the transfer of title deeds to themselves.
We revealed how this group was led by an ex-Communicare employee, who was fired for corruption, and her associate in the fraud; a story they had hidden from the courts.
The RCA is not the only group of Communicare tenants making demands for title deed transfers; Communicare Tenants Beneficiaries Albatros (CTB) is perhaps the most prominent anti-Communicare group.
These tenant groups are also in support of the people who have invaded vacant Communicare units at the Goedehoop complex in Brooklyn, and have asked the Minister of Human Settlements Lindiwe Sisulu to deny Communicare rental support payments.
The net effect of these positions is that for CTB and RCA, Communicare must be brought down, and its properties confiscated and transferred to tenants (and in the case of people unlawfully occupying units, opportunists).
Communicare is a social housing institution (SHI), one of a few managing to stay afloat.
SHIs are vital in resolving the housing crisis. Subsidised rental units unfortunately still make up far too small a share of the government's response to the housing shortage. According to the 2019 Budget Vote, the Social Housing Regulatory Authority's Consolidated capital grant, administered by the DHS, accounted for just 2.6%, or R852 million, of the national department's R32.5 billion budget in 2017/18 (the subsequent budget appropriation, for 2018/19, cut this grant by R100 million).
The Reclaim the City (RTC) occupations at the old Woodstock Hospital and Helen Bowden Nurses Home began as a protest against the failure of government to develop social housing in well-located areas. The court cases that they and support organisation Ndifuna Ukwazi (NU) developed subsequently have forced the local and provincial governments to recognise their social housing obligations.
(Ironically Cape Town Mayor Dan Plato has tried to link the Communicare occupations to those of RTC, despite the Communicare occupations acting as an attack on social housing. His 15 March statement on the Communicare occupations spends many more words attacking RTC and NU than condemning the Communicare occupations.)
The policy that governs social housing is the only policy to explicitly acknowledge the need for well-located housing in inner cities for low income households, and the only way to provide this type of housing. Social housing is about rentals, not ownership. "Social housing is not intended to be used by beneficiaries seeking immediate individual ownership," says South Africa's social housing policy, which is contained in the National Housing Code of 2009.
Government and government-supported housing for low-income households is dominated by ownership plans (GroundUp's guide to government housing provides an introductory explanation). The problem is that all of these houses are built on the outskirts of the city, far from jobs and developed services. Municipal estimates tell us that some poor households spend up to 40% of their disposable income travelling to work. This is not sustainable.
Social housing is the only means we have, at the moment, to combat apartheid spatial planning. All the more reason why non-profit companies like Communicare need to succeed, so that examples can be set and more social housing complexes can be developed. Well-located and well-maintained rental properties for lower income families can act as a springboard for developing greater well-being.
For social housing to work, people have to pay their rents. Specialist companies like Communicare and SOHCO, are usually much better at collecting rent than when government tries to do so directly. The rental collection rates for these companies is over 90%, even during a pandemic.
By comparison, Community Residential Units, owned by municipalities directly, collect at a far lower rate. According to Rayan Rughubar, Chief Director: Housing Development, City of Cape Town, speaking at a 2019 meeting of the Western Cape Provincial Parliament's Standing Committee on Human Settlements, CRU collections averaged 20%.
SHIs have come to be perceived as ruthless for evicting people, but they usually have to be: if they don't enforce the rules a social housing complex risks falling into ruin. This isn't callousness - it's in the national policy on social housing:
"... the raising or escalation of rentals must occur through well-defined processes (to be detailed in the regulations). It should be noted however that it will be necessary to escalate rentals on an annual basis (at CPIX). Such escalation of rentals is necessary not only to ensure the financial viability of projects and institutions, but also to ensure that there is a "harmonious" rent level for units of comparable quality across the social housing sector. One result of a failure to escalate rentals is that earlier projects will be able to offer comparable quality accommodation at lower rentals than later projects ... In the event that a household is unable to afford these rent increases, it will be required to leave the project."
GroundUp's story about RCA and Communicare may seem like nothing more than a sordid spat between disgruntled people and their former company, but it is much more than that. It is about opportunists endangering a vital and vulnerable national housing programme.
Social housing as a sector seems to be in trouble. Take for instance the largest provider of social housing in the country, the Johannesburg Social Housing Company (JOSHCO). (JOSHCO and Communicare are the only two fully accredited members of the National Association of Social Housing Organisations (NASHO) to publish their annual reports online.) JOSHCO is a Johannesburg council-owned social housing institution, but is run by an independent board. Some of JOSHCO's problems are very similar to those faced by Communicare - others are much worse.
In their 2018/19 annual report, JOSHCO tells how they have "experienced a significant drop in revenue collection ... attributed to, amongst others, a rental boycott across many JOSHCO projects as tenants were protesting for ownership of the units. In some instances, tenants were protesting against legal action that was taken against high defaulters, initiated by JOSHCO."
JOSHCO's report also lists a number of incidents of illegal occupancy and invasion of vacant units. The tenants protesting JOSHCO have demands in common with the RCA and CTBA; they also want ownership transferred to them.
JOSHCO is struggling, compared to Communicare, with real doubts over whether it can continue as a going concern. Their rent collection sits at just 78%, down from 84% the previous year. Recovery from debtors stood at just 72%. Their previous audit had a number of findings, only 33% of which were addressed in the year.
JOSHCO had 7,356 units under management in 2018/19. JOSHCO's total revenue was R177 million (against a budgeted R197 million) against total costs of R218 million - for an operating deficit of R41 million.
JOSHCO spent R52 million on their 108 total staff (down R10 million from the previous year due to vacancies in senior roles). According to the financial statement, JOSHCO's current liabilities exceed its current assets by R36 million. It is only solvent due to a subsidy from the City of Johannesburg (Communicare cannot rely on such benefaction from the state).
By comparison, in 2018, Communicare's rental collection rate was at 99% across approximately 3,500 units. Its total asset stock was worth R2.6 billion, and it spent R37 million on staff costs. Its revenue was R175 million, and net profit, R48 million (which is reinvested into the company to improve infrastructure and subsidise rentals). Despite all odds, and unlike its contemporaries, Communicare is working as policy intended.
Other SHIs are also not doing so well. GroundUp has spoken to those who run SHIs. They report that some of their complexes are being systematically targeted. In some cases political opportunism seems to be the motive with unachievable promises made to a large voting bloc. In others, organised crime use complexes to serve as a market and distribution point for drug cartels.
In the first decade following democracy, attempts to provide social housing failed. Not only did social housing units form a vanishingly small number of total units, but the institutions that were providing the housing through government subsidies failed.
A 2018 paper from Andreas Scheba and Ivan Turok for the Human Sciences Research Council paints a terrible picture: "According to the review undertaken by SHRA, 12,168 of 19,630 total units that were financed between 1996 and 2006 through the Institutional Housing Subsidy Programme (IHSP) failed, were in distress or were not viable (receive support from municipalities or donors). This is 62% of the total number of units financed through the IHSP. In comparison, 18% of projects financed through the Interim Social Housing Programme between 2007 and 2010 were in distress."
According to the SHRA's 2019/20 annual report, between 2014/15 and 2019/20, against a target of 19,584 units, just 16,978 units of social housing were completed.
By comparison, between 1994 and 2005, between 1.5 to 2 million RDP houses were built.
Our National Treasury isn't optimistic. A 2015 memo from the National Treasury's Government Technical Advisory Centre presents a gloomy outlook on the future of SHIs: "There are significant concerns about the extent to which current practices generate financially viable projects... the pace of delivery remains relatively low, with around 2,600 units approved each year between 2007/08 and 2013/14." Debt or equity funding is not forthcoming; with one exception, "the social housing programme has never achieved its target of 10% equity funding per project ... debt financing, which accounts for 26% of spending overall, is almost exclusively sourced from development finance institutions."
The Treasury memo also says: "The failure of one of the key subsidies - the Restructuring Capital Grant (RCG) - to keep pace with inflation, resulting in real decreases in effective levels of subsidy". In 2015 the RCG was R125,615 per unit; the same as it had been at inception in 2008. Then there are "concerns about the legal and political capacity of lenders to repossess social housing stock in the event of non-repayment of loans" as driving this hesitancy from lenders.
The memo concludes: "Until greater regulatory certainty is achieved, risk-averse investors will likely continue to see social housing as an overly risky investment."
This memo effectively tells investors to steer clear of providing finance to SHIs.
Our reporters have several times interviewed or encountered Neville Petersen, who appears to be the main driver of the anti-Communicare campaign. Petersen is a resident of Communicare's Albatros complex facing eviction and the spokesperson for the self-styled Communicare Tenants Beneficiaries (CTB).
It is a polite understatement to say that we, and other journalists we have spoken to, have found him less than reliable. His understanding of property law is weak; his views on how social housing should work is self-serving.
In an interview with GroundUp, Petersen said that the CTB supported the Goedehoop invaders, and that they believed that a court order should be required to remove any person trespassing on property, including in the case of a burglary. This was not a principled stance from Petersen, as he repeatedly affirmed that he, the other members of the CTB and the RCA, as individuals, 'deserve' to be granted the title deeds of properties that they occupy (and for which they once paid rent) at Communicare's expense. Sometimes, when faced with a series of intractable contradictions, a reporter is forced to conclude that the subject of their interview is not engaging in good faith.
Yet Petersen and his colleagues have had a relatively easy time in the media and sewn great confusion. Coverage of Communicare has been extraordinarily uneven against the social housing company.
On 11 February this year in the Cape Argus, Mthuthuzeli Ntseku and Mwangi Githahu wrote under the headline Western Cape Rental Housing Tribunal under fire after illegal eviction. This story covered Communicare's removal of people who had broken into vacant units at the Goedehoop complex in Brooklyn. But the incident described was not an "illegal eviction". The subject of the story was not a tenant; by her own admission she broke into the vacant house and claimed it as her own.
The article quotes Maitland station commander Sizwe Mpindwa as saying that, "According to court, the complainant must obtain an eviction order before carrying out the eviction. For the security company to come here at night and evict the occupant was against the law and they were in contempt of court." This is an extraordinarily mistaken view, and astonishing to hear from a policeman.
The CTB and RCA's project is not a simple dispute between tenants and owners, but a takeover attempt. They are not looking for clemency for late rent or a reduction in annual increases, or even getting the company to improve maintenance. For these claims, Communicare often appears before the Rental Housing Tribunal and in most cases the disputes are resolved constructively.
The CTB and RCA tell us that Communicare must fall (into their hands). But if Communicare falls, there is little hope for other SHIs.
We have interrogated the claims of the anti-Communicare lobby, and have little doubt that the preponderance of truth is on the side of the company in this dispute.