Revised Rental Housing Amendment Bill [B21-2011]: public hearing

Meeting report

The Chairperson stated that public participation was very important to Parliament in executing its mandate. Despite earlier discussions, the Committee had decided to extend the consultation process. The Committee appreciated the responses that had culminated in this meeting being held. Submissions that had been tabled before the Committee in previous meetings would be considered seriously. If there were any issues the Committee could not agree on in the submissions, it would inform the stakeholders that had participated in the consultation process. The Committee would try to be transparent in unpacking its views.

Submission by the Banking Association of South Africa (BASA)
Mr Pierre Venter said there was a need to strengthen the weaknesses in the existing Housing Act, particularly improving the efficiency of tribunals, the need for increased levels of transparency in respect of lease agreements and improved landlord-tenant governance and processes.  With reference to the amendment of section 2(5) and (6) which referred to vulnerable families, BASA was concerned about the whole logistical framework outlining what the Department could and could not do. The guidance came from the Prevention of Illegal Eviction From and Unlawful Occupation of Land (PIE) Act where there had been a number of legal outcomes, two of which had been before the Constitutional Court and the Supreme Court of Appeal. 

As indicated in its submission, the amendment to the Bill and regulations drafted by the Minister would have little effect. The legislation intended to strengthen rental housing in the country but further attempts to shift responsibility for the vulnerable from the state to the private sector would result in:
- Unnecessary and costly court cases for the state
- Promote landlord flight from rental into home ownership models particularly within inner cities and coastal towns
- Induce the private sector to spurn further rental stock investment at a time when the Department of Human Settlement had identified rental housing as an important alternative form of tenure as well as there being an acute shortage of rental stock particularly within the gap and affordable housing market.
 
The intention of the state was to protect the vulnerable but in the past the PIE Act had shown that unscrupulous tenants and criminals had used the same framework to frustrate landlords and to hijack buildings especially in the city of Johannesburg. It recommended that the Committee remove section 2(5) and (6) of the Amendment Bill and put that into the Social Housing Act. 

There was a need for re-evaluation of the recommendations of the South African Human Rights Commission’s Eviction Hearings, of 2007 which included among other things:
- A review of government policy of assisting only first-time home owners
- The need for municipalities to include the provision of alternative accommodation for those left destitute by evictions into their Integrated Development Plans (IDPs)
- The creation of loss of income cover as part of the social security system. 

In 2008 BASA piloted a project with the Gauteng government for vulnerable persons facing evictions. A process was put in place to assist them. The project was successful but attempts to convince national government to adopt it and review its focus on only first time homeowners failed. On section 4(B), Rights and obligations of landlords, it supported the need for the deposit to attract interest but the amendment should specify preferred-creditor protection for tenants and arms-length trust accounts for deposits.

The Amendment Bill made no provision for a transition period or clarity in respect of existing leases. BASA recommended that the Bill should not be retrospective or apply to existing leases. The Bill made mention that the Minister had the right to make regulations pertaining to norms and standards without public consultation. The BASA was concerned about the area around affordability, contact and geographical area. It was untenable that the Minister could create regulations without public consultation. If it were geographically based that could create patchy rental stock around the country as well as frustrate government intentions. In addition, it could impact on the viability of rental companies and investors to which mortgages have substantial exposure. As such section 15(1)(fB)(i) to be removed and there should be uniform norms and standards around the country. There was a need for a 30-day minimum consultation period before the promulgation of regulations.  On technical concerns about clause 6 amending section 4B(d)(ii) on obligations and rights of landlords, the landlord had the right to, “where the tenant fails or refuses to vacate the dwelling, repossess the rental housing property having first obtained an order of court;” BASA proposed that the section should rather refer to the landlord’s right to obtain an order of eviction from the court.

On section 10 of the Bill it was concerned about the holding tribunals in the absence of a nominated chairperson. There was no provision for the MEC to appoint an alternative chairperson. BASA recommended that an alternative chairperson be appointed.

Discussion
The Chairperson and suggested that the tribunal would appoint a deputy chairperson but the matter would be looked at. The reason the Committee wanted regulation to be done by the Minster was to ensure uniform standards. Before regulations would be promulgated, there would be public consultation and before the Minister gazetted the regulations, they would come to the Committee. She agreed that there were loopholes in the PIE Act which the Department was busy looking at and that before laws were promulgated, it was important that Parliament evaluate their impact. The PIE Act was supposed to be implemented at local government level where shacks were concentrated. The problem was that there was no mechanism within municipalities to ensure that there was capacity to implement the legislation.

Ms J Sosibo (ANC) asked if the loss of income cover was not going to push up the rentals and would people be able to afford the deposit? She wanted to know the percentage of the one or two month’s tenant deposit that which would go into the legal trust account.

Mr Venter said the loss of income cover would certainly push up the rental but in other sectors it increased the gap market from an affordability perspective.  In 2005 it had engaged with Human Settlement and explored whether it was possible for the state to look at it as an alternative solution for social security for vulnerable families. Perhaps there was another option where all households contributed for example through the Unemployment Insurance Fund (UIF) towards a fund to protect vulnerable families for a set period when they were destitute. The deposit referred to a one or two months deposit the tenant was required to give the landlord. There was an existing framework where an estate agent is required to have a fidelity fund, but outside that any deposit that the homebuyer makes, goes into a trust account.

Mr K Sithole (IFP) thanked the input from the Association. He sought clarity on affordability and overcrowding as well as BASA’s views on first time homeowners.

Mr Venter said that a family’s ability to join the property market was the aim of government but it was also easy to help people that had properties but later got into financial problems. In the Johannesburg Metro, it had created a tough definition of what was meant by the word ‘vulnerable’: people that were disabled, the aged and the likes. There were cases that qualified in the ‘vulnerable’ definition.

Mr Venter said overcrowding was a big problem and the Bill was trying to strengthen the fact that landlords must not abuse tenants. It would look at other issues such as affordability and students in a separate submission. 

Ms M Borman (ANC) agreed that it was quite tricky to balance both the protection of the tenant and the landlord. She wanted to know if the Arms Length Trust account was in existence or was something in the pipeline. 

Mr S Makgalapa appreciated the submission which he said had innovative ways of closing some of the gaps in the Amendment Bill. The Bill was meant to address three target markets which were: the problematic gap market, students and the vulnerable who were the consumers of rental stock. Linked to that was the issue of the PIE Act, which was linked to urban slums. What was its take on government policy to assist first time home buyers because in order to create credibility, people had to rent something which would enable the bank to trace an individual’s credit record.  How could alternative housing be provided in such a way that the consumers could understand the value of rental stock as a means to entering the property-owning market? What form of balancing act could be done by not chasing away the private sector from providing rental stock, yet ensuring the interests of tenants? 

Mr Venter said that the tenant-landlord balancing act was there already and there was a legal framework in place that the Department could write into the Amendment Bill but that would result in expensive court cases and two matters had been to the Constitutional Court already. The balance was in existence and the courts had to make use of it but not at the expense of the municipality or landlord. The private sector was prepared to go where the money was. But the more government legislated, the more an environment was created that constrained private sector investment. There needed to be a differentiation between social rental stock and commercial rental stock. In the cities, the private companies were focusing on the gap market and affordable housing with monthly rentals of R2500. The concern was that if more responsibility for the vulnerable were shifted from the state to the private sector, the private sector would move out of the rental market and sell the units. The property transfer costs in the country was restricted to properties costing R600 000 or more. Builders were charged amounts below R600 000 on rental stock which prejudiced developers and first time buyers as it pushed up the cost of the houses. Municipalities needed to create transitional stock and if the Unemployment Insurance Fund could be used to cover vulnerable families, there was temporary protection for the families.

The Chairperson said there was a misunderstanding on the issue of the vulnerable. The rental sector did not necessarily speak to the urban areas. Each city had rental stock. Even the teachers and nurses in the rural areas were exposed to the sector. It was not possible that all the responsibility should be pushed onto social housing, as it could not hold all the rental stock. The government had a responsibility to ensure that all vulnerable people were protected. The Association should provide the Committee with the information on the vulnerable pilot project it had implemented in Johannesburg. It was necessary that the rental stock be habitable. She requested the Parliamentary Legal Unit to clarify why it was supportive of section 2(5) and (6), and section 15(1)(fB)(i) of the Amendment Bill:

(fB) norms and standards that are aligned to the policy framework set out in section 2(3), in relation to:
(i) terms and conditions of the lease, specifically in relation to fairness and protection of the weaker contract party;
 
Ms Borman wanted the Association to provide its definition of vulnerable.

Ns M Njobe (ANC) asked if the Association had discussed with the Department the issue of shifting responsibility from the state to the private sector in connection with evictions. One could not be evicted unless there was alternative accommodation.
 
The Chairperson said that the issue would be dealt with in the PIE Act amendment.

The Parliamentary Law Advisor said in respect of section 2(5) and (6), the intention was not to affect the private sector. It looked at the broader policy of government and in relation to norms and standards in paragraph (fB)(i) the Committee wished to address the problem where landlords quite often abused the fact that the tenant was poor, illiterate and uneducated. A good example was a dwelling where a tenant paid R100 a month and when there was more demand by people, it was increased to R1000 per person per month which did not equate to the value of the property. The intention was not to limit what the private sector put as a value on rental housing and there was need for consultation. The intention was to slop abuse. In Europe there were certain norms and standards. For instance a room must be 5 square metres. It was however not going to be easy for the Department to do research on norms and standards

The Chairperson said the submission that the Bill should not be retrospective could not be taken up because the Committee had uncovered a lot of abuse during its oversight visits. As such old leases would be revisited and aligned with legislation.     

South Africa Local Government Association (SALGA) final comments
Mr Chris Neethling of SALGA’s National Executive Committee thanked the Committee for affording SALGA the opportunity to present its views. SALGA represented the 278 municipalities and welcomed the consideration of the organisation’s earlier submissions on the previous Bill, especially on section 3 and 7. While the Bill was very important there was need for amendments in view of its impact on municipalities and the general public. The amendments assumed roles and responsibilities for municipalities and required financial resources and implementation capacity. Housing remained an unfunded mandate for municipalities and the exact role they were supposed to be playing needed to be discussed.
    
Mr G Booysen, SALGA’s Specialist in Human Settlements, said the organisation was very grateful that the Committee had considered its earlier comments when it redrafted the Bill. This submission sought to reinforce some of the comments that had been considered by the Committee during redrafting particularly on section 14 and 15 of the Principal Act. Under section 14, the rationale behind the establishment of the Rental Housing Information Offices (RHIO) was to ensure that the public had access to the services of the Rental Housing Tribunal (RHT). It was a logical step given that municipalities were seen as the point of entry for all government services. However, such an arrangement raised a number of questions, for instance what would happen if the RHT did not function effectively? Ultimately, municipalities would be held accountable for the failure of the unfunded mandate. SALGA was happy that the establishment of RHTs was mandatory now: a “must” as opposed to “may” in the Principal Act. However, it would be difficult to implement and monitor the system after the promulgation of the Bill. Housing was still an unfunded mandate for municipalities and as such the establishment and operation of the Rental Housing Information Offices was an extension of the unfunded mandate. Not all the municipalities would be able to combine the responsibilities of the RHTO with already existing functions as was proposed in the Bill. Small and struggling municipalities did not have resources and capacity to carry out their mandated functions. The proposed addition of subsection (6) under section 3 of the Principal Act was welcomed and was one of the proposals SALGA had previously submitted: Provincial Government must financially assist local municipalities not yet on level three accreditation, in establishing Rental Housing Information Offices as contemplated in section 14. Nevertheless, it was not supposed to be obligatory for all municipalities to establish Rental Housing Information Offices. If it were obligatory it should apply only to municipalities that had been assigned the housing function.

With regards to section 15 of the Principal Act, SALGA acknowledged that the Minister of Human Settlements in terms of the Housing Act had the power to establish and facilitate national housing development. Under the provisions of the Constitution however, all levels of government were required to consult with SALGA but consultation in the Bill was a preserve of the MECs and Portfolio Committee responsible for housing in the Provincial Legislature. Municipalities were an integral part of government and as such it was the constitutional duty of all levels of government to consult with SALGA as the representative of Local Government on policy and legislature issues. It was proposing that section 15 of the Principal Act be amended further to add that the Minister must consult with organized local government, in addition to the relevant parliamentary Committee and MECs.

Discussion
The Chairperson appreciated SALGA’s submission and all submissions that had been tabled would be taken seriously by the Committee. If there had been an omission during provincial public hearings by the Department she was sorry for that. SALGA was not supposed to feel as if it was being sidelined because by appearing before the Committee, it had become part of the amendment process. The Committee agreed that any unfunded mandate needed to be addressed. Last year, it had been agreed upon that all municipal offices were supposed to have a fully-fledged human settlements office because houses were being built. Provinces had been instructed to assist in making sure that these offices were capacitated. The amendment stated categorically that accredited municipalities had no need of support but the Committee was aware that those that were not accredited, had a housing officer, as such the Committee was not pressurizing them. The project was supposed to be aligned with the budget process to prevent unnecessary excuses and provinces were supposed to budget for the activities. It was pre-emptive to say that RHTs were not going to be functional because it would now be mandatory, as opposed to the previous scenario.
     
Mr S Makgalapa (DA) agreed with the Chairperson that Rental Housing Information Office were supposed to be aligned with the budget. There was a need to move away from the system of treating the issue as an unfunded mandate within local government as there were a lot of grants that were being allocated. The issue was grant under expenditure. For example, rural municipalities were not spending the Rural Infrastructure Grant and in the last financial year only 20% of the R257 million was spent. He understood the fact that some municipalities would be overburdened but those that were accredited were supposed to have Rental Housing Information Offices. The Provinces were supposed to have a provincial RHT but the issue of building capacity in the Rental Housing Information Offices would be explored further.

Ms P Duncan (DA) supported Mr Makgalapa on the issue of unfunded mandate and welcomed the suggestion by SALGA to engage further and that all members should participate. The issue had to be addressed between the provincial Department and National Department because it was not enough to put the responsibility onto municipalities without ensuring that there was an evaluation and monitoring process. It was the same with Community Development Workers that were rolled out at local government despite the fact that it was the responsibility of provinces. As such there was a need for better coordination between the spheres of government.

The Chairperson said a delegated function should be followed by resources and finance. Coordination was integral to the process, all spheres were supposed to function as one government. Human Settlement was not a standalone issue. The municipal accreditation process was supposed to be accelerated to avoid some of the problems.

The Chairperson said that the process could be accelerated on condition that municipalities had the capacity because some that had been accredited had indicated that the project had failed. 

Submission by the Organisation of Civic Rights (OCR)
Dr Sayed Iqbal Mohamed, OCR Director and Chairperson, said the organisation had been involved in rental housing issues since 1994 and the present Minister of Finance was one of the founding members. The organisation did a lot of research but was essentially a grassroots organisation. Dr Mohammed said habitability was supposed to be an essential provision of the Act. There had been several High court cases on the matter. In Durban about 12 000 people were living in little cubicles similar to those in Johannesburg and Hillbrow where people lived in shipping containers in the heart of the city. The habitability issue was necessary though it would mean a long process of engaging with landlords and authorities. People were paying 700% more compared to up market areas. With the exception of Gauteng and the Western Cape, rentals had increased phenomenally. Pensioners and widows had been expected to pay an increase of R1500 phased in over a period of six months to a year,

There were tremendous amendments in the Bill but a lot needed to be done which could only come with training. OCR raised concern about Section 14 on the Rental Housing Information Office. Many manuals had been produced and workshops held with members and staff yet it still grappled with pertinent issues. The Act was not simple and it worked as part of other pieces of legislation and laws. Most tribunals would be overburdened and officials would be expected to engage and mediate in the process. Another concern that had been raised was that the tribunal was not a court though it performed a judicial function. It was however unique and differed from the Canadian system because it had much more power. The bottom line of the matter was that the ruling was an order of the magistrate court which could be appealed against. The debate had been ongoing between it and the Department. To launch an appeal through the MEC would compromise the operations of the RHT, for instance, in a case where the municipality was the landlord. If the complainant was the tenant, the tenant would not believe that the MEC was being objective, if the later represented the landlord. OCR was not sure about the intention of the appeal mechanism to the MEC. It was not possible to have one person reviewing and making recommendations on a ruling that had been adjudicated by three people. Then, it would be cheaper to have one person conducting the hearings which was the case with other overseas tribunals. OCR expressed concerned that regulations were to be promulgated only a year from now rather that simultaneously which was causing problems. For example if a complaint approached the tribunal and request reports of the proceedings, the cost of photocopying the documents would be a thumb suck.

Discussion
Ms M Borman (ANC) sought clarification on the issue of restricting the deposit to one month that was mentioned in the submission and that the deposit be refunded immediately once the tenant moves out. She applauded the observation that it was problematic when people would move out of a house without being refunded their deposit to enable them to pay for new accommodation elsewhere. The area needed tightening.

The Chairperson welcomed the recommendation on habitability because it was crucial. She applauded the organisation for points that were raised about renting because they spoke to a matter that the Committee was engaging. In particular, landlords were charging R1 000 for a small shack. The reason the Committee was introducing another appeal mechanism was because some people were running to the courts at the expense of the poor, taking advantage of their financial resources. The idea was too close that gap as had been the case with sectional title, which was still under discussion. Three options had been raised to that effect and the Committee would interrogate whether the MEC was not the best person to be charged with appeals deliberations. On promulgating the legislation simultaneously, the Committee was in the process of transforming the Department which had not shown much commitment in the establishment of the regulations. The Committee wanted to ensure that the legislation had been passed to help enforcement and implementation. The making of regulations and the legislative process in Parliament could not be combined because the process still needed to go to National Council of Provinces. Once the Bill was finalised and passed, the Department could begin the drafting process for the regulations. The Committee was happy with the submission.

The ORC represented tenants mainly from KwaZulu-Natal but other provinces as well. The tenant paid a deposit prior to taking occupation. Yet when it was time for tenants to leave, they would be expected to pay a deposit upfront at the next accommodation.  There was a seven-day waiting period. Most often even in a situation where there were no disputes, deposits were not refunded easily which accounted for increased cases at the Small Claims Court. In light of that, there was a need for protection of rights of tenants.

Western Cape Rental Housing Tribunal (WCRHT) submission
Mr Arno Botha, Chairperson of the Western Cape Rental Housing Tribunal said there were a lot of issues that needed to be addressed in rental housing. The tribunal was doing its best to balance the needs of both tenants and landlords and abuse was present on both sides. There was a need for further debate on the Prevention of Illegal Eviction From and Unlawful Occupation of Land (PIE) Act as well. In respect of the revised Bill, the Committee had its written submission that was a joint effort between the Rental Housing Tribunal and the legal section of the Department of Human Settlements in the Western Cape.

Clause 10 of the Bill sought to amend Section 9 which dealt with the composition of the tribunal. According to the Act, the Minister could appoint a tribunal consisting of not less or more than five members. Yet the amendment sought to make it compulsory that the tribunal had to have seven members. In Gauteng there was a huge workload on members of the tribunal and Gauteng was suggesting that the tribunal be divided into two committees to be able to hear more matters and address its backlog. To impose a compulsory seven-member tribunal on provinces that had not had tribunals before would was an administrative nightmare and it was expensive. The Western Cape suggested that the MEC should rather appoint a tribunal consisting of between three and seven members which would cater for the needs of both Gauteng and smaller provinces. With regards to the composition of the tribunal, the Act suggested that the tribunal must be divided into two committees. The word “must” was should be replaced by “may”. In smaller provinces where there was not much work, the tribunal could do the work as one committee.

The WCRHT supported the recommendations by OCR on the appeal process. There had not been good reasons why the process was necessary. The relief that was provided by the rental tribunal was a free service and the tribunal had a good staff complement that investigated matters properly. The WCRHT had two attorneys, one advocate with a legal degree and the other with six years’ real estate experience. There was a slim chance that the five could deliberate and make a mistake on a ruling. Hence, the Western Cape did not support the appeal process as evidence had shown that relations between tenants and landlords tend to be emotional. Giving a free right of appeal to every one would result in 80% to 90% of cases being appealed. The principal Act contained a useful provision that matters should be finalised within 90 days which was for a good reason. As had been said by the OCR, the tenant wanted the deposit to pay for new accommodation and the landlord kept the same deposit for repair of damages to property and having an appeal was not only going to prolong the process but would frustrate both parties.

To impose a compulsory seven members tribunal on provinces that had not had a tribunal yet would be an administrative nightmare and it was expensive. It suggested that the MEC should rather appoint a tribunal consisting of between three and seven members which would cater for the needs of Gauteng and other smaller provinces. With regards to the composition of the tribunal, the Act suggested that the tribunal must be divided into two Committees. The word “must” should be replaced by “may”. Furthermore, the Tribunal rendered similar services to the public as that of a small claims court and in that form there was no right of appeal. An appeal process would lead to further expense for various governments in that the MEC, in terms of the proposal, would have to ask the tribunal for the reason for its decision with the result that its members would have to be paid for extra time. The MEC would have to appoint an internal and external attorney or advocate and pay such a person to consider the appeal and make recommendations

Where the matter is returned to the tribunal, its members would have to be remunerated for the extra time they would spend dealing with the matter. If that right of appeal was given and proved to be problematic, it would be difficult to reverse. It was untenable that one person could be a judge and an interested party at the same time. The MEC was technically a landlord and in certain circumstances could become a party in a matter. Matters between tenant and landlord could be better dealt with through the review process.

Discussion
The Chairperson said that the appeal process was necessary and the only matter that the Committee had not agreed on was the appointment of the MEC to oversee appeals. There was no perfect tribunal. She had had a lot of complaints from tenants that had reached her office. There was a need for an alternative to the structure of the single-committee tribunal. The Committee did not accept that the Western Cape was too small to cope with that. The Committee however agreed with the Western Cape Rental Housing Tribunal that the MEC was not supposed to be both player and referee in the appeal process. The tribunal was not much better than the Ombudsman as both were quasi-judicial structures. The appeal process was intended to stop people from running to the courts but things were supposed to be run properly. Communities were coming from a previously disadvantaged background so those issues had to be looked at carefully.

Mr Sithole wanted to know the fear of the Western Cape Rental Housing Tribunal on the appeal process.

The Chairperson responded that the Western Cape Rental Housing Tribunal had answered on the matter and had raised the same concerns the Committee had.

Mr Makgalapa said there was need to define the appeal process and specify who was to undertake the duty. It was not possible for the MEC to be both referee and player in the appeal process. It was however important that the issue of capacity be dealt with as had been raised by SALGA.

The Chairperson said that members were not supposed to complain about capacity. The Western Cape would have to budget for the process as would other provinces. When the process began, the Committee would make sure that there would be a budget for that. The issue of budgeting was not supposed to be debated. Rather, Members were supposed to concern themselves with the review and appeal process.

Mr Makgalapa said that there was supposed to be due consideration for small district municipalities as the process would have to be implemented nationally. On the structure of the tribunal, he said that the suggestion to have between three and seven members had been done to allow municipalities to choose, based on their capacity. It was necessary that the Committee create a structure that was competent to implement the legislation. The appeal process needed to be looked at and the issue of whom was the appropriate person to undertake it.

The Chairperson said that the issue would be dealt with but provinces had not come forward to lay complaints about the issue and there was no province that would be given preferential treatment. There were a number of issues that the Committee would want to engage with the tribunals. In particular, there were complaints from tenants about the billing system and the issues were not being resolved by RHTs.

Mr Makgalapa proposed that a meeting be held with RHTs in light of the submission of the Western Cape Rental Housing Tribunal.

The Chairperson replied that they would be summoned after the processing of the Bill because they were given an opportunity to submit their inputs but did not – with the exception of Gauteng. However, the Committee would engage with them towards the end of the year.

The meeting was adjourned.