Windhoek
With rent control one of the options on the table by government to solve the high rental prices in the country, experts are of the opinion that it may actually exacerbate the situation. Housing gurus weighing in on the matter are of the opinion that rent control could lead to urban decay and even a decline in housing investment.
According to Namene Kalili, Senior Manager for Research and Development at FNB Namibia, rent control is not a viable solution because the housing crisis is a supply side problem while rent control is a demand side intervention.
“Namibia finds itself in this position because municipalities have failed to service sufficient land over the past 10 years. Rent control usually leads to urban decay, in that the landlords can no longer afford to maintain their properties at these lower rental prices – pretty much the same as government housing. As the properties deteriorate so too does the quality of tenants and before you know it the rental stock will be overrun with criminals and illegal immigrants. Many countries tried rental control after the Second World War, such as the USA, Britain and even South Africa. These all resulted in urban decay and slums. I am yet to find an example of successful rental controls,” said Kalili.
Meanwhile, Head of Securities at Simonis Storm Securities, Purvance Heuer, feels that rent control will reduce investors’ appetite to invest in property as it will limit potential returns. He also believes that rent control will result in many of the existing properties going off the market.
As an alternative Heuer suggests that a land registry be set up at municipal level to allow for better management of land delivery to first time buyers.
Such a register, he explained, should detail those who already own land to exclude them from participating in a programme to make land available.
He suggests that only those who do not have land and are in a position to afford the servicing and housing costs should be in the running to actually acquire property. He added that those who actually qualify should go into a lottery to be allocated plots within their budget.
“This can be done on a repeated basis until the list of people interested in plots equals the plots available after development. This will also remove the speculation currently in the market in which land is auctioned by municipalities at significantly high prices that are clearly unaffordable for first time buyers,” explained Heuer.
Furthermore, Kalili feels that dealing with the housing crisis boils down to a fundamental principle of supplying enough serviced land to meet the demand. “Ensure that the land delivery process is robust enough to meet the housing demand of the population. Municipalities must be held accountable for land delivery, with the buck stopping with the CEO,” he continued.
However, he emphasised that municipalities should also be adequately funded to service the required land affordably. “This I suggest should be funded through higher property taxes. As controversial as this may sound, recent research shows that Windhoek has one of the lowest property tax rates in the world. Property tax serves as a disincentive to speculation as it increases the holding cost of land. Therefore the lower the property tax, the higher the incidence of speculation,” said Kalili.
He noted that FNB Namibia’s house price model indicates an inverse relationship between property prices and property tax, so much so that an increase in property tax pushes down house prices. But he stressed that this relationship is moderate and would need to be supported by increased housing supply.
Kalili added that larger municipalities must be broken down into smaller municipalities so that they compete against each other for residents and business. “Residents and businesses will run to well-run municipalities, while the slack municipalities will die a natural death as they struggle to retain rate-paying residents,” he said.
Heuer, who pointed out that providing houses is an expensive exercise, also proposed building flats that can be rented with the option to own it.
For instance, after paying rent for 20 years the flat becomes the property of the tenant, and the same can apply to the low cost houses being developed.
“I also suggest making the National Housing Enterprise responsible for the development of the plots, houses and flats. They can enter into smart partnerships but the exploitation of this should be managed/monitored very carefully. We cannot have low cost houses costing more per square metre than a house in let’s say Ludwigsdorf. We also think that government should not look at land in isolation. Consideration should be made for water and electricity, pavements, transport networks, safe parks, etc.,” added Heuer.