The City of Johannesburg plans to convert 500 dilapidated buildings into affordable accommodation, including for students, within the next two years with the support of the private sector as it attempts to solve a growing housing backlog in SA’s economic powerhouse.
This forms part of Johannesburg mayor Herman Mashaba’s plan to combat the neglect, crime and grime that have beset SA’s wealthiest city. A large part of this redevelopment will be focused on the inner city, which experienced an exodus of big business in the 1990s.
Property developers have already committed to redeveloping 86 buildings as part of a first phase, with the city having accepted bids worth R20bn.
These properties will be converted into 24 developments whose funders include Absa, First National Bank, Capitec and property finance specialist TUHF. The government would continue owning the buildings, but would enter into leasing agreements with developers and property managers.
Councillor Reuben Masango, who is in charge of development planning for the city, said that 500 buildings had been selected for redevelopment. Following the announcement that 86 buildings would be redeveloped in phase one, another 70 buildings were released on Friday for tender.
He said developers were expected to foot the cost of clearing the buildings of hijackers and waste, as well as the replacement of broken fixtures and fittings. The city would "help to find alternative accommodation for people who had illegally occupied buildings".
Mashaba met on Monday with the developers for the first phase. These included a mix of established, largely black-owned developers, including Brickfields Housing, Milzet Consulting, Nthwese Developments, Pahamo Oven, JM Corporate Real Estate Solutions in a joint venture with Ryden, Bayete Capital and EGC Properties, as well as architects such as Bentel & Associates and Gapp.
They committed to breaking ground on the developments within the next six months.
Mashaba said the inner-city rejuvenation project was aimed at cutting into a housing backlog of about 300,000 units and was not limited to the inner-city.
This backlog is set to grow as Johannesburg’s population expands at an average growth rate of 2.3% a year.
The 86 buildings are situated in Johannesburg Central, Yeoville, Berea, Vrededorp, Fairview, Salisbury, Marshalltown, Wolhuter, Turffontein, Soweto, Randburg, Houghton, Orange Grove and other parts of the greater Johannesburg area.
Mashaba said the first phase of development would create 10,096 jobs and about 6,500 housing units, which could be rented out for between R900 and R4,500 a month.
The support of established banks had encouraged developers to bid for many of the buildings.
Prosper Mpofu, CEO of the Johannesburg Housing Company, which is one of the investors in the first phase, said as much as 25% of the housing it had developed was in the inner-city.
"We wanted more than we were awarded but we are excited that we have an opportunity to work on various well-located buildings with strong investment potential."
No listed property companies were among the 171 bids received for the first phase.
Top listed property CEOs have previously said the redevelopment of mothballed and derelict buildings did not fit in with their investment risk profiles. Craig Smith, head of research at Anchor Stockbrokers said large listed property players need to have the expertise or need to work in joint ventures with those who do before taking on development or redevelopment risk in the inner city.
Jeffrey Wapnick, the CEO of JSE-listed Octodec Investments, which already owns large investments in the Johannesburg and Tshwane inner cities, said his company preferred to develop and own its residential assets rather than lease them from the government.
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