Cape Town’s DA councillors, who voted last week to dispose of the city’s trophy property in Clifton for about R1bn, have erred.
They should either be hanged, drawn and quartered for a financially treasonable act, or face residents’ claims for damages. The ANC sale of city land in Blouberg to Tokyo Sexwale in 2000 should not have been copied. The excuse that the money is needed for social housing or infrastructure is false because land rents can pay the costs of loans.
Cities can never be willing sellers to citizens or companies because the most these pay for land is about 20 years’ rent in advance. This is often the duration of mortgage bonds. It is also the period beyond which analysts hold that a present value rental calculation does not significantly alter. But, barring acts of God and mismanagement, land does not depreciate. It is deemed to be always in an out-of-the-box condition, though the use might change — like the land being sold in Clifton.
If the latest Massachusetts Institute of Technology estimate is correct, the earth still has 2-billion years left. So selling for 20 years’ rent not only deprives the city of trillions of billions of land rents, but shamefully fills the pockets of buyers with the heist. By some estimates, the average land rent of the city’s Clifton cottages below Victoria Road, which were sold to the occupants in the 1970s, has risen about 33 times to R50,000 a month.
The prudent and equitable instrument for bridging the gap between affordability for citizens and full value for cities is a perpetual land-lease where the rents are reviewed every four years. It is not as if this method is unknown. The British introduced perpetual quitrent tenures in the early 1800s. More recent landmark leases that have been realised in Cape Town are the 2006 sale of the V&A Waterfront to private investors by Transnet. City leases included Strand Street Parkade, Cape Town Sun hotel and Woolworths HQ.
Peter Meakin Member, SA Institute of Valuers