Urban Forum (2010) 21:123–138

DOI 10.1007/s12132-010-9081-x

Access to Land for the Urban Poor—Policy Proposals

for South African Cities

Mercy Brown-Luthango

Published online: 3 March 2010

# Springer Science+Business Media B.V. 2010

Abstract The issue of land is a critical one in post-Apartheid South Africa.

Growing informality and poverty in urban areas, driven to a large extent by
urbanisation, necessitates greater concerted action around land use management in
urban areas to ensure more equitable, environmentally and socially sustainable use
of finite land resources. The operation of the urban land market has been identified
as a significant obstacle preventing the urban poor from accessing affordable land. A
new approach, advocated by the UK Department for International Development and
the Swiss Agency for Development and Cooperation entitled “Making Markets
Work for the Poor—M4P” emerged in the 1990s. The M4P approach recognises that
even successful market development will not distribute land to the poor and
intervention in the land market is therefore required to promote more equitable land
distribution patterns. The M4P perspective however has been accused of an
obsession with economic solutions to the problem of landlessness and informality
to the exclusion of other socio-political and legal remedies. The Brazilian case
provides an example of a more progressive approach as it combines social policy
and legal reform to regulate the use of urban land to ensure that land fulfils its
“social function”. The presence of large tracts of vacant and unused land in cities is
an important issue in the context of growing informality and competition for land
and therefore requires urgent policy attention. The paper discusses the Brazilian case
and the instruments used in that country to deal with vacant/unused land in cities. It
argues that the progressive taxation of vacant land in cities could be a potentially
valuable policy instrument in South African cities. Land-based fiscal instruments can
be utilised by local government to manage the use of land and to access additional
revenue which can be redistributed to the poor for the provision of infrastructure and
services. Although these tools are not a panacea for challenges of informality and
poverty in the developing world, they do have the potential to augment municipal
income and to facilitate urban renewal, infill development and a more compact city.

M. Brown-Luthango (*)
African Centre for Cities, University of Cape Town, Room 5.06, Engeo Building, Rondebosch,
7701 Cape Town, South Africa
e-mail: mercy.brown-luthango@uct.ac.za
124 M. Brown-Luthango

The paper argues though that these tools should be applied on a city-wide scale; part
and parcel of an overall urban land reform strategy and plan for the city.

Keywords Land . Housing . Taxation . Property tax . Vacant land . Brazil . M4P

Introduction

Growing urbanisation is a reality in South Africa. According to the 2006 State of the
Cities Report, in 2001, SA had an urbanisation level of 56.25%. Between 2001 and
2006, South Africa’s urban population increased faster than the national population.
Rapid urbanisation and the accompanying competition for diminishing land
resources, require effective land use control and management in order to ensure
fair land distribution patterns. Despite rapid urbanisation, urban land issues have
received very little policy attention and land reform in South Africa has been largely
focussed on rural land. Land forms an important component of a sustainable
livelihood strategy for the urban poor, especially given the urbanisation of poverty
and increasing informality which characterise patterns of urbanisation in the
developing world. The operation of the urban land market presents a significant
impediment for the poor in terms of accessing affordable, well-located land. Some
have argued that market-oriented policies will not necessarily result in fair and
sustainable land distribution patterns and therefore intervention in the urban land
market is required to ensure that those most desperately in need of land, i.e. the
urban poor, can access land. Different approaches have dominated the debate on
access to land for the poor. The neo-liberal perspective views the market as the most
effective way of distributing land and opposes any state intervention in the land
market, in contrast, more leftist approaches, like the “right to land” perspective argue
against over-reliance on the market to distribute land and support direct state action
to make land available to the poor. A new approach, the “Making Markets Work for
the Poor (M4P)” which emerged in the 1990s seeks to improve the functioning of
markets in order to produce pro-poor development outcomes. The paper will
critically discuss the merits of the M4P as a strategy to distribute land to the poor. It
also considers the issue of vacant/unused land in South African cities and analyses
different land use management instruments which can be applied to bring this land
into productive use in order to ensure that the urban poor can access land to satisfy
their need for housing and other social services. Vacant/unused land within cities is
an important resource for local governments and presents opportunities to
significantly restructure the urban form and reduce spatial inequalities, in addition
to providing additional revenue for local government.
Different countries in the world have realised the potential of vacant plots of land
in the city and have employed strategies to ensure that vacant land is put to
productive use. The paper examines the implications of the above-mentioned issues
for South Africa. The issue of land is a critical one in post-Apartheid South Africa.
Historically skewed land distribution patterns, coupled with growing informality and
poverty in urban areas, driven to a large extent by urbanisation, necessitate a new
thinking around land use management in urban areas. This paper argues that
although the last few months have seen the launch of at least two new initiatives at
Access to land for the urban poor—policy proposals for South African cities 125

national level aimed at making land available to house the urban poor, these have to
be supported by appropriate mechanisms at local level to facilitate the release of
affordable, well-located land to the market. An important area for policy intervention
is the presence of vacant/unused land in cities and the innovative use of South
Africa’s property tax legislation to both provide municipalities access to additional
revenue whilst at the same time controlling and influencing the use of land. These
and other land use management instruments however need to be implemented on a
city-wide scale; part and parcel of an overall urban land reform strategy and plan for
the city as a whole.
The paper is organised into three sections. The first part of the paper provides an
argument for the significance of land for the urban poor in particular and discusses
perspectives around the operation of the land market and its impact on the poor’s
ability to access land. “Strategies to Deal with Vacant Land in Cities—International
Experience” discusses the international literature on particular land management
instruments with a focus on vacant/unused land in cities. The last part of the paper
examines the policy implications for South Africa.

Debates Around Land Access for the Urban Poor

Land and Sustainable Livelihoods for the Urban Poor

In a context of urbanisation, growing informality and poverty, the issue of access to

land for the urban poor is critical. A study conducted by the Centre for Development
and Enterprise in 2005 recommended that there should be a greater focus in South
Africa on urban land reform as most of the respondents interviewed during this
research view land as a “place to stay” rather than a “place to farm” and therefore
seek access to urban land, because they want to be close to employment and other
economic opportunities (CDE 2005).
A more equal distribution of land is imperative as poverty is linked to land access
(Porteous et al. 2005). An effective land reform programme is crucial for sustainable
economic growth, environmental protection, poverty reduction, social cohesion and
political stability. With reference to historical data from countries in Latin America,
Asia and Africa, Van den Brink (2007) argue that countries with more equal land
distribution patterns experience faster economic growth. According to a scoping
study on urban land issues conducted by the Urban Sector Network and
Development Works “the value of urban land to the poor can include the following:

& Land is a natural asset that provides space for other physical assets such as housing
& Land provides living/social space
& Land can give access to infrastructure (roads, water, sanitation, electricity)
& Land can be an economic asset that can be sold or bequeathed to one’s heirs and
that can potentially be used as collateral or credit
& Land can be used for income generation purposes, for example, through providing
space for home based micro-enterprises, through rental of accommodation e.g.
rooms or backyard accommodation and for providing space for urban agriculture
(vegetables, maize, livestock, etc.)” (USN and Development Works 2004: 13).
126 M. Brown-Luthango

Land constitutes an important component of a sustainable livelihood strategy for

the poor. Access to land that is well-located in terms of its proximity to social
services, infrastructure and employment opportunities can significantly improve a
household’s economic situation. The sustainable livelihoods approach holds that
“land and housing assets in urban areas can improve livelihoods by providing the
poor with access to services and the urban economy” (Nemasetoni and Royston
2005: 4). This is supported by a study conducted by Zack and Charlton where the
researchers found that
“respondents often cite distances from shops, schools, clinics and recreational
facilities as a problem. They commonly say distance to amenities has a major
impact on their household finances: the cost of transport, particularly to places
of work as well as schools, is cited as a heavy financial burden” (Zack and
Charlton 2003: 28).

The Urban Land Market and its Impact on the Poor’s Ability to Access Land

Conventional neo-liberal economic policies argue that the land market, if left free
from state regulation, operates more efficiently and automatically allocates land to
the poor (Department for International Development (DFID) 2005). Dowall (1993,
2) argues that urban land markets have four functions:
1. “they bring buyers and sellers together to facilitate transactions;
2. they set prices for land;
3. land markets allocate land by setting prices so that the land market “clears”, that
is, the quantity of land offered for sale equals the quantity of land demanded and
4. land prices play an important role in ensuring that land is efficiently used”.
However, scholars and policy-makers are increasingly starting to question the
efficiency of the land market and particularly its ability to distribute land to the urban
poor. Kotaka and Callies (2002, 1) argue that “the free market does not always—
some would say often—result in a logical and equitable distribution of land uses and
attendant public facilities necessary to serve the use of land”. Van den Brink (2004)
shares a similar view when he argues that even under perfect market conditions the
market will not redistribute land from the rich to the poor. In the absence of effective
regulatory instruments inefficient land use practises, like land speculation, will
flourish and lead to market imperfections. Speculation affects the supply of land by
withholding land from the market and therefore drives up the price of land, making it
almost impossible for the urban poor to access well-located land. Some scholars go
as far as arguing that the functioning of the urban land market, rather than poverty, is
the most significant factor in the growth of informality. Smolka and Furtado (2003)
argues that “the excessively high price of serviced land is one of several explanations
for the extent and persistence of informal land markets and a more consistent policy
to reduce informality, and in so doing reduce poverty, should be at least neutral or
contribute to reducing high land prices”.
A new approach, advocated by the UK Department for International Development
and the Swiss Agency for Development and Cooperation entitled “Making Markets
Work for the Poor—M4P” emerged in the 1990s. The central tenet of the M4P
Access to land for the urban poor—policy proposals for South African cities 127

approach is that the most effective route out of poverty for the poor is through
economic participation. It is argued that “the involvement of poor people in
economic growth is the best way to get people out of poverty and represents the exist
strategy for aid…. Market-based economic engagement with the poor is essential for
sustainable development” (Tschumi and Hagan 2008; 26). With regards to land
markets, the M4WP approach argues for a more equal distribution of land and more
secure rights in land and property as a means to achieve economic growth, address
inequality and reduce poverty (DFID 2005). Secure land and property rights can
allow the poor to access credit which can be used to generate economic activity,
thereby providing them with a way out of poverty. A land market that works for the
urban poor is one which facilitates their ability to participate in the land market by
allowing them access to land which is affordable and well-located and allows them
greater choice (DFID 2005; 5). Another way in which secure rights in land foster
economic growth and poverty reduction, according to the M4P approach is by
making the environment favourable for foreign investment which would produce
“more and better jobs” (DFID 2005).
The M4P approach to land therefore presents a middle-ground between neo-
liberal market approaches which advocate for complete state withdrawal from the
market as state intervention is believed to cause market distortions and more leftist
approaches like the “right to land” perspective which reject market-based strategies
to address landlessness and informality (Porteous et al. 2005). Critics of the M4P
perspective, particularly those who subscribe to the “right to land” view, take issue
with its pre-occupation with economic responses to address landlessness, poverty
and bring about urban reform. Huchzermeyer (2008) argues that the growth-oriented
development agenda of the past decades have done very little to reduce poverty. She
therefore questions approaches which view economic policy as the primary vehicle
to address the poor’s exclusion from the land market and instead argues that
approaches to deal with landlessness and homelessness should be rooted in social
policy rather than economic policy. This view is supported by McAuslan who argues
that it should be recognised that “there is a social role for land in society” and “land
is part of the social patrimony of the state” (in Fernandes 2001; 2). Such an
approach, as espoused by the Brazilian constitution and regulated through urban
policy and legislation in that country, promotes the use value of land over its
exchange value in order to ensure that land fulfils its social function and contributes
to a broader urban reform agenda. This is relevant to the South African context
considering high levels of social inequality, landlessness and land reform objectives.
The next part of this paper will examine in more detail the issue of vacant and
unused land in cities and the role that vacant land parcels can play as part of an
overall urban land reform strategy to effect more inclusive land use patterns. It will
also look to international experience and particularly the Brazilian case to glean
lessons for South Africa as far as the management of urban land is concerned.

Strategies for More Inclusive and Sustainable Land Use—The Use of Vacant/
Unused Land in Cities as Part of an Urban Land Reform Strategy

Vacant or unused land presents a huge challenge to many cities in terms of urban
renewal and safety and security as vacant lots often attract illegal activities and
128 M. Brown-Luthango

contribute to blight and urban decay. Besides the social challenges associated with
vacant land, the presence of significant parcels of vacant or unused land also has
economic drawbacks in terms of a loss of revenue to local government and is
generally a symptom of an inefficient land market. Moreover, in a context of a great
demand for land for housing, the presence of unused, vacant land in the city is
unsustainable and inefficient. Furtado and Jorgensen (2006; 12) sum up the issue as
follows;
“In general the antisocial nature of vacant urban land can be seen basically from
two angles. The first is retention of such land while the areas around them are being
equipped with public infrastructure, leading eventually to private appropriation (by
the owners) of the value increments. The other is the social perverseness of retaining
unused land within a context of scarce public resources that could be used to provide
urban infrastructure for all the land concerned”.
In cities in the USA for example there is a growing movement towards realising
and exploiting the potential of vacant/unused land in terms of urban renewal and
economic rejuvenation. Pagano and Bowman argue that vacant land can contribute
towards an economic development strategy aimed at creating jobs, increasing tax
revenue, improving transportation infrastructure, etc. (2000; 1). The term vacant land
encompasses a variety of different unused or underutilised land including “derelict
land, land with abandoned buildings and structures, small or irregular shaped
parcels, land with physical limitations e.g. steep slope, land prone to floods, etc.”
(Pagano and Bowman 2000; 2). The Centre for the Study of Economics in the USA
defines a parcel of land as “vacant” if less than 10% of the parcel’s value is structural
(Lloyd and Vincent 2008; 11). Considering the potential of vacant or unused land, it
is very important for any city to conduct comprehensive land audits to ascertain the
extent and nature of vacant land in the city as part of an efficient and sustainable
urban development strategy and to devise and implement appropriate instruments to
address the issue of vacant/unused land.
This is especially vital in a city like Cape Town where the city is struggling to
eradicate a huge housing backlog. But what is the extent of vacant land in Cape
Town? Reliable statistics on the extent of vacant land in Cape Town are difficult to
obtain. A study conducted by the Land Audit Research Unit of the African National
Congress in 2000 estimated that there are approximately 40,000 vacant pieces of
land in Cape Town, most of which are privately owned (ANC 2000; 17). The study
also identified about 2,900 parcels of public land, suitable for housing in Cape
Town. For the purposes of this study, four criteria were used to measure suitability
for housing:
1. buildability (i.e. no unstable soil, not located in 1:50 year floodplain, not steeper
than 1:4, not in environmentally sensitive area, e.g. wetland)
2. location (well-located in terms of proximity to transport, employment and other
urban opportunities)
3. size (only pieces larger than 1 ha were considered)
4. cost (only public land was considered, because it was deemed less expensive to
acquire than private land)
The study further estimated that approximately 305,000 households could require
land for subsidised housing between 2001 and 2031. Bearing in mind the 2,900
Access to land for the urban poor—policy proposals for South African cities 129

parcels of vacant, public land identified and assuming that 70% of this could be used
for subsidised housing, it was estimated that an additional 2,800 parcels of private
vacant land would be needed by 2016 to address the housing backlog (ANC 2000).
A more recent estimate of the extent of vacant land, based on data from the 2002
property valuations roll, put the number of vacant land parcels in Cape Town at
27,000 (Meakin 2007). The housing backlog in Cape Town is estimated at
approximately 400,000 housing units. It is clear that a range of innovative housing
instruments and typologies are needed to address the growing housing backlog.
Effective land use management policies and appropriate instruments are however
central to a sustainable livelihood strategy for the poor. The issue of vacant or
unused land in the city is therefore a critical one.

Strategies to Deal with Vacant Land in Cities—International Experience

Land Taxes

The property tax is the most important source of revenue for local governments.
Depending on the rating system, however, the property tax also has an important role
to play in terms of managing the use and distribution of land. Property taxes can be
collected in three different forms. There is the flat rating system which is a tax on
the value of both the land and the buildings or improvements on the land. The other
forms of property taxation is site value rating, which is a tax on the value of the land
only, excluding the value of buildings and improvements and composite rating, also
referred to as the two-rate system. The two-rate system allows for the value of the
land to be taxed at a higher rate than the value of the buildings or improvements. Site
value rating, also referred to as land value tax, has been identified by many
economists as the most efficient form of taxation. In terms of economic efficiency,
Van den Brink (2007) identify the following factors:
& “it does not distort economic incentives (because the overall supply of land is
fixed);
& it is fair, because it specifically targets unearned income (a rent)—the value of
improvements of land caused by public investment (owners are taxed on what
was there originally—the potential of the land) and not an economic activity of
the owner;
& it provides a disincentive to land speculation in both urban and rural areas;
and
& it is relatively easy to administer, because it is impossible to hide land (Van den
Brink 2007; 3)”
Other economists argue that land-based taxes not only provide a significant
source of revenue, but also have an important role to play in terms of
“complementing” planning systems and can therefore contribute significantly to
broader urban management and reform objectives (Lloyd and Vincent 2008). A two-
rate or composite rating system which places a higher tax burden on land than on
buildings, would discourage the speculative retention of well-located vacant land
and encourage trends towards “infill development and gradual recentralisation of
130 M. Brown-Luthango

urban development”, impacting significantly on urban sprawl (Gaffney 1993 in

Gihring 1999). Land-based taxes therefore facilitate compact urban form and more
efficient and sustainable use of land. Gihring (1999) argues that land taxes therefore
have the potential to perform an important urban growth management function by
“maximising accessibility, reducing distances between origin and destination and
minimising energy consumption” (1999; 64). Composite rating in particular could
have the following “expected outcomes” (Gihring 1999; 64):
& Discourage urban sprawl
& Encourage infill development
& Discourage building disinvestment
& Intensify land development
& Discourage land speculation
& Restrain rising residential land prices
It must be noted however that the success of a land-based tax system or any
property tax system for that matter depends on well-functioning and efficient
administrative procedures from property valuations right down to the collection and
enforcement strategy. The tax rate is also an important consideration. If the valuation
roll does not reflect the true market value of properties and if the tax rate is too low,
the tax burden imposed on landowners will not act as a sufficient disincentive for
retaining land. The cases of Taiwan and Jamaica where “underassessment” resulted
in low collection rates and failure to effectively address land speculation, are
instructive in this regard (Bahl et al. 2008).

Instruments in Brazil to Deal with Vacant Land

Many countries in Latin America recognise the potential of urban vacant land and
have put specific fiscal measures in place to address the retention of vacant urban
land for speculative purposes (Furtado and Jorgensen 2006). In Brazil for example,
the most important legislative and institutional changes which have facilitated urban
reform are the enactment of a new Brazilian constitution in 1988, the 2001 City
Statute as well as the Ministry of Cities and National Council of Cities in 2003
(Fernandes 2007a, b). The 1988 Constitution included a chapter on urban policy.
The chapter on urban policy includes two very important sections, Article 182 and
Article 183 insofar as more inclusive land policies are concerned. Article 182 and
Article 183 establish the “social function of urban property”. This means that the use
of urban property is regulated in favour of the “common good, safety and well-being
of all citizens, as well as environmental equilibrium” (POLIS 2002, 40). The right to
private property is thus regulated to ensure that it does not precede collective rights
to urban property. In 2001, 13 years after the promulgation of the 1988 Constitution
and following intense mobilisation from the Urban Reform Movement, the City
Statute was introduced. The City Statute provided the necessary regulation for
articles 182 and 183 of the constitution and established general guidelines for urban
policy. According to Fernandes, the City Statute gives expression to a number of
interconnected collective rights which include “the right to urban planning, the social
right to housing, the right to environmental preservation; the right to capture surplus
Access to land for the urban poor—policy proposals for South African cities 131

value and the right to the regularisation of informal settlements” (2007a, b; 211).
Fernandes argues that
“the City Statute broke with the longstanding, individualistic tradition of civil
law and set the basis of a new legal-political paradigm for urban land use and
development control in Brazil to ensure “a balance between individual and
collective interests over the utilisation of this non-renewable resource essential
to sustainable development in cities”, that is, urban land” (2007a, b, 13).
Probably the most important policy tool used in terms of the vacant or unused
land in Brazil is what is referred to as “progressive taxation on vacant or unused
land”. Vacant or unused land is taxed at a progressively higher rate every year for a
period of 5 years, up to a maximum of 15%. If after 5 years the land owner has not
subdivided, used or build on a parcel of land, the municipality can expropriate the
land. In this way the Brazilian legal framework regulates speculative retention of
urban land. Compensation for expropriation is paid in municipal bonds at the
original use value. In other words, the compensation amount does not include
increase in land value produced by government investment in the area where the
property is located or “expectations of gains, ceased profits and compensatory
interest” (POLIS 2002, 50). In 1994, the city of Porto Allegre in Brazil made a
concerted effort to apply the property tax to “capture unearned land value, deter
speculation and encourage social fairness and economic growth” (De Cesare 1998).
Specific priority urban zones, which had access to high-quality urban infrastructure,
equipment and services, were earmarked for development and occupation.
The idea was to increase densities in these areas without necessarily increasing
public investment, effectively giving more people access to well-located areas with
high-quality infrastructure and services. One hundred and twenty vacant sites of
between 3,000 to 360,000 m2 were identified within these priority areas and
legislation was introduced which made the development of these sites within a
stipulated time period mandatory. In terms of this legislation, if the identified sites
were not developed within the specified time-frames, the property tax rate on that
land would be raised by 20% annually up to a maximum rate of 30%. Priority was
also given to construction on these sites (De Cesare 1998). This initiative elicited
fierce resistance from the landowners who challenged the local government in court
and after 3 years only five of the 120 sites had been developed. This is however an
example of the innovative use of the property tax to manage urban development and
achieve goals of social justice and economic growth.
Another tool used in Brazil in instances where land is occupied informally is the
special rights of “usucapião” for urban property. Under this provision any urban
dweller who has occupied a parcel of land or property of 250 m2 or less for more
than 5 years, uninterruptedly or without contestation, uses it for their residence and
does not own any other property or urban real estate, can establish their “dominion”.
In the case of private land, occupiers can claim “adverse possession” or “prescriptive
acquisition rights” and in the case of public land, they acquire a form of leasehold
referred to as “concession of the real right to use” (Fernandes 2007a, b, 180).
The instruments described above are very progressive and have the potential to
significantly improve the use and distribution of land. However, in Brazil a number
of challenges persist insofar as the implementation and effective application of these
132 M. Brown-Luthango

instruments are concerned. These challenges encompass a variety of political,

institutional and technical obstacles. Furtado and Jorgensen (2006) identify the
political influence of large landowners and technical difficulties as two of the major
impediments to a comprehensive and large-scale introduction of these land
management instruments in Brazil. According to Furtado, 5 years after the City
Statute and despite the fact that it was adopted in more than 200 cities, less than 12
of these cities had concrete experiences of the application of the tools provided in the
City Statute. In this instance the relative autonomy of the local authority seem to be a
factor. Cities where the local authority has greater autonomy to implement policy
and secure their own revenue show more “consolidated” experiences (Furtado and
Jorgensen 2006). Another trend, identified by Caldeira, is how the principle of
popular participation, enshrined in the City Statute, has reinforced spatial inequality,
because powerful elites like property developers are able to use the democratic space
to further their own interests. So, for example, upper middle class residents were
able to successfully lobby against changes in zoning regulations that would have
threatened privileges in “exclusive residential areas” (Budny 2007; 3). The Brazilian
case provides important lessons for South Africa as far as the introduction and
implementation of innovative land use management instruments are concerned.

Implications for South Africa

The Urban Context in South Africa

Despite considerable progress being made in terms of the provision of infrastructure

and services to previously excluded communities over the last 15 years, South Africa
still faces a number of development challenges, a significant housing households
being one of the most pressing social challenges. It is estimated that there are 2.4
million households living in inadequate housing in informal settlements and
backyards in South Africa (Watson 2005 in State of the Cities Report 2006). Table 1
provides a breakdown of the housing backlog in three metropolitan areas and the
estimated time it would take to eradicate the backlog at current rates of delivery.
The above figures do not take into account levels of urbanisation and new household
formation. According to census data, SA had an urbanisation level of 56.25% in 2001.
Between 2001 and 2006, South Africa’s urban population increased faster than the
national population (State of the Cities Report 2006: pp. 6–3). Data from Statistics
South Africa shows that between 2001 and 2006, 3 million South Africans migrated
from one district or municipality to another. Most migration occurred into Gauteng
and the Western Cape (State of the Cities report 2006). Urban centres also contain a
large number of poor people. According to the United Nations, 36% of all households
and 41% of female-headed households living in urban areas in developing countries
live on incomes below the locally defined poverty line. This pattern also holds true
for urban areas in South Africa. The 2006 State of Cities Reports states that 77.31%
of people living under the minimum living level are located within 60 km of areas
that generate at least R1 billion of geographic value added1. The minimum living

1
Geographic value added is a measure of economic performance and reflects the level of output in the
economy and excludes taxes and subsidies.
Access to land for the urban poor—policy proposals for South African cities 133

Table 1 Housing backlog in selected metropolitan areas

City Housing backlog Delivery rate per year Estimated time to remove backlog

Cape Town 350,000 5,000 Nevera

Johannesburg 250,000 5,000 50 years
eThekwini 250,000 13,000 19 years

Housing backlog: SA needs to pick up the pace by Lindsay Dentlinger, from page 4 of Cape Argus,
October 24, 2007, quoting information from State of the Cities Finance Report 2006 in “Land First—an
approach that can deliver”, presented by Eglin, Ronald at Land Access Workshop, October 2008,
organised by Afesis-Corplan
a
Housing backlog increasing 2% year=7,000/year

level is a poverty line used by the Bureau for Economic Research at UNISA and
refers to “the minimum necessary for an average family if its members are to maintain
their health and have acceptable standards of hygiene and sufficient clothing for their
needs” (Dasnois 2005). The level is currently set at R1950 a month.
Increased urbanisation is also accompanied by growing informality in most
developing countries and South Africa is no exception. It is estimated that there are 1
billion people living in slum areas globally. Sub-Saharan Africa is the region with
the world’s highest annual slum2 growth rate3. According to the World Urban
Forum, “informal settlements are quickly becoming the most visual expression of
urban poverty” (2002; 3).
Access to land is a major impediment to the poor’s ability to access decent
housing and other economic opportunities in South Africa. Despite the recent
slowdown in the South African property market, ABSA’s Housing Review for the
third quarter of 2008 shows a nominal increase of 16.9% in the average price of land
for new housing. According to the ABSA report, the average price of land for new
housing is now R410 700 (ABSA 2008). This makes land and housing unaffordable
to the majority of the South African population.

Access to Land for the Urban Poor in South Africa—Policy Implications

South Africa has made important policy interventions, especially at the national
level, to provide access to land for the urban poor. The National Housing
Development Agency (HDA), spearheaded by the National Department of Housing,
is one such important initiative. The National Housing Development Agency was
officially established in August 2008 and its primary objective is to “identify,
acquire, hold, develop and release state and privately owned land for residential and
community purposes and for creation of sustainable human settlements (National
Department of Housing 2008)”. The national Department of Land Affairs also

2
The word slum is defined by the World Urban Forum as a term describing a wide range of low-income
settlements and/or poor human living conditions and also includes informal settlements (WUF 2002: p. 2)
3
City, Magnets of Hope: An Overview. UN-Habitat
134 M. Brown-Luthango

launched its Land Acquisition for Sustainable Settlements (LASS) programme in

August 2008. The LASS programme will provide grants to “poor” municipalities for
the acquisition of land for residential development (Van der Merwe 2008). These
initiatives however are situated within a constitutional context which some argue,
unlike the Brazilian Constitution which explicitly endorses the social function of
property, seek to uphold individual property rights at the expense of land reform
imperatives. Ntsebeza (2007) for example attributes the slow pace of land reform in
South Africa to the entrenchment of existing rights to property in the South Africa
constitution and the “willing buyer, willing seller” principle. The “willing buyer,
willing seller” principle confers considerable power on land owners and effectively
puts those in need of land at their mercy as it gives land owners the right to sell their
land on the open market to the highest bidder or a bidder of their choice (Lahiff
2005). Land reform initiatives in South Africa, whether in the rural or urban sphere,
therefore, need to be considered within this legal and policy context which endorses
private property and the commodification of land by allowing the market to decide
who can access land.
Initiatives like the HDA and the LASS programme should be supported by
regulatory measures at local government level, such as the efficient taxation of land
to facilitate the release of affordable land to the market. The property tax, which
refers to a tax called the “rates on property” has been in effect in South Africa since
1836 (McCluskey and Franzsen 2004). Prior to the enactment of the Municipal
Property Rates Act (MPRA; Government Gazette 2004), South Africa had a long
tradition of land-based taxation. The previous property tax system allowed for some
diversity in the methods used in different municipalities (areas) to collect the tax.
Municipalities were given a choice of three systems, in some cases the tax was
levied on the site-value of land; some areas preferred the flat rate, while others
preferred the composite rating system. A study by Dunkley (2000) found that during
the period 1951 to 1984, a majority of municipalities in South Africa opted for the
tax on the site value. During this period the number of towns that raised revenue
from site value increased from 36 to 98 while the number of towns on flat-rating
declined from 187 to 61. In fact, of all the major cities in South Africa, only Cape
Town and Port Elizabeth still preferred the flat rate. Bell and Bowman (2002) found
a similar preference for a system which taxes land more heavily than improvements.
Of the 840 municipalities in existence during the time of the study, two thirds were
either using site value rating or composite rating (Bell and Bowman 2002 in
Department of Land Affairs and World Bank 2006: 24).
The Municipal Property Rates Act which was enacted in May 2004 allows for the
levying of a rate on the market value of the immovable improvements on a property.
Market value is defined in the Act as “the amount the property would have realised
if sold on the date of the valuation in the open market by a willing seller to a willing
buyer (Municipal Property Rates Act Government Gazette 2004)”. The new
Municipal Property Rates Act has effectively done away with pure site value
taxation and composite rating and requires all municipalities to prepare new
valuation rolls and to move to a flat rate system by the 1 July 2009 (Bahl et al. 2008;
277). Another alternative does, however, exist for municipalities to facilitate more
efficient use of vacant land in particular. Section 8 (1) of the MPRA allows
municipalities to charge differential rates for different categories of rateable property.
Access to land for the urban poor—policy proposals for South African cities 135

It is therefore possible for cities in South Africa to charge a higher rate on vacant
land, similar to the practise in Brazil. A higher tax on vacant land could provide
local government with additional revenue which could be redistributed to poorer
areas in the city for the provision of infrastructure and services. A higher tax rate on
vacant land could also encourage the productive use of land by forcing landowners
to develop the land or release it to the market. This opens up the possibility for infill
development, higher densities and therefore a more compact urban form.
The eThewkini municipality in 2008 introduced a higher tax rate on vacant land
in the city (see Table 2).
eThekwini’s rating system seems to be much more progressive than both the
City of Cape Town and Johannesburg municipality as the rates charged on
residential and non-residential properties are considerably higher. The rate on
vacant land is more than three times higher than that charged by the City of Cape
Town for example. International commentators like Smolka and Amborski (2000),
Morales Schechinger (2008) and Bahl and Martinez-Vazquez (2007) have argued
that the property tax, probably the largest source of own revenue for local government,
is severely underutilised in many developing countries. The World Bank argues that the
property tax, is an “attractive and promising option for financing local government
operations, for providing local government with access to a broad and expanding tax
base and for its potential contribution to increased efficiency in financing service
delivery” (World Bank 1995, http://www1.worldbank.org/wbiep/decentralization/
afrlib/Afproptx.htm). Yet, the International Monetary Fund estimates that the property
tax constitutes a negligible percentage (1.3% on average) of total public sector
revenue in developing countries (UNESCAP 1995). In comparison to industrialised
countries like the USA, Canada and the UK where the property tax represents
between 4% and 6% of gross domestic product (GDP), in most developing countries
the figure is less than 1.5%. In South Africa the property tax constitutes
approximately 0.5% of GDP (Morales Schechinger 2008). This is particularly
worrying considering the fact that the Regional Services Council levies, another
significant source of income for municipalities, were cancelled as from 30 June 2006
(State of City Finances Report 2007; 3). eThekwini therefore seems to be heading in
the right direction and it would be interesting to research the impact of particularly
the higher rate on vacant land in terms of revenue collection and development in the
city in the future.

Table 2 Property rates for different land uses for 2008/2009—comparing eThekwini Municipality, City
of Cape Town and Johannesburg rate structures

Land use eThekwini City of Cape Town Johannesburg

Residential 0.9 0.493 0.004

Agricultural 0.23 Rebate of 90% of non-residential rate 0.004
Industrial 2.3 0.924 0.012 (mining)
Business and Commercial 1.79 0.924 0.012
Vacant Land 3.57 0.924 0.016
136 M. Brown-Luthango

Concluding Remarks

Access to land for the urban poor has become a critical issue in a context of growing
informality and the urbanisation of poverty. Conventional approaches have failed to
distribute land in an equitable and fair manner and policy-makers realise that
intervention in the land market is necessary in order to make land markets work for
the poor. An approach like M4P is useful in recognising that markets, without state
intervention, will not distribute land to the poor. However, approaches which seek to
change the urban landscape through market intervention are limited if they do not
take into consideration the importance of social policy and reform of the legal order.
Vacant/unused land is a significant resource for the city and local government should
put appropriate policies in place to deal with vacant land. A first step would be to
conduct comprehensive audits of vacant land in the city and for this information to
be made publicly available. This paper has drawn on the Brazilian case and the
instruments used in this country to deal with the issue of vacant/unused land in cities
in order to ensure that land fulfils its social function. It has argued that the
progressive taxation of vacant land could be a potentially useful instrument for South
African cities, given the fact that the new Municipal Property Rates Act
(Government Gazette 2004) does allow for differential rates to be applied to
different categories of properties. Land-based taxes present opportunities for
additional revenue for local governments which can be redistributed to poorer areas
in the city for the provision of infrastructure and services. Beyond augmenting
municipal income, these instruments can also play an important role in effecting
more equitable land use practises. Although these instruments are not a silver bullet
solution to challenges of informality in the developing world, they do have the
potential to facilitate urban renewal, infill development and a more compact city.
They do however require a change in mindset amongst public officials, enabling
social policy, legal reform and effective civil society mobilisation.

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