THE urban regeneration tax incentives announced in this year's budget may be generous but are unlikely to lead to large-scale refurbishment of blocks of flats to create affordable rental accommodation in city centres unless the owners can count on legal protection against defaulters, says Jo Pelser, MD of home developer Sable Homes.

A more holistic approach is required for good quality, reasonably priced accommodation in and around SA's city centres.

"The average annual income in SA is only about R25000, which means most people can't afford to buy their own homes and that most benefit substantially from the reduction in their transport costs if they are able to live close to work.

"It also means, however, that there is a limit to how much rent they can pay and that creating brand new rental accommodation in inner city areas is unlikely to be a viable proposition because of the high land and building costs involved, " says Pelser.

"So encouraging the refurbishment and remodelling of existing buildings in these areas is a good idea," he says.

"It should also promote empowerment as new investors see opportunities in acquiring and revamping old buildings and, in time, perhaps even sectionalising and selling individual units to smaller investors."

This goes with scrapping transfer duty on homes costing less than R140000 and efforts to stop redlining inner city areas.

"But unfortunately government appears to have missed the point that, no matter who owns the buildings or flats, they will need to be paid rent to maintain their properties, pay the rates that will help keep up the neighbourhood and earn a return on their investment.

"In the month since the budget, it has made much of the incentives but continued to ignore the fact that the law is unbalanced in favour of defaulting tenants. It has also said little about what the public sector might be expected to contribute to urban regeneration that is, better management of inner city areas by local authorities, and a significant improvement in the safety and security of these areas.

"And until all these issues are satisfactorily addressed, it will remain difficult to convince investors of the potential in inner cities, and virtually impossible to sustain any gains that are made through the use of the incentives."
Apr 02 2003 10:16:44:000AM Business Day Reporter Business Day 1st Edition