Broke City of Tshwane forfeits billions as illegal developers get free ride

The Tshwane metro has known for years of at least 19 illegal developments within its area of jurisdiction but failed to impose the punitive property rates the law provides for on the owners.

Instead, the illegality has been largely ignored as the properties were assessed as if used for agricultural purposes. This means the owner’s rates bill is calculated at a quarter of the rate applicable to households, or less, and that other ratepayers in Tshwane have effectively been subsidising them.

Its political leadership seems clueless about the tools the legislator put at the council’s disposal to deter illegal developments by imposing punitive rates.

The situation persists in the city’s new general valuation roll that has been published for comment and contains many big increases in the valuation of individual properties. Ratepayers have until 2 May to submit objections to their valuations.

ALSO READ: Tshwane hits Afrikanerdorp Kleinfontein with stiff rates bill

Punitive rates applied only to some

The punitive rates scale, which allows the city to charge rates at seven times the scale for residential properties, has only been applied to four of the seven properties occupied by the ‘Boere-Afrikaner’ settlement of Kleinfontein since September, shortly after the High Court in Pretoria ordered the council to apply the law regarding town planning, which it failed to do for decades.

In Kleinfontein alone the rates bill increased from R5 230 in August to R126 148 in September, according to a notice circulated by the board of the Kleinfontein Aandeleblok (KA), which manages the enterprise among residents.

Moneyweb has learnt that the KA has declared a dispute with the city about the increased rates bill, but has also increased efforts to bring the settlement into the ambit of the law.

In a letter addressed to Tshwane city manager Johann Mettler, Lex Middelberg – who represents the Republican Congress of Tshwane in council – says the list of illegal developments has been circulating among Tshwane executives for at least the past two years.

According to the list, there are 19 500 “erven” in these “developments”.

Moneyweb previously reported that some of the erven are being advertised for R600 000 each. Middelberg says he has visited several of these developments and the houses have multiplied since the drafting of the list.

ALSO READ: Sapoa calls for action on illegal developments in Tshwane

They are luxurious and could easily fit in affluent parts of Pretoria such as Mooikloof.

At an estimated value of R1.5 million per house, and assuming 19 500 houses, Middelberg estimates that the metro is losing around R1 billion per year in rates, the bulk contributions that lawful developers must pay, and the fees for municipal services foregone.

Taking into account that Kleinfontein has been in existence for decades and Leeuwfontein, an illegal development east of Pretoria, since at least 2017, the city has lost billions by failing to properly tax these properties.

Middelberg writes that “owners in for instance Leeuwfontein would each contribute less than R2,00 per housing opportunity!”.

“Yet the house built will any day fit into a Mooikloof or a Grootfontein in the east of the city where median property rates are well over R4 000 per month per housing opportunity.”

He points out that nine of the 10 portions of the farm Zwavelpoort 373JR, on which the illegal Masepa Patla development has been established, seem to be missing from the new valuation roll, which gives the owner a free pass regarding property rates.

ALSO READ: Multimillion-rand houses mushroom in illegal Tshwane development

Council must categorise correctly

Ben Espach, director of Rates Watch, previously confirmed that the City of Tshwane’s rates policy provides that properties used in contravention of the town planning scheme be charged at a punitive rate and the council should categorise all such properties accordingly.

He explained that the council’s rates revenue is collected on a proportional basis – if some pay less than they should, others must pay more to ensure the council gets the revenue it budgeted for.

Compliant owners end up subsidising those who don’t comply with the town planning scheme.

During a recent media briefing, Moneyweb asked Deputy Mayor Eugene Modise whether other illegal developments, like Kleinfontein, will be slapped with punitive rates.

Modise responded that the city cannot value non-compliant properties, which is blatantly wrong.

City CFO Gareth Mnisi acknowledged that the city can, in the absence of proper subdivision, still put a value on the property as a whole.

Modise said the city will consider expropriation where properties have been abandoned by the owners (referring to land illegally occupied), but where the owners are known, it “will engage them”.

This comes as property owners in Lombardy Estate to the east of the city are still waiting to be refunded after several court victories ruling that the city failed to follow due process when it recategorised their properties from agriculture to residential more than a decade ago.

This article was republished from Moneyweb. Read the original here.