Capital City Housing NPC and another v Msunduzi Municipality and others

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Mngadi J
• Judgment Date: 01 September 2023
• Citation: 2023 JDR 3227 (KZP)
• Hearing Date: 17 August 2023
• Docket Number: 1046/2021P
• Court: KwaZulu-Natal Division, Pietermaritzburg

Mngadi J:

[1]

The applicant seeks an order declaring a provision in first respondent’s Rates Policy and the definition of ‘specified public benefit activity’ in s1 of the Local Government: Municipal Property Rates Act No 6 of 2004 (Rates Act) inconsistent with the Constitution. The applicant by the relief seeks to obtain rebates on rates comparable to that of public benefit organisations (PBOs). The first, third, and fourth respondents oppose the application.

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[2]

The first applicant is Capital City Housing NPC a non-profit company as defined in the Companies Act No. 71 of 2008 (Companies Act) in business rescue. The second applicant is Pieter Hendrick Strydom an adult insolvency practitioner appointed for the first applicant in terms of chapter 6 of the Companies Act as first applicant’s business rescue practitioner.

[3]

The first respondent is Msunduzi Municipality a municipality established in terms of s12 of the Local Government: Municipal Structures Act 117 of 1998 (Municipal Structures Act). The second respondent is the South African Local Government Association established and recognised in terms of the Organised Local Government Act No 52 of 1997. The third respondent is the Minister of Co-Operative Governance and Traditional Affairs a minister of state in the government of the Republic of South Africa. The fourth respondent is the Member of the Executive Council representing Co-Operative Governance and Traditional Affairs in the Province of KwaZulu – Natal.

The fifth respondent is the Minister of Finance a minister of a state department in the National Government. The sixth respondent is the Minister of Hauman Settlement a Minister of a state department in the National Government. The seventh respondent is the MEC for Human Settlement a Member of the Executive Council in the Provincial Government in the Province of KwaZulu-Natal.

[4]

The first applicant is a duly accredited social housing institution functioning as a social housing institution as defined in the Social Housing Act No. 16 of 2008 (Housing Act). It has acquired and developed three properties within the municipality district of the first respondent. The first property consists of 311 residential units, the

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second property consists of 952 residential units and the third property consists of 393 residential units. The first applicant owns and manages the three properties for the purposes of providing ‘social housing’ as defined in the Housing Act.

[5]

The Housing Act seeks to contribute to the realisation of a constitutional right of access to adequate housing. The Constitution proscribes the three spheres of government to promote the establishment, development and maintenance of socially and economically viable communities and for the provision of safe and healthy living conditions. The Housing Act defines social housing to mean ‘a rental or co-operative housing option for low to medium income households at a level of a scale and built form which requires institutionalised management, and which is provided by social housing institutions or other delivery agents in approved projects in designated restructuring zones with the benefit of public funding. Section 2 of the Housing Act provides:

‘(1)

In giving priority to the needs of low- and medium-income households in respect of social housing development the National, provincial and Local spheres of government and social housing institutions must-

(a)

ensure their respective housing programmes are responsive to local housing demands, and special priority must be given to the needs of women, children, child-headed households, persons with disabilities and the elderly;

(b)

support the economic development of low to medium income communities by providing housing close to jobs, markets and transport aid by stimulating job opportunities to emerging entrepreneurs in the housing service and construction industries;

(c)

afford residents the necessary dignity and privacy by providing residents with clean, healthy and safe environment;

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(d)

not discriminate against residents on any of the grounds set out in section 9 of the Constitution, including individuals affected by HIV and AIDS;

(e)

consult with interested individuals in all phases of social housing development;

(f)

ensure the sustainable and viable growth of affordable social housing as an objective of housing policy;

(g)

facilitate the involvement of residents and key stakeholders through consultation, information sharing, education, training and skills transfer, thereby empowering residents;

(h)

ensure secure tenure for residents in social housing institutions on the basis of the general provision governing the relationship between tenants and landlords as set out in the Rental Housing Act, 1999 (Act No 50 of 1999), and between primary housing co-operatives and its members as set out in the Co-operatives Act, 2005 (Act No 14 of 2005)

(i)

. . .

[6]

Section 14 of the Housing Act as functions of social housing institutions, provides:

(1)

Social housing institutions must:-

(a)

comply on an ongoing basis with the criteria which qualify for them for accreditation;

(b)

acquire, develop, manage, or both develop and manage, approved projects primarily for low income residents with joint support of local authorities;

(c)

promote the creation of quality living environments for low income residents;

(d)

re-invest operational surpluses generated as a result of funding provided in terms of the social housing programme, in further approved projects;

(e)

consult with municipalities with a view to developing social housing stock;

(f)

enter into and comply with annual performance agreements with municipalities on approved projects in their areas of jurisdiction;

(g)

inform residents on consumer rights and obligations in respect of social housing;

(h)

observe and operate within government policy on social housing

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(i)

. . .

[7]

The applicants contend that one way of promoting the objectives of the Constitution and the Housing Act is to provide affordable quality housing to as many people as possible is affording providing social housing institutions some relief in respect of rates and taxes. That enables social housing institutions to acquire and maintain reasonable stock of accommodation and to keep rentals at affordable levels.

[8]

The first applicant states that its working capital consists of immovable property. The rates bill is its greatest expense. The expenses schedule attached shows that rates by far is a major monthly expense. The first applicant’s only source of income is the rental from its tenants. The issue of rates is critical for the existence of the first applicant. The first applicant is a non-profit company and any savings from reduced costs accrue for the benefit of its social housing enterprise.

[9]

The applicants state that to obtain tax relief, including rates relief, social housing institutions are required to be approved as Public Benefit Organisations (PBOs) in terms of section 30 of the Income Tax Act No. 58 of 1962 (Income Tax Act).). The first applicant is an approved PBO. The applicants refer to an attached certificate dated 27 January 2003 issued by South African Revenue Service which evidences the approval of Msunduzi Housing Association’s exemption. The applicants refer to the provisions of the section 8 read with s15 the Rates Act which provides that properties owned by PBO’s and used for specified public benefit activities area placed by the municipality in a category conferring on the owners thereof preferential rates rebate. The applicants point out that since item 3 of Part 1 of the 9th Schedule 6 of the

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Income Tax Act in the definition of ‘specified public benefit activity’ excludes ‘land and housing’, the first applicant is excluded from the said category. The applicants maintain that the exclusion is arbitrary, unjustified and discriminatory to it, and the first respondent in its Rates Policy to align itself with the Rates Act excludes the first applicant.

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