What South Africa can learn from failed rent control policies worldwide?
This is according to nearly 80% of rental agents in PayProp's 2025 State of the Rental Industry report.
It's not uncommon for a modest apartment in Green Point to be advertised at a monthly rental of R22,000, while a small unit in Durbanville might go for R16,000 despite needing repairs and having an 'ugly kitchen' with broken appliances.
Many people have drawn attention to the price-quality mismatch, noting that similar or better homes in Joburg cost far less.
'Even more concerning, the vast majority of South African households (80%) are priced out of the formal housing market because their monthly income is under R26,000,' says Renier Kriek, managing director of innovative home finance business Sentinel Homes. 'We have an undersupply of about three million formal housing units.'
Living in Cape Town is particularly pricey, with average property sale prices increasing from R1.6m in 2020 to R2.1m in 2025. In contrast, Johannesburg's prices have remained relatively flat over this period, staying on average between R1m and R1.5m, according to property analytics firm Lightstone.
Soaring rent
'Obviously the higher capital values mean that people who buy for investment require a higher nominal return, which means the rents go up,' says Kriek. This has been happening in the Western Cape, where the PayProp Rental Index shows 9.6% year-on-year rental growth and average monthly rents reaching R11,285 in Q1/2025 – significantly higher than Gauteng (R9,201), KwaZulu-Natal (R9,170) and the Eastern Cape (R7,330).
Rent control
Calls for rent control in Cape Town are getting louder. The idea is to cap rent increases to make housing more affordable. However, this may win populist votes and provide short-term relief for tenants, but won't fix the housing shortfall, says Kriek, pointing to unsuccessful rent control in cities like New York, Berlin, Stockholm or Tokyo. While rent control impacts the entire property market, it ironically hits hardest in the low-income band – those who should benefit the most.
'Rent control leads to underinvestment and poorly maintained units as landlords have limited incentives to maintain or expand their rental stocks because their profits are capped,' says Kriek. Another problem is misallocation, where some tenants will stay in rent-controlled units even when these no longer match their needs. By blocking the units for people who genuinely need them, they create an inefficient housing distribution that worsens the undersupply further.
'Rent control is the most efficient technique currently known to destroy a city - short of bombing," says Kriek.
Making small units profitable
There's ample private-sector money available to invest in rental housing, says Kriek but government needs to change the market design that makes this segment unprofitable. Small units are more expensive per square metre to build – and sell – than larger ones.
In addition, he says, tenants in affordable units (sub-R7,000 rent/month) are more frequently in rent arrears than higher-income tenants as they feel economic pressure harder. The number of 'squatting' tenants (who haven't paid rent for three consecutive months and are still occupying the property in the fourth month) is also increasing: the TPN Squat Index rose from 3.48% in Q4/2023 to 3.71% in Q2/2024.
Legal protection of landlords
The balance of power is unduly tipped against landlords and needs to be levelled, says Kriek. 'The law that governs evictions, the Prevention of Illegal Eviction and Unlawful Occupation of Land Act (PAI), isn't fit for purpose.
"It was designed to evict land squatters but due to poor drafting it also applies to the eviction of tenants who don't pay their rent or refuse to move out when legally required. This makes the process unnecessarily expensive, time-consuming and open to exploitation.
'Historically, eviction is a sensitive topic in SA,' concludes Kriek. 'But if we don't allow strict enforcement of payment obligations, then landlords won't invest in rental housing, which is the easiest and the quickest way, using the least amount of government resources, to fix our housing undersupply.'
All rights reserved. © 2022. Bizcommunity.com Provided by SyndiGate Media Inc. (Syndigate.info).
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