SA's municipalities and housing authorities have thrown away the opportunity to buy thousands of inner-city flats and provide permanent housing for low-paid workers by not taking advantage of cheap flats in inner cities over the past few years, says Neville Schaefer, CEO of Trafalgar.

Schaefer says that the prices of inner city flats collapsed as management of these areas broke down and banks withdrew lending because of massive defaults on home-loan payments.

Authorities could have bought flats in inner Johannesburg, Durban and Pretoria as well as in other cities over the past seven years for as little as 5% of the cost of building them.

"Instead, the poor will be forced to the fringes of the major cities as their flats are rapidly gentrified and rents rocket," says Schaefer.

He says it was also a unique opportunity to create cities with permanent diversity of residents, one of the primary aims of the "compact city" objective of the Development Facilitation Act.

Schaefer, who is also chairman of the Residential Property Owners Association, says now that inner cities have been identified as the next great lifestyle and buy-to-let investment opportunities, buying has started and prices are rising.

"The days when you could buy a one-bedroom flat in a wellrun block for R15,000 are over," he says.

"Banks are extending their lending closer and closer to the inner cities and in a few years those same flats will cost more than R100,000."

But Jonathan Smith, director of property researchers and strategists Courtwell Consulting, disagrees.

He says Schaefer's comments could be interpreted too simplistically, because if social housing organisations had transformed central business districts into low-cost housing estates they could have been lost to rejuvenation and urban renewal forever by becoming no-go areas in terms of commercial activity.

"This would have exacerbated decentralisation and not necessarily improved the living standards of the poor," Smith says.

He says a far better solution would be to encourage the development of well-controlled lowincome housing estates such as envisioned in the Development Facilitation Act.

He says urban renewal of the central business districts should focus primarily on commercial rejuvenation so that these areas can once again become centres which people regard as a place of work.

Smith says properly planned and executed residential developments surrounding Newtown are a better example of how housing estates should be conceptualised and implemented.

"Housing of the very poor is difficult, and not a profitable industry to be in. As difficult as this may be for South Africans to accept, it will always remain the responsibility of government to promote the construction of housing for the very poor.

"One should never assume that the private sector would take direct responsibility for this, although they should be encouraged to form private-public sector partnerships."

Property consultant Niki Vontas says the idea of acquiring flats for 5% of the value is a "totally wrong process and wrong attitude". He says: "The idea in terms of housing in SA is to empower people to have access to capital in order to acquire decent quality accommodation. The suggestion of Mr Schaefer is like wagging the dog with the tail."

Vontas says the right thing to do is for financial institutions to create access to capital for a growing middle class so that such people can acquire quality accommodation.

"If the municipalities had purchased all these flats, it's debatable whether this would have provided any accommodation solution for people. The role of the municipality is not to be property owners. They are there to work for the benefit of the population at large and provide a public service."

Vontas says the response to the accommodation requirements of the country should not be "cheap and run-down accommodation".

"Also, if the municipality owns the building, are they going to pay rates to themselves?"

National housing department spokesman Mandla Mathebula says its not government policy to buy property to accommodate people. Instead, government assists those who want to buy properties.

"In the case of blocks of flats in the Johannesburg inner city, we've assisted some section 21 companies or housing associations for example, the Johannesburg Housing Company in purchasing quite a number of blocks of flats, also in Hillbrow, which were deteriorating.

"These housing associations have refurbished buildings accommodating people with low incomes.

"We've been especially targeting inner city areas as part of our urban renewal programme," says Mathebula.