May 262008

One of the baffling problems facing our local governments and development authorities is how to regulate the rights and obligations of the developers who construct and own housing schemes, plazas, high-rises and apartment buildings on the one hand and those who occupy them on the other. If you think this problem arcane or irrelevant, think again, for its solution concerns everyday urban life — things as unassuming as poorly maintained streets, unkempt buildings and poorly functioning utilities, things we interact with on an everyday basis — and touches all of us.

After a building developer has obtained permission to use land to construct a high- rise, he begins selling and leasing shops and apartments in the yet-to-be-completed building. By the time he’s done, he not only made a tidy profit, he’s also divested himself of his interest in the land itself. What this means is that if the faucet in your new apartment is keeping you up at night, you can’t call on the developer to come and fix it, for he’ll simply refer you to the section in your lease or sale deed where it says he’s not responsible for what he sold you. It’s also exactly the same excuse he’ll give you if you ask him to make sure things like the lift are working, or that the stairwells be kept clean and corridor light replaced regularly. Of course, I’m simplifying my point, and offer due apologies to the many scrupulous developers who stake their reputations on the quality of maintenance services they provide. However, this disclaimer also proves my point: beyond scruples there is nothing in our laws to provide tenants of apartments, plazas and high-rises with the clout to constrain unwilling landlords or developers to undertake and pay for services that they are obligated to provide. Informal neighbourhood or apartment communities pooling together to pay for security guards is evidence of the absence of any law or policy in this area.

One aspect of this problem raised its head in the aftermath of the Oct 5 earthquake and the tragic loss of life caused by the collapse of the Margalla Apartments in Islamabad. The Supreme Court, under Chief Justice Iftikhar Chaudhry, had taken notice of the plight of the victims of the collapse and had begun the process of compensation. That the case hasn’t progressed much since, the Judicial Crisis notwithstanding, is in part due to the fact that no one can agree on the basis of compensation. Our law — blessed may the Transfer of Property Act of 1864 be — is largely a 19th Century relic that belongs in a museum. It envisions proprietary rights as stemming from the ownership of physically ascertainable land or something connected to it. It’s a two-dimensional approach that has no way to deal with the ownership of an apartment which, on a legal plane, is technically the ownership of an identifiable cube in the air.

As the urban population increases, there is a commensurate increase in the demand for accommodation. Since our government’s achievements on the makaan front have never amounted to much, it’s been the private sector that has stepping in to supply the demand. With property prices ever on the increase, the most economical form of urban housing is increasingly becoming the apartment building. You may not notice this now, but you will soon enough. UN-Habitat estimates that Pakistani population is currently 35 percent urbanised, and that it will become over 50 percent urbanised in the next 10 years. Other experts disagree. Depending on how you define an urban area, Pakistan is already 50 percent urbanised. That isn’t the point, however. The point is that apartment living constitutes a major proportion of urban residential accommodation. And we’ve nothing in place to regulate it.

Why does this happen? Why haven’t we encountered this before? Why isn’t there a policy on something like this? After all, this isn’t a new problem? Congestion and a demand for housing is as old as our urban experience itself, but it has remained a relatively low-priority because of low-urbanisation. The reason it’s coming to a head now, the reason I’m writing about it is because an entirely new paradigm of urban demographics looms over the horizon.

I’m convinced the answer to some of these questions lies in our practice of urban rent control. Our urban rent restriction and control legislations act to freeze rent, save for periodic increments. Anyone who’s signed an apartment’s commercial lease knows this. Originally, the proponents of this “rent control” believed it was needed to protect the wave of urban immigrants that swept India’s cities during World War I. A war economy demanded massive relocations of labour, mostly to commercial and industrial hubs. These new immigrants needed safe accommodation and required protection from exorbitant rents and war profiteers, hence the argument for rent control. Incidentally, the same urbanising effect of war was felt in the US, the UK and most of Europe, and these jurisdictions also implemented rent control regimes for similar reasons.

That was then. Rent control is still justified on the same footing today. It’s still argued that without rent control tenants and occupants are at the mercy and whim of their landlords. As if. There is overwhelming economic evidence from all the jurisdictions that practice rent control that these justifications and arguments are not only mistaken, they are gravely mistaken, and that they lie at the root of our system’s inability to deal with everyday urban problems thrown up by things as unassuming as an apartment building.

The problem with rent control is that it distorts bona fide market forces. A landlord simply wants to make as much as he can by letting his property at the best available rent. There’s nothing wrong with that. But rent control is below the market level. This makes it popular with politicians: they can tell their constituents they’ve brought the cost of safe and respectable accommodation within the grasp of the common man. This may be so, but people lucky enough to find rent-controlled premises tend to want to remain in occupation at controlled rents. They become long-term residents at the expense of new residents, who are forced to find either the alternate rent-controlled premises (quite often of much worse quality) or, worse, uncontrolled accommodation. We see this in our cities every day. In Lahore, for instance, the rent paid by tenants of the Diyal Singh Mansion — one of the best locations along the Mall Road — is ludicrously low. And why would an old aunt continue to live in a massive apartment years after her family have left the congestion of the city if it weren’t for the fact that rent is cheap?

Being forced to accept rent at far below the market rate, in turn, affects landlord’s behaviour. No one wants to see the value of an asset drip away before their eyes. Some landlords try and make the most and scrape in an income by reducing their maintenance costs. Others ignore the obligation altogether. Some try to reoccupy the rented premises so that they can put it to more profitable use themselves.

Rent control, thus, acts to kill any landlord’s interest in investing in rental property. That we see buildings around us filthy and unkempt is evidence of the total lack of importance a building owner accords his responsibilities. This must change. The future of urban life in Pakistan can’t be this indifference. What we need is a system that allows the natural balance and relationship of a landlord and tenant to emerge. And this won’t happen unless we realise how important urban planning is and how far it reaches into seemingly unconnected disciplines.

The writer is an advocate of the high court and a member of the adjunct faculty at LUMS. He has an interest in urban planning. Email: ralam@nexlinx

Courtesy: The News, 26/5/2008




 Posted by at 6:48 am

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