Out To Lunch: The landlord bill should have considered property values

By Denis Jjuuko

If you regularly watch Ugandan television or listen to local radio, you would notice many jokes regarding the relationship between landlords and their tenants. Stories are told of landlords who have to remove an iron sheet during the rainy season to enforce rent payments or those who charge their tenants extra fees because their children (tenant’s) over use the pit latrine!

It is a real celebration when one buys or builds a house even when it makes zero business sense. And it is double celebration if one builds houses for rent in Uganda. It gives one bragging rights and a sense of accomplishments even when the return on investment is so low. It is who we are.

So it was natural that a bill was passed by Parliament to harmonize the relationship between landlords and their tenants. It is the right thing to do.

Although some clauses in the bill might be controversial and contentious depending on who you ask, some have been sensationalized and some landlords keen to continue collecting rents in US Dollars are unhappy. However, there is something that is probably more important than whether a landlord should access the houses they rent out or not.

Clause 23(1) says “the rent payable for any premises under a tenancy shall be determined by mutual agreement of the parties to the tenancy.” I find this problematic. If we want our real estate sector to grow, there should be a formula on how landlords determine rent. It can’t be mutual agreement between landlords and tenants. How come when it came to land tenancy, fees (obusuulu) were set?

Uganda’s real estate sector is probably one of the most distorted in the world. Houses of similar sizes and same quality in the same neighborhoods attract different rental fees or prices when buying. Everyone charges what they want.

It is more expensive to buy a house in Kololo than in many leafy suburbs in proper global cities yet there has been almost no regulation. This creates a market that is less attractive to investors because no one can tell when investing how much money they will actually get. Landlords with access to free money through corruption can easily undercut everyone out. Greedy landlords can charge as much as they want.

Uganda’s housing shortage is huge currently standing at 2.1 million units. With a population growth rate of 3.2% per annum, there are more housing units needed but the costs of construction are high. Land prices are determined by which car the buyer drives. Why should a 50×100 feet size plot of land in an undeveloped rural Kira or Kigo cost over Shs100m?

If you ask value reports of the worthiness of a property from three valuers, each will come up with a different figure. Buyers and investors in real estate are left to speculate on the actual value of the property depending a lot of times on illiterate land brokers. Land brokers will promise a paved road or point at an unoccupied hill and claim a Mzungu bought it and has plans to extend electricity and water mains. The rates by government valuers are also dependent on these land brokers.

There must be a systematic way to value properties so that we know how much a property is really worth. Government needs to develop a platform where if I key in GPS coordinates of a certain property, I get to know its base value or the value of land in that particular area.

Then in the bill, it should be made clear that rent is determined by the value of a property. They could say that annual rent should not exceed 10% of the value of the property. That way rent seekers will invest in other sectors and enable genuine players and indeed ordinary people afford to acquire properties.

Proper valuation will create a significant impact in urban development. Landlords fearing that their properties will lose their base value will no longer create slums in the name of ‘housing estates’ like they are doing today.

The writer is a Communication and Visibility Consultant. djjuuko@gmail.com