- 1. Historical Background
Public Rental Board was established under the Housing (Amendment) Decree number 12 of 1989 to take over the rental business entity of the Housing Authority and to manage the Public Rental Housing program on an economic basis without incurring a loss. Under section 34 of the Amendment Decree, the Board is principally required to operate on a non commercial basis by inviting Government to make good the shortfall (where the assessed rental applicable to a tenancy represents a disproportionate percentage of earnings) by way of subsidy.
The Board is empowered to extend the Public Rental Estates.
On the 27th day of March 1997 Public Rental Board was declared as a Commercial Statutory Authority (CSA). Being a commercial statutory authority makes PRB also responsible to the Minister for Justice, Electoral Reform, Public Enterprises & Anti Corruption.
At the inception of the Board, a total of 27 estates comprising 1,753 rental units were transferred from Housing Authority. Currently the Board manages 1,375 rental flats: (836) in central, (395) in western and (144) in northern divisions.
The entity’s function is to provide rental accommodation at prescribed areas, undertake assessment and collection of rents from tenants and also to promote home ownership to tenants or others. Non-commercial objective of the Board is to provide economical rental benefits to tenants. Furthermore, at times the Board through Government directive is asked to dispose rental properties.
Under Section 90 of the Public Enterprises Act, PRB is required to prepare and submit a draft Corporate Plan to the Minister for Justice, Electoral Reform, Public Enterprises & Anti Corruption and Minister for Local Government, Urban Development & Housing at least three months prior to the commencement of the financial year. For the purpose of the Board, its financial year covers the period from 1st January to 31st December.
- 3. Organization Structure
Public Rental Board operates under the Board of Directors appointed by the Minister of Local Government, Urban Development & Housing. It is organized into three divisions namely Executive, Properties and Finance & Administration.
The Executive Department is tasked with overall responsibility of guiding and leading the organisation as directed by the Board. It is also tasked with acquisition of land for future developments.
The Properties Department has responsibility for the organisation’s core business of rental operations. In addition, the department also undertakes maintenance of existing and construction of new flats.
The Finance & Administration department controls the financial, administration, human resources and information technology functions of the Board. It is also tasked with planning the corporate governance responsibilities of the Board.
The organisation currently employs 42 established and unestablished workers in the Board’s offices at Lautoka, Labasa and the head office at Raiwaqa.
- 4. Strategic Issues
Moving forward, there are issues that need the Board’s urgent attention and these include the following:
- Technically insolvent status of the Board
- Complete vacation of Four Storey Buildings
- Transitional Housing Policy
- Development of Rental Units
- Merger with HA
- 5. Technically insolvent status of the Board
The Board was technically insolvent at inception; this status has continued over the years to the present and is expected to continue for the duration from 2008 to 2012 planning period.
Going forward, the best option is for the transfer of funds which is balance of Housing Authority loans and also funds for the commencement of operations of PRB, to government’s books. The Board would anticipate this transfer to be treated as a paper grant rather than equity Investment because PRB will not derive any future benefit if the said transfer is treated as equity investment.
PRB requires government equity that could be channeled in the form of new project funding that increases the organization’s profitability while still being able to fulfill its mandate to provide rental accommodation affordable to workers.
- 6. Sale of Rental Units
In line with government’s policy of home ownership, the Board commenced sale in 2003 of units at Grantham road and Kia Street estates. Out of 96 totals, about 86 tenants have completed sale transactions and are now home owners.
In accordance with Government’s policy and Cabinet Decision CP (03) 434, the Board is expected to complete sale of its Grantham and Kia estate properties as follows:
- 72 units at Grantham Road by December 2008
- 24 units at Kia Street by December 2008
Forty-one ex MH tenants at Grantham Road estate have been presented offer letters at a sale price of $11,606.00 without arrears in accordance with the above Cabinet Decision. Thirty-one tenants at Grantham Road estate have also been offered at a sale price of $16,808.75 plus arrears. Seven properties at Kia estate are being sold to ex MH tenants excluding land value. The sale prices are below market value but in accordance with Cabinet Decision. PRB will forego $1,038,654.00 profit as a result of selling these properties below market value. The sale of these flats will definitely decrease the rental revenue of the Board.
- 7. Status of Four Storey Buildings
In the 1990s buildings components have started to show weathering limitations like concrete railings becoming detached and falling down. This issue was highlighted in the media and which prompted PRB to commission a study. Submitted report said that subject buildings were not able to withstand earthquake situation. The report was submitted to government but unfortunately it was shelved.
A former minister for Housing picked up the report in 2003 and brought it to the attention of the board. The board commissioned another study in 2003 only to confirm the earlier report that the buildings are below acceptable standard in an earthquake situation. This report was also submitted to government for a decision because cabinet had earlier decided that the buildings were to be demolished and tenants resettled elsewhere. The Board is in no financial position to handle this issue single handedly.
In dealing with the matter, it was decided to look at some short term measures to be done. It was decided to treat the buildings through upgrading rather than demolish. Another study was done with report saying the same things reported earlier and also mentioned the costs of temporary strengthening of buildings. As could be seen, there was nothing done. We have however advised tenants of the situation and asked them to move out. They have also been told not to pay rents from March of 2004 because we were advised by solicitors that we should not be charging rentals if we have advised tenants to move out.
The Board is foregoing $265,000 in rental income yearly from the said buildings and while expending approximately $50,000 in operational costs in the maintenance of estates.
The latest report concerning Raiwaqa and Raiwai 4-storey tenants is as follows:
Public Rental Board has valid 99 year leases over land at Raiwaqa and Raiwai. Tenants were given two year tenancy agreements with PRB; these tenancies were not renewed at expiry in 2003 as the Board was in the process of relocating tenants away. The four storey buildings have a total number of 344 one room and two room flats.
Tenants were advised in 2003 to vacate their flats because of the structural deficiency of buildings in an earthquake situation.
Consultant Engineers’ Reports
In 1996 AWH Tierney engineering consultants was commissioned by the PRB board to undertake an engineering assessment of the structures. The resultant report highlighted various deficiencies structurally and non-structurally however confirmed that the structures are vulnerable to seismic loading on the longitudinal direction. This report was tabled in Cabinet in 2003 whereby Cabinet decided to relocate all tenants away and demolish the structures.
In 2003 Public Rental Board, Board of Directors again commissioned the engineering firm of Sinclair Knight Merze which confirmed the AWH Tierney report, that the structures are vulnerable to seismic loading on the longitudinal direction.
In 2004 the PRB Board again commissioned the engineering firm of Houng Lee Kaba Jacobs to look at upgrading the structures and also look at the two earlier reports. The cost of upgrading was estimated at more than $3m. The Board then decided in 2004 that the tenants must vacate the flats and structures demolished.
In March 2004 the Board ceased all rent charged to the 4- storey flats thus incurring a loss in rental revenue of around $0.265m annually.
The board also exhausted all notices for tenants to vacate including series of meetings with the community and on a one to one basis advising them of risks to lives.
Incentives for Relocation
Public Rental Board saw that the notices given to tenants to vacate was ineffective thus in 2005 offered four options to encourage tenants to make decision. The options were as follows:
i) HART relocation for financially disadvantaged tenants with maximum benefit of $750
ii) Relocation to other PRB estates with maximum benefits of $1,000
iii) Home ownership with HA with maximum benefit of $5,000 for materials and labour for construction of standard design houses including 50% subsidy from HA towards land costs.
iv) Relocation to village with maximum benefit of $5,000 towards building materials and transportation costs to tenants respective villages.
The above incentives were not favorably considered by tenants.
The Board of Directors in April of 2008, because more than half of tenants continued to stay, decided as a last option, to give cash incentives; otherwise forcefully remove tenants through the Court system if they refuse to move out. The cash incentives range from $500 to $3,000 depending on the weekly household income of tenants.
Calculations of the above cash incentives were based on a household income survey conducted by the Board in March this year. Findings of the survey revealed that some nine tenants received income of more than $300 per week; these tenants were asked to vacate their flats without any cash incentives.
The Board continues to plead with tenants to make the decision to move out early because of the huge risks involved in their continuing to occupy the four storey flats. As of Fiday 6th June, 2008 149 families continue to stay; 45 in Raiwai and 104 in Raiwaqa. The Board however has targeted that all flats be vacated by December 31, 2008 to make way for demolition and new low cost housing to be built on the two sites.
The Board gives assurance to the relocated tenants who are employed that they can apply for allocation in the new buildings that will b constructed.
- 8. Transitional Housing Policy
The Board has never been able to carry out its policy of transitional housing. Tenants have continued to stay for many years and with the perception that their present accommodation is an end in itself.
In the absence of any firm transitional housing policy the Board will continue to face difficulties in promoting transitional housing. On the whole, a contributing factor towards low achievement of transitional housing is the continuing enjoyment of rental subsidy and historical rents by tenants. Furthermore, there has been the lack of housing development appropriate for PRB tenants through HA. This shortfall however, has been resolved through improved communication with stakeholders to ensure continuing availability of housing lots for tenants who may be ready for home ownership. Some formal understanding between the major housing providers namely Department of Housing, HART, HA and PRB will go a long way in ensuring consistency with respect to provision of housing for the public.
- 9. Social Cost
Over the years the Board has been incurring substantial social cost by not charging market rent. This cost has never been reflected in its financial statements because it was not quantified. In 2004 the Board commissioned KPMG as consultants to determine the market rent and quantify social cost. KPMG has quantified social cost at approximately $725,000 per year. Subsequent report has been forwarded to respective ministries.
The Board has implemented charging market rent from 2005. This will ensure the Board accounting its full income potential in its financial statements and meeting its obligations as a commercial statutory authority.
The increase in rental will be subsidised from the $1 million rental subsidy allocated to PRB by Government. The Board is also expected to commission another study on subsidy distribution to eliminate the discrepancies and unfairness of the existing criteria. At the completion of this study, the Board will progressively transfer payment of market rent to its tenants, hence reducing Government’s assistance to tenants. The increase in market rent is also expected to promote home ownership and transitional housing.
The Board will also undertake studies to identify social cost associated with providing rental accommodation at outer islands and unprofitable locations.
- 10. Rental Subsidy
Rents received by direct deduction from tenants employers amount to 60% of total whereas the balance of tenants pays rentals at PRB offices or at agencies of the Board. Tenants are reminded of their obligations in the timely payments of weekly rental. Their timely rental payments provide the much needed revenue for PRB to meet the maintenance costs and also generate funds for expansion of its operation in addressing rental housing demand.
The financially and socially disadvantaged tenants of the Board have continually received rental subsidy from Government. The Board has been receiving on average $360,000 subsidy on an annual basis until 2001 to assist low income workers as a social obligation and in accordance with section 34 of the of the Housing (Amendment) Decree No. 12 of 1989. This subsidy was increased to $694,000.00 in 2002 and $1,000,000.00 from 2003 to date. The Board anticipates continuing receipt of the increased subsidy in future in order to support tenants either through rental subsidy or through capital subsidy.
Withdrawal of subsidy, in its current state, the Board will be left with no option but to charge tenants the full rental amount which ultimately in many cases will unbearably lead to eviction.
The subsidy distribution since 1999 has been based on the following criteria;
Criterion 1 – Household Income (HI)
Tenants with gross Household Income (HI) below $125 per week shall be considered for rent assistance.
Criterion 2- Subsidy Rate
To ensure that more assistance is directed to disadvantaged tenants the following differential rates of assistance shall apply:
Income Range $0 to $64pwk, Tenant pays rate of 5%HI level
Income Range $65 to $80pwk, Tenant pays rate of 10%HI level
Income Range $81 to $100pwk, Tenant pays rate of 15%HI level
Income Range $101 to $125pwk, Tenant pays rate of 20%HI level
Income Range $125 to $150pwk, Tenant pays rate of 25%HI level
Criterion 3- Subsidy Allocation
To ensure that the most deserving tenants receive full subsidy, the annual allocation shall be applied commencing with low-income range upwards.
- 11. Development of Rental Units
The completion of 43 two-bedroom rental units at Macfarlane in 2003 is part of PRB’s corporate target to develop 100 rental units annually.
Twenty seven one- bedroom rental units have been built at Kia Street Raiwai in 2006. The projects are being funded by PRB through its investments funds. The Board proposes to develop new rental accommodation to meet the market demand for low income earners in the next five years.
- Raiwaqa ex-sewerage site
- Redevelopment of Kalabo site
- Redesign the build at existing Raiwaqa and Raiwai site
- Namaka vacant site
- Savusavu vacant site
Because of PRB’s financial position, development earmarked for 2006 onwards will need funding from external source.
- 12. Maintenance of Properties
The 7-year General Maintenance cycle was satisfactorily completed in year 2006. Urgent Maintenance is undertaken as and when the need arises.
- 13. Rental Housing Demand
The Board currently has 3,000 application waitlisted, 90% of applications are from the central division where there is a great demand for rental accommodation. There is also demand in Nadi.
- 14. Community Halls
Sixty percent of PRB’s estates have community halls. Community halls play a vital role in estates namely
- Used for meetings between PRB and tenants
- Pre-school sites for children
- Places of worship
- Meeting places for tenants
PRB plans to build 3 new community halls in 2008.
Public Rental Board