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sustainability
Water and Real Estate – Making the Connection
For decades residential real estate developers and managers have worked within a given set of relationships between themselves , the municipality as service provider , the state as regulator and the investors whose primary interests they serve . That set of relationships has been based on a robust set of assumptions , so the decision-making process has become routine and institutionalised .
But what happens if the core assumptions change ?
Let us examine some of those core assumptions so that we understand the implications of any change that might happen . Arguably the absolute foundation of any real estate development is the assumption that the municipality will provide five basic services – roads , electricity , water , sanitation and refuse removal . This means a routine decision-making process each time a new development is launched , much like a checklist .
This changed when Eskom crashed and suddenly the assumption of assurance of supply ( AoS ) – the guarantee of a given quantum of energy delivered to a given entity at a given time and at a given price – was found to be flawed . After initial anger and then turmoil , adaptive responses came in the form of standby generator sets . So it is the AoS assumption that is critical to the raft of municipally delivered services that enable development to occur in the first place .
Now let us apply the AoS assumption to water . Here there are two major elements to be disaggregated – potable water and waste water . AoS for potable water is the guarantee of a given volume at a given pressure and a given quality at a known price at a specific time and place . We know that certain elements of this are no longer happening .
For example , the homeowners ’ association ( HOA ) of an estate located in Madibeng , a municipality known to be dysfunctional , pays the monthly water bill , but this does not get passed onto Rand Water , so the water pressure gets cut . Nothing the HOA can do will change this , because the bottleneck is the dysfunctional municipality .
Another example is the excessive chlorination levels in water from a municipality . The reason for this is the overloading of a bulk water plant that was never designed to convert sewage effluent into potable water . This bulk water plant cannot meet the legal specification for biological parameters , so those running the plant compensate by overchlorinating . While this kills the bacteria , it also creates a new health risk in the form of elevated levels of trihalomethane , a carcinogenic by-product of the decay of chlorine . In short , the attempt to manage one risk creates a new set of risks in an increasingly complex domino effect .
Yet another example is the management of sewage . A residential golf estate processes its own sewage , but is also under pressure to source alternative water for irrigating its fairways and greens . Next-generation technology now enables a very sophisticated plant to be installed that recovers all of the water from the sewage stream to be used safely as irrigation water . Advancements in disruptive technology include financing , so that this solution can be financed as operational expenditure rather than capital expenditure . This has major benefits for a residential estate where the words “ special levy ” typically trigger anger and consternation . In short , the AoS aspects that used to underpin the entire relationship between the developer , the municipality and the investor have changed .
This has left a vacuum in which HOAs are increasingly expected to replicate the core