The future of inclusionary housing in Cape Town : A discussion on key drivers to accelerate delivery

 

Inclusionary housing can play an important role in diversify the groups who have access to housing across various well-located parts of Cape Town. 

DEFINITION

Inclusionary Housing : Housing developed by the private sector, where the project or development also makes available or introduces units which are more affordable for more diverse income groups e.g. lower than the median income of the neighbourhood, or are in a well-located location where certain income groups would not qualify for a loan or bond or below the average market value of properties in that area .(Source: Future Cape Town)

As part of Future Cape Town’s ongoing research and engagement into inclusionary housing, which included the 80:20 series, as well as a review of numerous international case studies the following key thoughts have emerged as points for further discussion.

CONTRIBUTE 

1) Focus on delivery while building policy
The focus of inclusionary housing is often too heavily weighted on policy development without identifying the  delivery mechanisms or “sweet spot” for unlocking inclusionary housing by the private sector in the short to medium term. The focus needs to be on the mechanisms to increase the delivery and supply of housing across diverse income brackets and the “bankable” incentives to which the private sector or private developers can act on.
An inclusionary housing policy alone – which may include great levels of complexity – alone is not going to achieve delivery of affordable housing delivered by the private sector in well-located areas, if it cannot adapt to changes in the market and development.
 
“If one considers that between 4 – 5 000 formal market houses are built every year across the entire city and that 50% of those are estimated to be single residential houses, only about 2 500 units (higher density, sectional title) may be “available” for inclusionary housing interventions. Then, taking into account, that the inclusionary component can only be viably applied to a percentage of the additional rights granted, even a successfully implemented policy is only likely to result in a couple of hundred inclusionary units per year across the city!”
 
While policy is essential to guide government officials (in particular where a Municipal Tribunal is involved) it does not deliver actual units on the ground within a defined period of time. In order to drive delivery, clear objectives and targets need to be established e.g. XX units over YY years in area ZZ.
 
Inclusionary housing policies should not necessarily focus on prescribing minimum percentages of affordable housing units to be included in developments (e.g. 20%) as these percentages are often arbitrary and may be unrealistic depending on the project. In some cases, where public land or land-based incentives are involved a much higher percentage could be achievable on-site or nearby.
 
“Its approach will make the planning system clearer, quicker, and more consistent. It will increase the amount of affordable housing coming through the planning system, and accelerate delivery for those who deliver more” –
2) Fast track pilot projects or development models which display innovation
 
Given the lack of progress in Cape Town in delivering any form of inclusionary housing over more than two decades, it is essential that the next few years are considered as a learning phase which sees government officials, communities and developers learn by going beyond business-as-usual and feeding these learnings into our policies. Over the next five years,  pilot projects that demonstrate innovation in the inclusionary housing space and deliver affordable housing, or a mix of affordable and open-market housing, should be given priority status and be fast-tracked with expedited planning approvals. Furthermore, publicly-released land for affordable housing should be considered test sites where partnerships are established with a diverse mix of developers and agencies.
 
“In a new set of guidelines, the Public Design Commission shows how a more equitable, resilient, and livable city starts with affordable housing”
 
3) Cooperation is required between government, developers, communities, banks and designers
The delivery of well-located inclusionary housing requires cooperation and negotiation between local government, developers, designers, banks and communities on a regular basis.
 
Developers tend to be risk-averse for various reasons, including the unstable political and economic context (and the need to report to shareholders), and in Cape Town, very few developers have plans to include more diverse income groups in their developments owing to the high cost of land, a lack of clear incentives (which can be realised immediately and factored into financing and development models) as well as a lack of decisiveness and clarity from local government on how additional development rights are granted.
 
There have been no clear terms of engagement with developers, communities and other groups about achieving a certain number of affordable or inclusionary units in a particular time-frame.
 
Local government itself, and its various departments and officials are often not aligned with an inclusionary housing agenda, resulting in red tape, barriers, delays and a wilderness of policy and regulations to navigate without support and awareness of the cost implications of delays for the private sector. These additional costs lower the viability of inclusionary housing projects, as a severe delay or high holding costs significantly reduce the incentive and viability of introducing more-affordable units into a project.
 
On the other hand, local government officials are not necessarily sufficiently informed about how property development works, including finance, design and the realities of building in the city. An intensive education programme for officials will provide a good foundation for developers and local government to understand each other’s positions and their needs.
 
Serious engagement is required on how municipal land use management should be set up so that it better aligns with the political priorities and socio-economic goals of a city. The lengthy planning and other regulatory processes are already a roadblock to the speedy delivery of housing.
 
Municipalities could also consider :
  • undertaking a significant proactive rezoning process of areas that show high potential for well-located mixed-use developments and where the inclusion of affordable housing units is a condition for additional development rights e.g. on the edge of high-density areas or areas zones for high density development
  • purchasing land in areas or precincts which show high potential to gain value over time
 
Banks also need to come on board by becoming more flexible and engaged in financing innovative projects that promote inclusionary housing. Bans should offer finance, on less restrictive terms, in cases where applicants are moving closer to work and spending less on transport.
 
4) Affordability needs to be defined more precisely

 The definition of affordable housing needs to be defined with some form of consensus reached between government, practicioners, developers and communities which could be revised slightly over time based on new information and learnings. A blanket definition of affordable housing tends to be used but this definition does not reflect the price gradient of housing across cities. Affordability should be defined in relation to :
  • in relation to the median income of an area and/or
  • the median value per square metre of bulk in that area and/or
  • in relation to the average market value of a property in that area.

To deliver inclusionary housing across diverse incomes, a definition :

  • based  on a fixed current market value e.g. R800,00o would required updating quite regularly given the current escalations and might not take into account the size of the unit or the cost of bulk per sqm in a part of the city
  • based only on social housing, or subsidy models may be restrictive and be too low of a base for affordability for every area in a city.
For example, how is “affordable” defined in well-located areas like the Cape Town CBD or City Bowl where the average price of a 1 bedroom is approximately R2.2 million ZAR and the average price of a 2-bedroom unit is R4,5 million? While costs and interest rates increase per annum, no review is being done each year that broadens the classification of income bands in need of some form of assistance, be it through the public or private sector.
 
It should also be acknowledged that cities in South Africa are different ; for example, land is much more expensive in Cape Town than other cities in SA, which has a significant bearing on levels of affordability.
5 ) Create a new, nimble management agency to allocate units and keep them affordable
 A new form of housing agency (municipal or outside of government) needs to be established that will manage the process to allocate affordable and inclusionary housing units to appropriate households and ensure that these units remain affordable in the long-term. Such an agency will be able to manage affordable housing that falls within already used definition and those outside of the Social Housing or subsidy-linked housing, which that are already managed through existing agencies.
Consideration should be given as to whether such an agency is located within government (managing both owner occupied and rental units) or if it is more efficient and cost-effective as an independent agency outside of government.
 

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Image Credit : Cover Image by Makeka Design Lab