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Feasibility analysis in the works for City’s proposed inclusionary housing policy

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The demand for well-located affordable housing is acute in Cape Town and in cities across South Africa.

With only about one in four households in Cape Town able to afford an entry level house of R600 000 it is clear that an inclusionary housing policy is one of the numerous means which could potentially facilitate and advance greater spatial equality. It could also assist in meeting the accommodation needs of households of workers such as our teachers and nurses, social workers, police officers and young professionals. 

Over the last couple of years, the City of Cape Town has been looking at developing more affordable housing interventions, such as the greater roll out of social housing and developing an inclusionary housing policy which aims to give direction to private sector partners for the future inclusion of affordable housing in their developments where feasible.

A feasibility analysis is expected to be undertaken from the beginning of next year. This will primarily inform a draft inclusionary housing policy.

Salient points

• Cape Town would be only the second city after Johannesburg to implement an inclusionary housing policy, although it is likely that the policy approach will be different due to the differing property markets of these metros

• Such a policy would look at enabling and encouraging more affordable well-located accommodation over the long-term close to transport, employment and economic hubs

• The City aims to have further extensive engagements with industry and sector stakeholders in the development of such a policy

• Background analyses to inform potential policy choices for an inclusionary housing policy has been done

• The upcoming Feasibility Analysis will look at the complex matters of development cost implications, incentives, target group income and levels of affordable housing contributions. The analysis will primarily inform such a draft policy

• It is expected that the feasibility analysis will be completed in the first half of 2020. It is anticipated that a draft policy will go for public participation at the end of 2020 or the beginning of 2021

The demand for well-located affordable housing is acute in Cape Town and in cities across South Africa. 

As part of the City’s overarching affordable housing programme, strides are already being made with the roll out of social housing opportunities in well-located areas while work is also ongoing on an inclusionary housing policy.

On 7 November 2019 City Council’s Portfolio Committee for Human Settlements noted a report on the background work that has been done for an inclusionary housing policy. The Committee gave its support for the work to continue.

Why is there a need for more affordable housing in well-located areas?

• An entry level house in Cape Town costs around R600 000. One would need an average monthly household income of R20 000 to afford this. Only 27% of Cape Town’s population would be able to afford this

• To date, the average sale price in Cape Town (up to the end of September 2019) for a house is R930 000. One would need a monthly household income of approximately R30 000 to afford this. Only 16% of households can afford this

• To date, the average sale price in Cape Town (up to the end of 2019) for a flat is R1 675 000 and one would need a monthly household income of approximately R54 000

An inclusionary housing policy is one of the numerous means which could potentially facilitate and advance greater spatial equality and assist in meeting the accommodation needs of households of workers such as our teachers and nurses, social workers, police officers and young professionals.

Many of these people are earning above the threshold for housing subsidies and in addition, it is difficult to afford well-located accommodation due to market pressure which makes accommodation unaffordable. 

Much work has been done already on this type of accommodation and we need to ensure that the programme is supported by developmental tools which assist developers to accommodate an inclusionary housing provision.

It is necessary to develop and adopt an inclusionary housing policy to provide clarity and the right incentives to developers who are very important stakeholders to help drive our vision of greater social inclusion in Cape Town. 

What is inclusionary housing?

It is when the private sector is incentivised to include affordable rental or ownership housing as part of market-rate developments. The affordable housing contribution could also be expressed in the form of fees in lieu, or a well-located off-site affordable housing contribution. 

This is a complex and intricate housing model and the feasibility analysis must provide us with the nuts and bolts of such a draft policy. It must also be noted that for such a policy to be implemented, it would require amendments to the Municipal Planning By-law.

Inclusionary housing implementation should not be viewed as the free provision of housing by the private sector. An inclusionary housing policy will also not produce affordable homes at scale, but the spatial justice imperative must be considered. The private sector development of affordable housing products will also increase the supply of this much needed type of accommodation.

It is about affordability in good locations over the long-term and finding the right incentives for the private sector developers, without whom this policy would not be able to be implemented.

We need to continue to remove or reduce barriers to expand housing provision that are within the City’s authority and ambit. We need to think about location, sustainability and integration against a backdrop of high urbanisation and pressure on resources such as land and basic services.

Inclusionary housing is not a silver bullet to solve the great need for affordable housing. A one-size-fits-all approach is also not the answer to our human settlements challenges. It is however part of the City’s longer-term strategic shifts when it comes to human settlements delivery.

We will look carefully at the financial feasibility of such a policy intervention as we need to ensure that development can thrive and that we adequately incentivise the private sector as this policy would be successful only if it makes economic sense for developers.

Next steps

  1. Feasibility analysis to determine policy choices (January to June 2020)
  2. After analysis and engagements, policy drafting could commence in July 2020
  3. Between July 2020 and June 2021:

• Proposed draft Inclusionary Housing Policy

• Proposed draft amendments to the Municipal Planning By-law

• Key targeted stakeholder consultations

• In-principle approval on draft policy and by-law by the relevant portfolio committees

• Draft Amendments to the Municipal Planning By-law and the Draft Inclusionary Housing Policy for public participation

• Amend policy based on comments received 

• Mayoral Committee and Council for approval

• Policy implementation begins

What’s the difference between social, inclusionary and Gap housing? 

Gap market housing

It is made up of households who earn between R3 501 and R22 000 per month, and do not qualify for a full housing subsidy. However, these households are eligible to a range of partial housing subsidies and programmes.

Inclusionary housing

Refers to conditions that are imposed on developers to include units within a development that are classified as affordable. 

Social housing

Refers to rental housing in well-located areas constructed and managed by the City’s social housing partners or Social Housing Institutions in terms of the  Social Housing Act, 2008 (Act No. 16 of 2008). 

The City and its partners have 28 social housing projects in the planning or construction phases and five social housing projects have been completed to date. The City is commitment to affordable housing, including Gap-, social-, inclusionary- and affordable market housing in and near urban centres aims to develop a greater spatial equality in Cape Town.

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