By Maryna Botha, Director STBB

To include affordable units within new developments is a consideration that is intensely debated in South Africa. While it is relatively well-developed in other jurisdictions, such as the United States, New Zealand and some European countries, local development of inclusionary housing models is still in an introductory phase.

Both the City of Johannesburg and the City of Cape Town have kickstarted planning to accommodate inclusionary housing to resolve (i) existing inequalities in housing offerings; (ii) the housing demand from low-income households; and (iii) the lack of social mix in race and income across these jurisdictions. Their targets are to increase housing supply for the lower income earners, create a mix of different income groups in new developments and to provide affordable housing units in areas close to jobs and amenities.

However well intended and deliberated the municipal policies for the promotion of inclusionary housing may be, these alone are insufficient methods by which to achieve the required outcomes because they are not nuanced enough to reflect the various faces of ‘low-to-moderate-income’ residents within new developments. According to industry role-players, a one-size fits all policy approach risks failure.

Reaching the ideal outcome

The housing crisis in South Africa presents factually in the numerous poor (mainly black) households who do not have access to adequate housing, much of which is ascribed to spatial architecture and settlement patterns that were a feature of apartheid policy, resulting in poorly located and unaffordable housing.

  • From a legal point of view, inclusionary housing is a method of housing delivery that entails requiring private housing developers to ‘dedicate’ a part of their housing developments to the low-income segment of society. In so far as this is obligatory, it impinges upon the property rights of developers as they are required to forego a certain portion of their (expected) earnings that would otherwise accrue from building at market rate. However, policy reasons behind this limitation on property rights are sound and would not constitute an arbitrary deprivation of rights under the Constitution.
  • From a practical point of view, role-players are increasingly arguing that inclusionary housing policies should not only focus on prescribing minimum percentages of affordable housing units to be included in developments. For example, some have suggested that since the purpose of an inclusionary housing programme is to increase the number of units built for low-income categories, and promote the integration of socio-economic classes, a prescribed percentage of units in a new development must also be financially accessible to low-income earners.

Where units for the low-income bracket are provided in an upmarket area, generic policies often underestimate the impact of adequate infrastructure in the environment. The inclusionary housing outcomes cannot be met where accessibility to jobs, services and social infrastructure are absent. Low-income households are unlikely to be able to afford living in the same environment as households of middle-upper income bracket in terms of costs for schools, public transport, shopping, or even recreational facilities.

“Affordability should be assessed in relation to the median income of an area as well as the median value per square metre.”

Developers argue further that imposing a blanket requirement that 20% or 30% of a new development must be earmarked for integrated housing, often works arbitrary and may be unrealistic, depending on the project. The inclusionary housing allocation should be more nuanced to reflect the viability of the area for the required integration. Whilst some new developments are applying such a model, also in Cape Town, developers state that the model is based on the perceived needs of the local market, which may mean that the development caters primarily for the middle-income market and not the low-income market.

In addition, it is argued that the definition of ‘affordability’ should differ from city to city to reflect the price gradient of housing across cities. Affordability should be assessed in relation to the median income of an area as well as the median value per square metre. For example, it goes without saying that the cost of land and of providing affordable housing in well-located areas like the Cape Town CBD, are different from those in, for example, Port Elizabeth, which has a significant bearing on levels of affordability. While costs and interest rates increase per annum, no automatic review is provided for to inform the classification of income bands in need of some form of assistance.

Whether the pending inclusionary housing policy will advance meaningfu access to residential opportunities for low-income earners, is yet to be seen. The feedback from the industry for local authorities to remain flexible in their approach, appears to reflect a sound consideration, considering the myriad scenarios in our South African landscape.

STBB offers a variety of legal services where our expertise and friendly approach allows us to deal with every legal matter in an effective and efficient manner ensuring a pleasant experience for our clients.

In the property sector we cover:

  • Property law: We offer benchmark services for both retail and development property transactions. We are reputed for our teams of seasoned property law practitioners who share an extensive set of skills to smoothly address every aspect of property law and land development transactions.
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