Joburg’s housing shake-up
Joburg’s plans for a more inclusive city involve a 30% ‘affordable’ component in new housing developments
By 4.30 each morning, office manager Joe Mthembu is on his way to work: a 20-minute walk to the taxi rank, a 30km minibus ride, another 1km walk, and another 20km taxi ride.
It’s 7.30am by the time he reaches his job in Morningside. The commute costs him about a third of his salary each month — and that’s not counting lost time.
This is the reality for many South Africans, who remain saddled with the spatial legacy of apartheid. They live far from places of employment and economic opportunity, a historical hangover that entrenches social and economic divides.
For the City of Joburg the solution, in part, lies in its inclusionary housing policy.
Approved by the council on February 21 and set to take effect on May 22, it stipulates that all new residential developments will have to include an affordable component for low- and low-middle-income households (those earning less than R7,000 a month) or for "households that may not otherwise afford to live in those developments".
Reuben Masango, MMC for development planning, says SA has needed such a policy for more than 20 years. It’s also important, he says, given the "very limited mixing of households across the suburbs of Joburg both in terms of race and income".
"This framework aims to increase the supply of lower-income housing, create more of a mix of income groups … and create more affordable housing in areas that are well located," he says.
The policy requires that 30% of the number of residential units in new developments with upwards of 20 units must be set aside for inclusionary housing. Developers are given four options for compliance — each with its own set of incentives.
In the first option, the 30% affordable component may include rental units under the government’s subsidised social housing programme (medium-to high-density units, generally for those with a gross monthly income of R1,500-R7,500); units for sale under the government’s finance-linked individual subsidised programme (Flisp) for first-time homeowners grossing R3,501-R22,000 a month; or rental accommodation capped at R2,100 a unit in 2018 prices.
To offset this, developers will be granted an increase in the floor area ratio — the floor area relative to the size of the development plot — equal to the total percentage of the inclusionary housing component. This can be used to extend the height or coverage of the development.
The inclusionary housing component is counted over and above the allowable density, effectively increasing the permitted units per area.
For the second and third options, the affordable component is not limited by price so much as by size.
The second option, applicable in medium-density areas, envisages 10% of the residential floor area being set aside for the affordable units — at a minimum size of 18m² a unit and maximum of 30m².
In the third option, 20% of the residential floor area is set aside for units that are half the size of the open-market units, at a maximum 150m². Both options offset the affordable component by increasing the floor area ratio and density allowance.
The final option leaves it up to developers to make a tailored inclusionary housing proposal, in writing, for the authorities’ consideration.
Importantly, minimum design requirements are in place: all units must have the same outward appearance; they must share communal areas; and all but the social housing units must have a private bathroom, be a minimum 7m² of habitable space per person and be no smaller than 18m². The inclusionary housing units must retain their affordable nature in perpetuity.
Options 2 and 3 make for a differential understanding of "affordable" — one based on market mechanics. An official involved in drawing up the policy, who asked not to be named, says the idea was expanded after it was suggested developers would struggle to cost and rent out stock for R2,100 a month. The additional options allow for a natural price limitation based on unit size.
"This means that in an affluent suburb like Sandton an 18m² unit will be the cheapest unit — and considered inclusionary — compared with other units in a development," he says. "But that 18m² unit may still be more expensive than non-inclusionary units in Jabulani, Soweto."
He believes developers will buy into the idea to benefit from the higher densities they can secure, and resultant higher yields.
It’s a plan that seems to have worked for some. Stephen Brookes, CEO of Balwin Properties — the biggest developer of sectional-title apartments in SA — says his company has been building less expensive units alongside more expensive ones for years, and has attracted more customers as a result.
The indirect incentive of state support — through the social housing and Flisp programmes — may also prove a sweetener. Zandile Makhoba, head of research at real estate advisory firm JLL, says the subsidies almost guarantee that developers will get tenants for these units.
"The interest is high from all parties, but the policy’s implementation must be protected from corruption," she says.
Octodec Investments CEO Jeffrey Wapnick makes a similar point, warning that some parties may take out a lease, and then sublet the affordable component at a higher rental in a profit-taking exercise.
Not so, says Masango. Properties in the first option are regulated by the Social Housing Regulatory Authority, or developers must prove they have sold the unit to a Flisp recipient, or "the owner must provide an audited rental roll to the city each year to prove the units are inclusionary".
Similarly, Musah Makhunga, speaking on behalf of the Joburg Property Company, says lease arrangements are monitored under the inner-city rejuvenation programme, and a means test will determine eligibility.
As for the other options, the "invisible hand" of the market would seem to prevail as a regulatory mechanism.
But there are other issues. Some property watchers are waiting to see how the policy works in practice, but critics say building low-rental developments next to upper-end ones may prove more successful than mixing them.
"When you develop housing, you deal with perceptions," says Rob Kane, CEO of Boxwood Property. "It may be difficult to get wealthier people to buy or rent units in the same development as affordable units; they may fear crime could increase … Creating cheaper housing in a separate development using cheaper land … may be easier to pull off."
Anton Wessels, architect and urban designer at NewUrban, says middle-and upper-class South Africans are also largely unaccustomed to living in densified apartment blocks; most live in suburban houses. And, he says, the jury is still out on whether inclusionary housing has worked elsewhere.
However, he believes there’s no harm in any form of inclusivity.
"Without it, we’re stuck with the status quo, where we have concentrated poverty in selected areas, and concentrated wealth in others."
Property economist Francois Viruly similarly applauds the noble intentions underlying the policy. However, he believes the integrity of the ideal requires a great deal of political will.
"[Units] must remain affordable permanently," he explains.
"If strict controls do not protect the rights of owners or tenants, then we will see the wave of gentrification repeating another form of forced removals of the urban working class."
For Masango, the benefits extend beyond affordability. "As a city we can look at improving infrastructure when people are closer together — when important parts of Joburg are densified," he says. "People will live closer to work opportunities and we will achieve social cohesion."