Last month, Ndifuna Ukwazi launched litigation in the Western Cape High Court to advance inclusionary housing in Cape Town.
Some members of the public may be asking: what is inclusionary housing? Why do we need it? How does it work? Who can access an affordable housing unit? Also, how does it affect the development industry, the economy and investor confidence?
What is inclusionary housing?
Cape Town is a racially divided city. It is also facing a housing affordability crisis. The lack of racial and economic integration means that the best land is reserved for wealthy, predominantly white population, who can afford to live close to good jobs, schools, and hospitals. Increasingly, poor and working class families find themselves struggling to find affordable housing options in the areas where they grew up or close to their jobs.
This problem is not unique to South Africa. As a response to exorbitant housing markets, hundreds of local governments in North and South America and Europe adopted inclusionary policies to address the lack of affordable housing opportunities for poor and working-class households.
The notion of inclusionary housing emerged in the US in the 1970s and later in Europe. Inclusionary housing policies are implemented to achieve two goals:
1) Produce more affordable units.
2) Foster greater social integration.
Local governments adopted inclusionary housing in response to property booms to ensure that poor and working class families were not “priced out” of well-located housing in cities.
This works through the local planning system. When a developer applies for planning permission, the local administration would require a private developer to make an inclusionary housing contribution in one of three ways:
1) Reserve a fair portion of units for low-income households in the development;
2) Build affordable housing units on a near-by off-site development; or
3) Pay a fee to the local administration which it uses for affordable or other housing needs. This contribution is obtained in exchange for additional development rights and other incentives like fast-tracking processes.
Inclusionary housing usually occurs in “hot” property markets close to jobs and commercial activity. In the US, inclusionary housing was used to counter racist planning practices that excluded minority groups from living in white areas. Its policies ensure that low-income households are not excluded from living in good areas, close to jobs, good schools, health care and shopping malls. Thus, inclusionary housing is also used to foster social and economic integration and cohesion.
The global spread of inclusionary housing reflects the acknowledgement that local governments around the world hold private developers to a higher standard of public accountability.
Growing Interest in Cape Town
Inclusionary housing is one tool in a range of tools needed to mitigate against Cape Town’s dysfunctional and exclusive spatial design. Traffic congestion, high land and property prices and long and costly commutes on unreliable public transport continue to make Cape Town an unsustainable city. Added to this, the majority of people living on the periphery having to travel into the CBD every day are working class black and coloured residents.
There is growing interest in inclusionary housing among some private developers and the City. Private developers in Sea Point, Observatory, Paarden Eiland, Century City and Diep River have proposed these housing units as a way to comply with statutory requirements of spatial justice and equitable access to land for disadvantaged persons. The City has also done some research into a policy but has not yet formalised this process.
While there are some signs of inclusionary housing, private developers and the public need certainty. Which areas of the city will trigger an inclusionary housing contribution? What household incomes qualify as affordable?
What is a fair portion of inclusionary housing units?
Who will the beneficiaries of these units be?
Only the City has the authority to answer these questions. Once it adopts the housing policy, affordable units will start to be built by private developers. It will also encourage those private developers who may want to include affordable housing now but are uncertain of how it will work.
The more the City delays, the less likely private developers will include affordable housing in their developments. It is also more likely that private developers will wait for the adoption of an inclusionary housing before proceeding with developments. This impacts economic growth, job creation and investor confidence.
Why would a developer want to incorporate inclusionary housing in his development?
Inclusionary housing builds a more inclusive society. If this policy is adopted, there will be more units available to families earning below R18000 a month.
Children will have better access to schools. Research shows that children fair better when they grow up in mixed-income communities rather than high poverty areas.
Their parents will save 40% of household income used on public transport. There are evidently a myriad social benefits that result from this policy not just for adult beneficiaries but their children too. This has a positive contribution to addressing the legacy of apartheid.
Such policies offer a host of incentives to private developers in exchange for inclusionary housing, like: fast-tracking the application process, providing density bonuses so private developers can build higher, reduce parking requirements, decrease monthly bulk service contribution, or a bulk services infrastructure payment “holiday”. The benefits of reduced bulk service payments alone could potentially result in 29% off the overall cost of a unit. All the incentives benefit the developer and potentially result in faster returns on investments.
Evidence from localities where such housing policies have been adopted showed it aided long-term economic development by providing more disposable income for low to moderate income households. This will stimulate local economic growth.
An inclusionary housing policy should be designed with care to ensure that it does not chase development investment away from the areas that need growth.
A formal policy also ensures that there is development certainty and predictability, so that the public knows “the rules of the game”. It also allows private developers to use the additional cost of the inclusionary housing contribution to negotiate a fairer price of land, which is often inflated by sellers on the assumption that additional bulk rights will be granted by the City. This will likely result in a reduction in land values making development more viable in the long term.
In conclusion, inclusionary housing is a fair trade between private developers and the real and urgent needs of spatial transformation. In exchange for the rights to build, local governments require private developers to contribute to community needs.
* Jonty Cogger is an attorney at Ndifuna Ukwazi Law Centre.
** The views expressed here are not necessarily those of Independent Media.