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Township micro-developers can help housing crisis

A view of Cape Town from Du Toits Kloof Pass. Picture: Leon Lestrade. African News Agency/ANA.

A view of Cape Town from Du Toits Kloof Pass. Picture: Leon Lestrade. African News Agency/ANA.

Published May 29, 2022

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MEMBERS of the Western Cape Property Development Forum (WCPDF) have called on the government and financial institutions to heighten efforts to stimulate the growth of micro-developments to address the affordable housing crisis.

Development Action Group (Dag) Project Coodinator, Chuma Giyose has called for reforms of the municipal legislative framework if micro-development was to succeed in helping solve affordable housing need. Picture: Supplied

The calls, made at the organisation's conference this week, come in the wake of government's failure to speed up the provision of houses for the poor.

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In the city alone, almost 500 000 people are on the housing waiting list.

The conference, which brought together property developers, architects, engineers, quantity and land surveyors, town planners and the construction industry, heard that micro-development in the city's townships was mushrooming at a fast pace but needed support from the government and financial sector.

Researcher Robert McGaffin says the phenomenon of rental stock units in the townships was growing at a fast pace. Picture: Supplied

Government subsidised housing would not be able to meet the growing demand evinced in the increase of backyard dwellers, informal settlements and a need for decent affordable housing, the conference heard.

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The Development Action Group (Dag), an organisation that has been working with citizens on land and housing issues, called on the government to "do more" to help scale up the provision of affordable rental housing.

The organisation called for a reform of the regulatory framework and the introduction of incentives to help the sector meet the affordable housing needs.

It also said in the city, no new public rental units were being built in the townships.

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Double-storey rental units by micro-developers have now become a phenomenon in townships such as Delft South, Masiphumelele, Dunoon and Khayelitsha.

In 2021, Dag commissioned the Human Sciences Research Council (HSRC) to conduct research on how municipalities could help regulate and form the township micro-development sector.

Dag project coordinator, Chuma Giyose said the small scale rental sector offered a wide range of benefits to help with post-Covid-19 economic recovery.

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Giyose made a distinction between the micro-developers in the township, and said some of the affordable units were provided by homeowners who built rental flats on their properties on a once-off basis.

The other group was entrepreneurs who purchased pieces of land and developed affordable rental units in several areas.

Giyose said micro-development was largely influenced by the regulatory framework of local governments, including policies and "bureaucratic systems“.

He said despite resolutions taken by local government to support micro-development, township developers were discouraged to obtain planning commission due to the associated lengthy costs.

Micro-developer, Lisolethu Ntoyakhe, ventured into the small-scale rental sector in Khayelitsha to provide decent affordable housing. Picture: Supplied

"Our study showed that a 12 unit development in Ilitha Park, Khayelitsha, the onerous regulations had huge cost implications, " said Giyose.

A fully compliant development was 250% more expensive to construct than one that did not meet all those regulations, he added.

"So in essence, the huge costs are incurred through efforts of meeting compliance. The building and zoning applications can also take up to eight months to be approved and these also cost money, up to R50 000.

"Incentives are required to support the sector, especially around the process of planning overlay zones," said Giyose.

He also called on municipalities to introduce "one-touch/stop units"  that would act as central hubs where developers would gain assistance.

Researcher at the Urban Real Estate Research Unit (URERU) Rob McGaffin said the emergence of micro-development was due to the fact that it was offering a housing solution and delivering it at an affordable level and scale.

He said Dunoon, with its "double-storey" rental buildings, became a "sought-after" area due to its proximity to industrial areas and farms.

But McGaffin said township micro-developers also managed to crack the value versus cost challenge.

"The micro-developers are getting this right and the units are rented out between R2 000 and R3 000 a month and are generating yields in excess of 20 to 25%," he said.

McGaffin said the enterprises were also addressing the transformation in the property development sector, creating employment and an army of black entrepreneurs.

"In one development site in Khayelitsha, 16 people were employed. This translates to local employment and contributes to the economy," said McGaffin.

He said one of the reasons why micro-development was successful was because the developers managed to use small spaces of between 12 and 15 square metres efficiently, their skills base grew all the time with each development and this also resulted in efficient designs.

Another player who has conducted research in the sector, John Spiropoulos said most of the township's micro-development was financed through selling personal assets such as vehicles, loans, credit cards and savings, he said.

Spiropoulos said on average eight units were constructed per development and if this could be replicated at a fast pace it could help provide housing solutions.

"People are building all the time. There is a demand in the townships. The properties are valuable, they support families, education and consumption," Spiropoulos said.

He also called on finance institutions to do more to support the micro-developers.

"We need more. If you think there's risk, go out there and have a look at what the character of the risk is and how to manage it," said Spiropoulos.

The tenants were usually single household families, in the age group of between 25 and 35 years-old and had regular employment and income, it was said.

One of the micro-developers and chairperson of the newly formed Township Development Forum of Western Cape (TDFoWC), Lisolethu Ntoyakhe said the major challenges included lack of financing, zoning issues, limited capacity of bulk infrastructure and access to land.

Ntoyakhe called on the City to expedite overlay zones for key areas and to set out clear policies regarding the small-scale rental sector.

Regarding financing of the sector, he said the "hands-off approach" by finance institutions didn't work.

"Loans in this space should come with a package of project management support, the costs of which must be included in the project costs," he said.

Chairperson of WCPDF Deon van Zyl said it was "near impossible" to fund development.

"The big boys who have made it have a fair chance of funding. The township developers are struggling.

"It needs to be recognised that we are in a constant crisis; we have a growth emergency. And without growth, our industry has no reason to build,” Van Zyl said.

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