The state must intervene in Cape Town’s land and housing markets
THE imminent eviction of the Bromwell Street tenants is a microcosm of something happening across Woodstock and Cape Town, but also in cities across South Africa and around the world.
We cloak this trend in sanitised terms like “gentrification” and “urban regeneration” that conceal what is truly under way – the deliberate, systematic, and state-sanctioned displacement of families and destruction of communities.
Many argue this is inevitable – that rising rents forcing poor, working and increasingly middle class families to the urban periphery are a byproduct of economic advancement, that the market should be left to its own devices and we should be grateful for the few trickle-down jobs created by new coffee shops and artisanal stores. City officials assert they have no power to disrupt “market forces” – these are simply isolated disputes between private parties, rather than a societal problem in need of regulation.
They are wrong. Not only are there legislative and constitutional requirements for state intervention, but a glance beyond our borders exposes that the City of Cape Town is decades behind many other world-class cities in accepting regulatory responsibility and successfully implementing progressive policies to advance inclusive urban development.
These cities are succeeding because they are taking proactive action in what is widely recognised as a growing market imbalance. On the one hand, urban land is seen in terms of its primary use – sites for housing, businesses, or public amenities. On the other, land and homes are held as commodities much like an investment in stocks or bonds. In an increasingly globalised and neo-liberal environment the latter force is increasingly dominant. This leads to unscrupulous speculation, exorbitant profiteering and ultimately property bubbles.
The destructive nature of this cycle for the economy at large was poignantly illustrated in the 2007 housing crisis that triggered the largest global recession since the Great Depression.
State intervention in land and housing markets to balance housing affordability and a fair return for developers and investors is no longer an outlandish utopian ideal – it is the norm. The globally respected consultancy group McKinsey recently argued government not only has a vital role to play in protecting and expanding mixed-income housing, but such interventions are beneficial for all of society, including business.
The costs associated with the City of Cape Town’s failure to heed this advice are clear. Cape Town has been ranked third globally in terms of the highest year-on year-property inflation rate (behind Shanghai and Vancouver). At 12 percent a year, average property values in the city are growing at more than twice the rate of inflation. Combined with the fact that the average Capetonian needs to earn three times the average salary to afford an average home, and the legacy of spatial apartheid, Cape Town is without doubt facing the worst urban housing affordability crisis in South Africa, and one of the worst globally.
How do we move forward?
There are two tried and tested regulatory tools – applied notably in New York but also in other cities around the world – which the city can draw on to address this crisis. These serve to expand and protect affordable rental stock in the private property market.
This year marks 100 years since New York City implemented the world’s first citywide zoning scheme, primarily to address reduced light and air for pedestrians caused by taller buildings. Property developers protested the height restrictions would smother the incentive to build and adversely affect the economy and property market. The opposite occurred. New York experienced a building boom and improved urban spaces that led to the metropolis we know today.
A century later, New York has amended its zoning policy to address a new urban challenge – a significant shortage of affordable housing. In East New York 20 – 30 percent of new private developments must include affordable rental stock. These are fully built and maintained by private developers, who continue to make a fair return on their investment. East New York is similar in many respects to Woodstock and Salt River – mixed low-income residential and former industrial areas on the cusp of gentrification. In East New York, the city administration intervened early to ensure when development does occur, there are conditions for affordable housing attached.
Although gentrification in Woodstock and Salt River is well under way, there is no reason inclusionary zoning could not be used here to compel or incentivise developers to build affordable stock in new developments. At present, no conditions are attached to new developments and the meagre incentives that do exist have failed to create affordable housing.
A second possible intervention is rent control. About half of New York’s two million homes must adhere to strict regulations that allow landlords to increase rent only at an annual rate set by the city administration. Rent control in New York has protected diversity in neighbourhoods such as Manhattan that would otherwise become exclusive enclaves for the super-rich.
Rent control is not new to South Africa and was implemented in areas like Woodstock and Salt River until the end of apartheid. New legislation will soon once again render rent control a viable policy instrument once The Rental Housing Amendment Bill (2014) commencement date is set by the national Department of Human Settlements. This will provide an opportunity for local and provincial government to impose rent controls on rapidly gentrifying areas.
While these tools are imperfect and cannot be directly transplanted onto a South African city, they do illustrate a commitment by other city administrations to acknowledge housing crisis where they occur, and work to resolve them. Cape Town has failed to do either, due largely to significant pressure from developers and financiers making exorbitant profits, in no mood for the party to come to an end.
All Capetonians have a common interest in insisting the City fulfills its obligation to protect our homes and neighbourhoods. Do not wait until you are priced out of your home – the time to act is now.
Silber has a master’s degree in urban planning from New York University and works at Ndifuna Ukwazi.