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Joburg inclusionary housing a reality this year

Posted on August 8 2018 by Gert Minnaar in Johannesburg Inclusionary Housing Policy

Despite considerable criticism and several threats of legal action, the City of Joburg hopes to pass its inclusionary housing policy before the end of the year.

Moneyweb earlier reported that the draft policy provided that developers of residential complexes with more than 10 units would be required to set aside at least 20% of the total number of units for low and low-middle income tenants, with rent being capped at R2 100 per month.

Some developers considered this to be an unconstitutional infringement of their property rights and warned that, if adopted, the policy would be challenged in court.

The city has now given feedback to stakeholders about the comments from stakeholders following the publication of the draft policy in February, and has made some changes.

The 10-unit threshold before the inclusionary housing policy becomes mandatory has been increased to 20 units. Developments with fewer than 10 units would however be able to participate voluntarily, should they choose to.

The policy would still apply to all new developments within the jurisdiction of the City of Joburg, should they have 20 or more units.

The minimum size of the inclusionary housing units has been increased from 15m2 to 18m2, still with at least a bath, toilet and basin.

In the previous version of the draft policy, the city proposed two implementation models. The first was for the units to be managed by a social housing company as defined in the Social Housing Act. The second was for developers/owners to rent the units out privately – although, in the case of sectional title developments, the units should be owned, managed and rented out by the body corporate. The city proposed strict reporting requirements for body corporates as part of this model.

This second option has now been removed after several stakeholders expressed their concern that body corporates are run by volunteers without the necessary skill to manage such rentals.

The city now proposes four options, some without mandatory rent control, where:

  1. 20% of all units are social housing rentals with the rent capped at R2 100 per month, or housing in terms of the Department of Housing’s Finance Linked Individual Subsidy Programme (FLISP), which provides for subsidies for South African citizens who earn between R3 500 and R15 000 a month to buy their first homes;
  2. 10% of the total residential floor area to be made up of small units, varying between 18m2 and 30m2;
  3. 20% of the total residential floor area to be made up of units that are 50% of the average market unit size, that is between 18m2 and 150m2; or
  4. Proposals “To the satisfaction (in writing) of City Transformation and Spatial Planning, City of Johannesburg”.

The incentives offered to developers include an increase in the floor area ratio and density to accommodate the inclusionary units, as well as a reduction in the parking requirements for these units.

The city is still considering whether it will reduce the developers’ bulk services and parks contributions.

Officials told Moneyweb that it is not yet clear whether there will be another opportunity for stakeholders to make submissions on the basis of the changes made. The city does however hope to have the policy approved before the end of the year.

Moneyweb earlier reported that the South African Property Association (Sapoa) had raised concerns that the proposed policy could deter the private sector from developing residential units.

Sapoa represents the biggest property developers in the country, most of them operating in Johannesburg.

Sapoa CEO Neil Gopal says the fourth option the City has proposed constitutes the “negotiation-based approach” supported by Sapoa’s research and which formed an important part of the research recommendations. “Discussions with the City regarding how they plan to implement this approach (the format of negotiations, etc.) have indicated that they are yet to fully develop its implementation”, Gopal said.

Gopal said the overall perception was that stakeholders reacted favourably to the amendments. “We are of the opinion that some of the changes improve the feasibility of inclusionary housing provision (including Changes 2-5) and may incorporate risk associated with fluctuations in the housing market and land values across the City. The addition of the “negotiation-based approach” as option of inclusionary housing provision adds to our optimism in this regard.

“However, uncertainty remains regarding the implementation of this option as well as the remaining development feasibility risks associated with the policy. In addition, there is uncertainty regarding the way forward for the policy document, especially whether the final document will be open for public comment. During the engagement, the City expressed the possibility of opening the amended policy document for a second round of comments – a shift from their initial position.”

According to Gopal the final policy document is planned for the end of August.

-Antoinette Slabbert on 8 August 2018 for Moneyweb