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Mixed response to City of Joburg’s inclusionary housing policy

Posted on February 27 2019 by Gert Minnaar in Johannesburg Inclusionary Housing Policy

The rich will soon live side by side with the poor in Johannesburg.

The so-called ‘inclusionary housing policy’ that was adopted by the City of Johannesburg on Thursday, which envisages the rich and poor living side by side in some of the city’s exclusive residential developments, has garnered mixed reaction from private property developers.

The policy compels property developers to allocate at least 30% of any new residential developments comprising 20 or more units to what is called inclusionary or affordable housing.

The requirement will be imposed on property developers by the city when they apply for land use and development approvals.

The policy, which comes into effect in the next three months, means that property developers who build residential units for rent and sale in wealthy Johannesburg neighbourhoods such as Rosebank, Sandton, Melrose and Hyde Park, must dedicate a portion of their developments to affordable housing.

The city said its policy will give those in lower and middle income households – who often live in far-flung areas and spend an inordinate amount of time and money to travel to places of work because of the legacy of apartheid – an opportunity to live close to economic nodes.

Spatial equality vs continued investment?

Residential property developers and industry bodies are divided over the move, with some welcoming the policy for eliminating spatial inequality and economic injustice, and others fiercely objecting to it, saying it will deter new residential investments.

The South African Property Owners Association (Sapoa), which represents the biggest property developers in the country and was a vocal critic of the policy when it was in draft form in 2018, said it is “disturbed” by the adoption of the “onerous policy”.

“The city, even though we submitted extensive comments after undertaking best-practice international research on this matter, ignored most of the private sector view,” Sapoa CEO Neil Gopal told Moneyweb. “The unintended consequences [of the policy] could be that there is a shift in the focus from the residential sector to other asset classes.”

Gopal said there is not much the organisation can do to challenge the policy at this stage. “We [will] have to wait and see what approach developers would take.”

Chris Renecle, MD of property development firm Renprop, which has ongoing luxury residential developments in Rosebank, Dunkeld and Bryanston, says the unintended consequences of the policy could include a regulatory burden on private developers as well as increased time and costs for developments.

“The policy [if not implemented correctly] would have drastically slowed or even stopped residential property development in the City of Johannesburg, which would have serious consequences for the general economy and the property market,” said Renecle in his submission to an earlier version of the policy.

Policy support

Balwin Properties, a JSE-listed sectional title developer, has welcomed the housing policy, saying it should become a countrywide policy.

“Why should it be the right of only the wealthy to live close to work? We have a shocking legacy of apartheid and developers also have a responsibility to redress the crimes of the past,” said Balwin CEO Stephen Brookes.

Balwin, which has the capacity to develop 5 000 apartment units per year in areas such as Olivedale, Linbro Park and Kyalami, is already offering affordable housing valued below R700 000. Brookes said he wished the policy was supported by a strong infrastructure plan on public transport, which remains inefficient and limited in its reach across the city.

Four ways to comply

The city has offered property developers four options through which to comply with the policy:

* Under the first option, 30% of total units in the residential development must be social housing, ‘Flisp’ housing (Finance Linked Individual Subsidy Programme, where government subsidies are offered to first-time homeowners earning between R3 501 and R22 000 a month), or housing with rentals capped at R2 100 a month. The latter amount is intended to cater to households earning less than R7 000 per month.

* The second option stipulates that 10% of the total residential floor area of a development must be made up of units that are a minimum of 18m2, a maximum of 30m2 and an average of 24m2. And at least 30% of total units in the development must be for inclusionary housing.

* In the third option, 20% of the total residential floor area must be made up of units that are 50% of the average size of market units in the same development, with a maximum of 150m2 and a minimum of 18m2 per inclusionary unit.

* Developers under the fourth option might negotiate with the city and propose a plan for how they plan to incorporate inclusionary housing.

The city went further, saying the housing units must have the same outward appearance as other units in the same development or property, and must share common spaces such as entrances, lifts, communal spaces and shared amenities. “Access to these common facilities must be unconstrained for all residents,” the policy document reads.

The city has offered various incentives to motivate developers, including increasing the size and density of their residential floor area and reducing the parking requirements for inclusionary housing units.

Although Renprop’s Renecle is not embracing the policy, he says it is workable.

“We welcome the inclusion of more options for developers to comply with the policy. Having only option one under the previous policy was a disaster and made the policy not workable.”

He is also positive about the incentives the city is offering developers. “We would be getting more density. This allows developers to build smaller units to give potential property buyers more options to purchase affordable units.”

Ray Mahlaka on 25 February on Moneyweb