Rising property prices in vibrant downtown areas is a challenge for developers who have to deliver the dream of an urban lifestyle in the affordable housing market.
As pressure mounts from government to insure inclusivity and downtowns struggle to incorporate homes for their own workforce, the question is how to understand and deliver on a more inclusionary model that will be embraced by both the public and private sector.
The Western Cape Property Development Forum (WCPDF) Chairperson, Deon van Zyl, says that the Western Cape property sector is not clear on the concept of what could be deemed to be affordable in terms of residential property. There is a lack of understanding the differences between affordable accommodation and low-cost housing.
Van Zyl says: “We still feel threatened by the misconception of small erven, a concept that property economist Professor Francois Viruly calls the 40 x 40 x 40 concept – a 40 m² house situated 40 km from work and with transport costing up to 40% of a household’s income.”
The recent case of the Tafelberg Remedial School in Sea Point was “a wakeup call” (when the Western Cape provincial government won its case to sell school grounds for private development against public opposition and outcry. Van Zyl questions whether we can really afford not to use strategically located state-owned land for affordable accommodation. In other words, for the creation of accommodation for people who are active in the economy but who can’t afford market prices.
In the debate for what is deemed to be affordable, there is also a need to debate affordability across the full spectrum of home ownership and modes of occupation. While traditional definitions of low-cost housing often still refer to RDP/BNG housing that aims to address the country’s apartheid planning legacy that forced the poorest residents of a city to be geographically and economically separated from opportunities. There is increasingly also a need to address the needs of “missing middle” ̶ individuals and families that earn too much to qualify for government support, who live far from work opportunities.
It is this “missing middle” that so often builds a vibrant downtown community, says Rob Kane, Chairperson of the Cape Town Central City Improvement District (CCID): “Cape Town’s traditional downtown accounts for 25% of the metropole’s entire economy and over 30% of its workforce. As the CCID, we’ve worked incredibly hard with our various public partners to turn the CBD away from the urban blight it was experiencing nearly two decades ago. As a result, we now have a steadily growing residential community and, along with it, a high demand for the apartment stock that is available, which in turn has driven prices up as one would see in any high-demand, low-supply chain.
“This has meant, though, that for most of its workforce, the downtown lifestyle is not something they can afford in terms of residential property. And yet a diverse residential community in which all economic groups have a stake holding is vital to the vibrancy of a downtown if it is to have a life beyond its office hours.”
Van Zyl took the matter even further, speaking in June at a meeting of the Western Cape chapter of the South African Property Owners Association (SAPOA): “It is critical for the private sector to take the lead on this topic and to explore the opportunity: if we do not do it, I have no doubt that government will step up to the plate and start to create inclusionary policies that will force developers to provide housing as driven from a political perspective.”
He also urged private developers to be at the forefront to drive policy formation: “We need to understand what, if any, assistance we need from government and we need to take it to the table. If we don’t, we might end up with a model that just does not work.
He was also adamant that “affordable accommodation is not charity: it’s a business opportunity just like student housing became an opportunity when universities could not provide sufficient accommodation.”
Elaborating that the real opportunities surrounded the provision of rental units that were not intended to be “forever homes” where “people would one day retire”, Van Zyl further felt it was time for Cape Town to step up its game in terms of the global trend towards what downtowns abroad referred to as nano units: apartments often no larger than a small bachelor flat with community-shared facilities such as kitchens, dining rooms and recreational areas.
Van Zyl adds: “By converting commercial into residential rental units, we can also ensure the future adaptability of a central business district should the need shift again one day back to commercial. There is an opportunity among property owners, particularly with C-grade buildings, to protect certain stock for future redevelopment by converting it for the meanwhile to rental stock rather than selling it off sectional title.
“Plus, when affordable accommodation is able to net rentals of around R200/m², as has already happened in pockets of Cape Town, and you place these figures before developers, suddenly the penny begins to drop! And yes, there will be teething problems, but is our industry not about risk and reward in any case?”
According to Kane, examples initiated by the private sector in the Cape Town CBD around the provision of affordable rental options currently relate to the provision of accommodation both for students studying as well as young professionals studying or working in the Central City.
One of these is a complex known as Student at Home on Adderley Street in the heart of the downtown. Converted from an underutilised C-grade building, which still accommodates retail and offices on its lower floors, the remainder of the building has been converted to residential and is rented out as quality but small – and thus very affordable – units including shared rooms as well as studio apartments. In an extremely well-managed system with tight building controls in place, all units are furnished (including TVs) and have their own small kitchen and bathroom areas. Monthly rentals range from shared rooms starting at R5 000 per month to studio apartments at R7 500 per month.
Kane notes that the CCID has been very heartened by the City of Cape Town’s proposed Foreshore Freeway Precinct Project, in which it has called for public-private partnership proposals (six of which have already been shortlisted) to develop six hectares of valuable, underused City-owned land in the CBD that would address traffic congestion and also make provision for up to 4 000 affordable housing units.
“However,” says Kane, “it will be some time before this project bears fruit and the question right now, for the more immediate future, is how can we as private developers make use of what is already available to meet a market demand for rental stock that can accommodate families where the parents form a vital part of our downtown economy. How do we accommodate the bank clerk, shop assistant, office worker or teacher? We need to be innovative as South African developers but we also need to remember that there are many international best practice examples for both government and the private sector to draw from.”
Among these are the USA-based National Community Land Trust (CLT) Network, which with support of the Lincoln Institute of Land Policy, assembled a first-of-its-kind database in 2014 of inclusionary housing programmes across the USA, from big cities to rural areas. The database includes information on more than 500 housing programmes located across 482 local jurisdictions, with a spread of areas where policy has already become mandatory in terms of inclusionary zoning (IZ) policy as well as where it is still voluntary.
Closer to home, Van Zyl has also challenged the Cape Town development industry to start engaging with social housing companies and organisations such as Ndifuna Ukwazi around the concept of affordable accommodation. He adds: “The industry needs to break through the fear factor. There are developers in Johannesburg and Pretoria who have already found the business opportunity in affordable accommodation. Western Cape developers stand to lose out if we do not educate ourselves on this opportunity.”
Another option currently being explored and piloted in Cape Town by property developer Blok is the 80/20 model, successfully utilised in numerous cities overseas. In a document outlining the concept to be built on private land purchased in the Bo-Kaap area, Blok MD Jacques van Embden says the company has undertaken the challenge because: “We need a more diversified product range within our cities that will encourage more to participate in the urban opportunity that is so critical to their success.”
Known as 40 on L, approximately 20% of the units are being reserved for sale to low-to-middle income owners, with the building of these units being subsidised by the sale of the remaining 80% of the units. Says Van Embden: “These homes will be released … through best practice principles we have researched from inspiring cities and leading edge project globally.”
Kane concludes: “As the CCID, we would echo the message being put out by the WCPDF urging developers to look not only consider the provision of affordable accommodation but also to engage actively with the concept before it becomes policy and indeed to ensure that we are part of that policy formation, especially if we are to ensure diversity, inclusivity and lasting vibrancy in our downtown areas.”