Affordable housing: An opportunity for economic development in SA

BY ISHANI CHETTY

With the global population on the rise and economic inequality plaguing many parts of the world, affordable housing is becoming a necessity. South Africa’s housing crisis has been impacted by a ‘triple threat’ – rapid growth in population, growing financial inequality and the impact of Apartheid on the country’s spatial development have made affordable and inclusionary housing a national necessity.

The City of Johannesburg has provided a clear definition of inclusionary housing within its framework. “Inclusionary Housing is a housing programme, that through conditions attached to land use rights approvals, requires private developers to dedicate a certain percentage of new housing developments to low income and low middle-income households, or to households that may not otherwise afford to live in those developments.”

Across the country, heads of spatial development are working on generating solutions to the current housing crisis that we face. Globally, various countries have adopted their own unique policies in order to generate and increase housing opportunities for its residents. For example, Hamburg and Copenhagen improved the housing supply by placing publicly owned assets into an “Urban Wealth Fund” partnering with the private sector to implement projects.

Addressing the shortage of low-cost housing requires constant innovation that can benefit all parties involved including investors, property owners, developers and others. Taking a closer look at the newly implemented policy in Johannesburg, we can understand the various mechanisms being employed to implement affordable housing.

What is the importance of Affordable Housing in SA?  

 With poorer residents predominately located a far distance from where they work or in ‘rural’ areas, the spatial inequality still exists. Earlier this year, Time Magazine placed South Africa on their cover – showcasing an aerial shot photograph of the side-by-side inequality of the country. The renowned publication has labelled SA the “most unequal country”. The image indicates the stark economic inequality of communities that live side by side – a residential and rural area adjacent from one another.  

A study by the World Bank indicates that South Africa is the most unequal country in the world, both socially and economically. “South Africa remains a dual economy with one of the highest inequality rates in the world, with a consumption expenditure Gini coefficient of 0.63 in 2015. Inequality has been persistent, having increased from 0.61 in 1996. High inequality is perpetuated by a legacy of exclusion and the nature of economic growth, which is not pro-poor and does not generate sufficient jobs,” the study reads.  

This shocking data has yielded a movement towards improving socio-economic standards for all South Africans by implementing affordable and inclusionary housing. An increase in crime rates can be attributed to the economic inequality present in South Africa – due to lack of job opportunities, informal settlements and education. However, housing plays a pivotal role in shaping an individuals life – adequate housing conditions, including water and sanitation and access to electricity, can improve one’s living standard. 

Time Magazine placed South Africa on their cover – showcasing an aerial shot photograph of Johannesburg. Labelling South Africa as the world’s most unequal country.

AHIS Summit Kenya  

The Affordable Housing Investment Summit held in Nairobi, Kenya, Chaired by Neale Petersen, in June this year has functioned to facilitate a focus on developing inclusionary housing policies across the world. The summit aimed to generate a dialogue on the key issues faced in affordable housing. It also focused on creating affordable housing in a sustainable manner. Key stakeholders from investment, property and development were present at the summit, engaging on methods to make low-cost housing a reality.  

The Central Bank of Kenya reported that in 2017 there were only 26 187 mortgages, showcasing that there is a rise in slums and informal settlements in the country. The Cabinet Secretary, Ministry of Transport Infrastructure, Housing, Urban Development and Public Works, James Macharia spoke at the AHIS Summit explains that Kenya is moving towards implementing their affordable housing scheme.  

“This Summit is convened at a time when the Government has embarked on an ambitious plan of delivering 500 000 affordable housing units by 2022 as one of the pillars of the Big Four Agenda. The Affordable Housing Program (AHP) provides an opportunity to right the systemic issues in housing through clear interventions that will restore our people’s dignity,” he said.  

 Kenya’s AHP will focus on the mobilization of affordable housing finance, land identification and registration, the provision of support infrastructure, using innovative construction technologies and materials to generate a large number of houses. Using ‘end-user financing’ the AHP will offer various purchase options – from cash sales, tenant purchase (with the concept of rent-to-own) and subsidised mortgages.  

 Macharia announced at the summit that the first phase of the AHP is in construction. “Our first project to develop 1 370 units at Park Road is ongoing and the first phase comprising 288 units will be completed in November this year.”  

 Various forms of the existing legislature have been adapted to provide an opportunity for first-time buyers and developers. “These include the Stamp Duty for first time home buyers having been zero-rated with the Finance Act of 2018, thereby reducing the burden for home buyers,” said Macharia.  

 Other incentives of the AHP include; lower income tax rates for developers who are creating 100 units and above, lower taxation on housing bonds at 10%  (provided that the interested does not exceed KES 300 000).  

 At the AHIS Summit, Macharia concluded on the importance of housing for residents of Kenya. “Homes are tangible, appreciating assets that will give people a sense of ownership that we expect will eventually fix our politics – from emotions and personality—drive to issues based,” he said.  

 

The way forward for SA  

 STATS South Africa recently announced that countries’ GDP has dropped significantly by 3.2%.“The 3.2% decline is the biggest quarterly fall in economic activity since the first quarter of 2009, with the economy – under strain from the global financial crisis- tumbled by 6.1%,” STATS SA said in a statement.  

 With the countries’ economy in a precarious state, the implementation of affordable housing has been a slump one. The economic strains placed on local residents and shortage of job opportunities has compounded the growth of informal settlements and the dire need for affordable housing. Several plans for low-cost housing are yet to be implemented as they undergo critical analysis across the country.  

 At the most recent SONA address, President Cyril Ramphosa announced his hopeful intentions for new cities to be developed, even amidst the dismal economic state of the country.  

 “I dream of a South Africa where the first entirely new city built in the democratic era rises We have not built a new city in 25 years of democracy. Around 70% of South Africans are going to be living in urban areas by 2030,” said Ramaphosa  

 Although, the City of Johannesburg is pioneering this with their most recent policy implementation – creating rules by which new developers have to integrate low-cost housing there is a need to develop mechanisms that provide a fruitful output for investors, developers and residents. With loose ends still to tie, there future of affordable housing in South Africa appears positive.  

 

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