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Joburg inclusionary housing a reality this year

Threshold lifted, more implementation options.

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.

 

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The madness and sheer lunacy which is South Africa, continues. It’s like living in an alternate reality.

Do you have any constructive ideas to correct the gross inequality this country finds itself due to the pass laws which gave property rights to only a small minority ?

Create a building boom by increasing the co-operation between private developers and city planning departments. Look at all building regulations and scrap those no longer relevant. Re-look at new methods and materials to lower costs. Slash interest rates and create jobs for 1000s of under-skilled people. People with salaries will be able to afford to rent or buy the resultant houses on their own terms.
What we have now is asking developers to build the equivalent of servants quarters – not very uplifting.

Derekless- the pass laws had zero to do with property rights/ownership. This set of legislation was about influx control, urbanisation and segregation. The Group Areas Act would be what you are looking for as the basis of your argument. You need to brush up a bit on your history.

@ derekless

You cannot efficiently fix housing without fixing the economy. If SA can grow its economy 5x then most poverty-related issues will disappear. Housing for the poor will be one of those. Trying to fix huge problems like housing for the vast mass of poor with regulation is doomed fail and will slow down economic growth.

There has been almost 25 years of extensive employment, procurement and ownership legislation based on race, the likes of which apartheid has never seen, which would have provided more than enough opportunity to buy property.

SA is not the madness. The corrupt ANC is. And their supporters.

I thought JHB was in the hand of the DA. Of course politically there is very little difference between the ANC and the DA.

Financial growth and new investments are achieved by providing incentives to an entrepeneur , not by making business as difficult as possible …this simple reality our government has not grasped . Business does not invest at any cost ,nor regardless of the risk . Mugabe,s 51 % share ownership requirement for locals failed to bring new investments , for the same and very obvious reasons .
The municipalities cannot even provide basic services , how are they going to manage this complicated property ownership structure , which is based not on sound business principles , but on a socialistic ideology , Venezuela style . It is doomed to fail .

Its Election in a years time. Expect such statements.

However, it this is passed; then we in for turbulent times.

I fear that the universal law of unintended consequences will kick in and delivery may reduce.

Nation that get this right, like Holland have many listed housing companies that can manage the stock but the price points on rental are more realistic.

The NPV of these low cost housing units will probably be <0. If they are 20m^2 in size and building cost is R10,000/m^2 then cost is around R200,000. Rental capped at R2,100 p/m.
Say interest rate of 8% on the R200,000 for the developer and rental escalation of 6%. Discount rate of 10% is probably too low as the riskiness of the rental stream is high.
After 20 years the NPV is <0.
Above calculation ignores cost of land, maintenance, EWC, ect.
Stay away from this if you are an investor.

This simply makes the COJ look dumb. What will happen is that inclusionary housing will devalue the median property value of the suburb with respect to equivalent non inclusionary suburbs. A dwelling that would sell for R1.5 million would now sell for R1.0 million. The developer’s costs are the same. Either the land cost must be much less or the profit will evaporate into a loss. The developer thus does not build decent houses or only builds quasi shacks.

Problem is these guys are already paying 28% tax and VAT on all the development and construction expenses which if used correctly would go to providing cheap housing.

I think it’s a dumb plan but if you really want to do this then make it voluntary and incentivize by giving a tax deductible to the value of the difference between the rental/selling price of a normal similarly sized unit and the one put up for low cost housing.

Why would you build a expensive and complex high value high rise in Sandton if 10% of the floor space goes for nothing and you still pay the same taxes on the property. Non-nonsensical

Good luck finding buyers or tenants for the “regular” priced units!

I won’t be surprised if they come out with quotas of minimum bedrooms in your house that you have to make available to low income tenants 😛

The constant interference by politicians in private affairs will cause distortions in the property market. Initially, the ANC adopted a draconian policy to expropriate land without compensation, and now the DA is proposing inclusionary housing. The EFF seems to be setting policy tone. I wonder how two big political parties will respond to the racial slurs by the EFF as we are drawing closer to the elections

More “government” intervention? Where has this established a successful track record in anything in the past 20 years or so? Methinks the loony bin is the next stop for the RSA train…

If there is every another complex with more than 19 units constructed I would be very surprised.

I can’t wait to see how the cadres react to being asked to be unpaid/volunteer trustees.

I’ll bet my bile duct most of them have never heard of such a thing.

why do African politicians always destroy a country before they come to their senses.
mining industry , construction , apprenticeship system ,fiddling with private health insurance so they rob the reserved , hospitals Soe’s you name it they will destroy it

Here’s just another mess that the so called government is implementing. Things are really getting out of hand now. I mean who proposes such madness.

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