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Joburg wants 20% of living spaces set-aside in new residential developments

Rental income from ‘inclusionary housing’ capped.

There are only a few days left to comment on a City of Joburg proposed policy that will require at least 20% of units in all residential developments over ten units to be set aside for what is called inclusionary housing.

These units would be available to residents with a total household income of not more than R7 000 and the rent plus levies may not exceed R2 100 per month or 30% of the household income. That excludes the cost of utilities like electricity.

The city states the draft policy “is designed to provide rental housing at an affordable price”. Property consultant Erwin Rode of Rode and Associates, who studied the proposed policy, however warns that enforcing the policy could render residential developments unviable and result in a development strike.

He says it could lead to spiralling house prices in certain categories and points out that similar policies in the USA led to little additional low-cost housing stock.

The draft policy provides that inclusionary units have to be on the same site as the development. The units have to be at least 15m2 big and have their own bathroom consisting of at least a basin, toilet and shower.

The units must have the same outward appearance as other units and must “share common spaces, such as entrances, lifts, communal spaces, shared amenities, with market units in the same development or property. Access to these common facilities must be unconstrained for all residents”.

Provision for the units will be a requirement for development approval of all new residential developments with more than ten units, within the jurisdiction of the City of Joburg. The reservation of the units for inclusionary housing will be noted in the title deeds and continue in perpetuity or until repealed by a resolution of the city council.

The city proposes two models.

The first option would be for the units to be managed by a social housing company as defined in the Social Housing Act. “Developers/owners may register a social housing company to manage the inclusionary housing units, or may sell/lease/contract the units to an accredited social housing company for management,” the draft policy provides.

The other option would be for the developers/owners to rent the units out privately. In the case of sectional title developments the units should be owned, managed and rented out by the body corporate.

In the case of private rentals the city requires annual reports showing the rental amounts. These reports will be made public, according to the draft policy.

In exchange for the provision for inclusionary housing the city provides a set of incentives linked to the number of inclusionary units. These include the relaxation of parking requirements, building lines and density controls as well as discounts on parks and engineering services contributions.

Inclusionary units will qualify for certain property rates rebates as well.

Rode says an inclusionary housing policy is nothing new. He says in the USA more than 500 jurisdictions have implemented such policies, and these can be found in 27 states, including Washington DC. “The most productive programme in the USA ‒ Montgomery county in Maryland ‒ goes back to 1974,” he adds.

He says unless compulsory schemes such as the one proposed by the city provide for adequate incentives, “it could inhibit the development of all classes of housing, which would eventually push up the prices of existing housing stock”.

Rode warns against the unintended consequences of enforced schemes such as the one the city proposes, “the most obvious risk being a strike by residential developers”.

He says “the biggest risk [to developers] is that their sales tempo in new developments would be retarded to the extent that the development becomes unviable.

“From the developers’ point of view, the obvious solution to this problem is to keep the price gradient between the various price classes within a development small. For example, mix low-spec units with houses that do not cost more than, say, R500 000. However, the downside to such a reaction by the private sector would be (a) that the profit margins on low-priced houses are wafer thin and (b) that no more houses or residential units of more than R1 million would be constructed. This would lead to spiralling house prices in these categories.”

Rode says a municipality should approach such a programme “with the utmost sensitivity and care”.

He proposes that the city apply the policy to selected, degraded centrally-located areas where land prices are currently low, but where value could be added through allowing more bulk together with other incentives like rebates. “Urban Development Zones come to mind.”

That would mitigate the risk to the the greater residential market, Rode says.

Alternatively the city could make the programme voluntary he says. “In either instance, the incentives should be substantial enough to offset the costs to the developer.”

Rode calls the proposal that body corporates of sectional title schemes should manage and rent out the inclusionary units “a recipe for disaster”.

“Trustees of such schemes are typically volunteers who work pro bono, thus to expect them to be saddled with the hassles of conduct issues, not to mention bad debts, is unrealistic. As a rule of thumb, in schemes in which the market-related units cost less than R1 million, it is very hard to find competent and willing trustees. However, this comment does not apply to social housing institutions, as they are geared to manage tenants in low-spec units,” Rode says.

The deadline for comment on the draft policy is April 30.

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COMMENTS   41

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Even if the incentives could be made lucrative enough the red tape and paper work would be too much bother. Would anyone want to buy and expensive unit in a complex with a lot of 15m2 units included? Surely there are better ideas – mine would include:
Relook at building codes to allow cheaper building technologies
Fast track – yes even expropriation without compensation – of derelict buildings which are health hazards and give them to developers on condition that they are re-developed into low cost housing

I agree. Makes more sense to reclaim rundown buildings than insist new developments must sacrifice newly built properties.

The proposal that sectional title complexes be forced to rent out units and have it capped at R2100 is madness, it adds a financial drain to incomes that are already strained to the breaking point in many cases.
This is a disturbingly naive proposal from coj.

So your proposal is to steal a derelict building?

Radical economic transformation , brought to you by the DA

Your comment is incorrect. President Mbeki suggested low cost housing in high income suburbs. However it never materialised

Rent capping has been law in New York since the late 1960’s and proved successful in allowing people to live close to employment

Could it be that you don’t know Hillbrow is our own experiment in rent control? That’s how it became a slum in the first place.

Rent control has always been a disaster wherever it was tried. Rent control is really suppression of market rental rates- an economic distortion. Tenants therefore get something for less than its true value. This leads to excessive demand and suppressed supply which creates housing shortages. The properties typically, albeit not always, degenerate into slums as any maintenance and improvements are not done as this is money foregone without an adequate return.

people living in low cost housing have no care for their property and create a big mess. No one will buy into mixed developments. Cosmo city was a descent low coust housing development until they brought RDP houses now it is a D.trump hole.

DA effed-up Cape Town….

Now working on Jnb….

#DAxit 2019

A system that is being used in the UK. A percentage of those living on social grants share the land at substantial discounts in the inner part of the property. They have no respect for property….. do not work and so generally the property degrnerates. I agree with others that this remains a problem for council to build homes to please and mmmkot to punish. Suggestion take a trip to Spain….. Singapore…… where housing is developed exactly for all citizens.

This type of social engineering is a failed model which is even less likely to succeed in SA given the size of the gap between supply and demand. What is required is not a regional, supply side solution but rather a national, demand side answer. The first step is for the country to regain control of its borders – sadly SA is not yet in a position to meet demand from its own citizens let alone those people from other SADC countries seeking to escape poverty. Secondly, government needs to make life in rural areas more attractive so that the drift into urban areas has less appeal. Job creation by supporting farmers with more grants and improved security could be a start while the bigger issue of land redistribution is resolved. Creating more incentives to come to a city with already stretched infrastructure is nothing more than a sticking plaster offered to a patient that needs radical surgery.

This is what happens when communists run your city . They make unfriendly investment laws and then don’t understand why the private sector has taken their money somewhere else or have just left it on the Balance Sheet . It’s quite simple really !

The DA is running Jo’burg….

Vote for them at your own peril.

Not even ANC would come up with such a shite proposal…

(In a Yoda voice)

Grasping at straws … COJ is …

I see… hmmmmm!

Unrealistic proposal . The loss of profit on these low cost units will deter developers , and the low income inhabitants will deter sales of the more expensive units . Social engineering that wont work in SA. Rather provide state funded incentives for low cost housing .

Why are you so concerned about whether wealthy people will get wealthier? Are you one or do you ridiculously believe that you will one day be one the people that will benefit from lower taxes and a societal structure that takes from the poor and gives to the rich?

You should be concerned with wealthy people getting wealthier, because in a free market they do this by providing other people, including poor people, with the products they need at a cheaper price, better quality or higher convenience than anybody else.

Which place do think a poor person leaves happier, a Pepstores or the municipal offices trying to arrange some service?

This from Herman Mashaba, our “classical liberal” mayor. I would hate to see a DA socialist mayor in action. Its great for owners of existing high end developments. Everywhere else in the world this has happened those prices went through the roof. Next thing people will complain about, is inequality because the 1%’s home equity are going through the roof.

The DA are not socialist by any stretch of the imagination otherwise they would probably have been able to manage the water and living conditions in the western cape. The reality seems to be that the DA are neo liberals that have surrendered the economy to the machinations of the wealthy and want to win votes on fringe and general social issues.

Rent control and such programs work all over the world and that’s why some people can adequately house their people while capitalist hell holes like South-Africa can’t.

Johannesburg instituted rent control in Hillbrow after WW2. During rapid inflation in the 70’s it became impossible to maintain much less revamp the buildings. Lower and lower quality tenants therefore moved in until, it became a slum in the 80’s. Rent control might still be going on in Hillbrow so you can probably go enjoy the “cheap” housing in the socialist utopia.

Could they set aside some land for disposal of building rubble? Then ratepayers will not have to put up with illegal dumping along Witkoppen Rd and Maxwell Drive.

I would think that if this nonsense were passed, many developers would simply just build 10 unit developments to avoid having to subsidize the low income units.
Alternatively, at least offer some kind of tax benefit to make it worth their while… but as it stands I think it will be a lame duck…

YEs. Capitalist will do whatever can make a profit whether it destroys society quickly or slowly not being a critical issues for them. The profit motive first distorts the market and then with continuing and deepening competition destroys it. This you can see in most capitalist societies with only the best regulated ( most democratic) societies being able to avert massive downturns and market based disasters.

Will simply not work. Property is all about location. So who would like to stay next to a person who’s house mates will be inclined to break into yours. At best, development will come to a stop. At worst, people who buy high priced units next to low priced units will see their investment loose value very quickly. It also miss the point that they want to cater for people earning R7k/month when about 50% of their target earn less that R3.5k/month. People staying in poor areas will tell you all about people steeling their clothes (the little they have) off the line and the food out their kitchen cupboards. Even they move away as soon as they can afford and it has nothing to do with race.

So what do your propose we do about the massive inequality and poverty in out society Japie? Should we allow developers to build houses practically no one can afford to live in just because that makes them the sort of profits that will get them out of bed in the morning? I understand this is a complex problem but what is the point of democracy and voting if we so weaken the state that it can’t regulate the capitalist that don’t give a damn about human beings?

Where do you stay? In a squater camp or in as best a possible area you can afford? The issue is not the poor people but the crime.

Our people still do not get it.

The is NO such thing as free or subsidized which is still “free”.

Well technically when the federal reserve creates money it is ‘free’ so it’s only really a question of a government being able to control it’s money supply and then to decide how to allocate it so as to best educate and employ it’s citizens. IF there is a shortage of ‘money’ to pay for things it just means it’s being missalocated today or were missallocated in the past.

It’s untrue that the money created is free, you need to pay for inputs like paper and ink. Zimbabwe for example devalued their money so far by excessive printing that they could not even pay for this printing, therefore the “shortage” of cash they experienced. That’s why people started trading with traveler’s checks etc. when they had to use Zim dollars.

If you refrain from physical printing like Zim did this last time, but just add balances in bank ledgers, you get a situation where people make 2 prices one cash and one multiple times higher for wire transfers. If you continue with this, the electonic money eventually become worthless.

Don’t be ridiculous. Socialism is theft. It is the most immoral system “I breathe therefore you owe me” being the basis of socialism. You are clueless about money creation and economics in general. Money is not about printing chits. Piles of federal reserve notes are not money. Money is only money once it is borrowed into existence. The cost of money is the interest on the debt. The government gets its revenue by taxation, citizens paying for services or borrowing, but not printing money as this simply debases the currency. Another form of theft.

There is a Grande Canyon of difference between allocation of money and money supply. This is a lesson the Federal Reserve learned with QE. It can control the money supply by bond purchases or sales but cannot allocate where the money goes. The Fed is not a government agency in any case.

Socialism has proved countless times that governments cannot allocate resources effectively hence the widespread shortages always encountered in socialist hell holes that ignoramuses, such as you, continue to propagate.

Hardly Stellar knowledge. Rank ignorance of basic economics of the worst kind. Read up a bit before you reveal yourself for what you are.

Richardthe Great Capitalist.. so what is Norway, Sweden Finland Denmark?

Capitalists can be so childishly whiny, how about talks about helping for the greater good?

I am sure you support your grand parents, kids in some measure.. or do they all pay you back in hard currency and at prevailing interest plus? or minus prime?

Economics is a pseudu- non-exact science with no natural laws.. people are so misled by economist and their bullshit..

The South African administration to every issue is take the easy way out, legislate to have someone else provide / pay for the resultion . Won’t mention the many examples , but the proposed sect 25 of constitution is another. This one by a council is just another thin edge of the wedge.
The heart string” part of this proposal is understood, as inclusion in city to facilitate access to work site and faculties is laudable,however as others who have replied the communistic approach will impact capitalistic investment by delelopers and intended purchasers who help the city via rates base on proper ty value, by inclusion of low cost 1/5 elect of the development- it’s doubted if this owner element will maintain- improve the properties ( which will impact the desirability and value of the subizing full vale properties ) causing a spiral to urban slums and ultimately devaluation of rates base.
Possible solution Is the state “ read “municipality developing sub-economics ownership estates, that have a public transport facility incorporated into the development -that provides ease of access to work and facilities, this sort of development would require a HOA that has poweres to ensure housing / living standards are maintained so that desirability and value of such estates are sustainable… but such a solution ( which is done world wide) requires leadership & foresight / management

Just another nail in the coffin of the inevitable devolution of South Africa into a Post-Modernist Neo-Marxist shithole of a country.

South Africa is a highly capitalist society with a government struggling to make some modest reforms and institute some regulation to prevent the worst abuses. South-Africa is not a socialist leaning society nor marxist and with no aspirations to communism. Communism and the preceding socialism both required very entrenched democratic outcomes as well as a freedom of want and need troughout the society. As you can perhaps understand we have not come close to a good democracy ( people’s needs are not being met) so there is no socialism and thus no basis to perhaps move on towards a communistic ideal.

hahahahahah Stellar, what are you smoking dude?

The ruling Tripartite Alliance, is an alliance between the African National Congress (ANC), the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP).

You see the communist part there right? Little propaganda devouring munchkins cant see the wood for the trees.

This stellar sounds like an SACP member. The claptrap coming out of his mouth has a very distinct communist ring to it. We are a capitalist society? REALLY? With HUGE state owned monopolies such as Eskom, Transnet and upto very recently Telkom.

With our militant labour unions and ludicrous labor laws that is ranked amongst the worst in the world?

With more social grant beneficiaries than tax payers? With free education, free electricity, free housing and very soon free land. Whilst we have 40% unemployment and a tiny tax base.

With all of that, you want to tell me SA is capitalist? HAHAH. Hilarious comment.

The closest we ever got to capitalism was under Mbeki, and it showed too. Free market friendly policies, and peaking at 4.7% growth. Then it all went downhill from there.

What is wrong with herman mashaba? He is beside himself

The simple reality is that you cannot solve a public social housing crisis with free market forces.
Developers require at least 20% profit (bearing in mind that some developments takes years to get off the ground, so not that excessive). The banks demand this project viability as a measure of protection for the banks money (your money in your savings account).
If you cannot finance a development then no dice, supply drops and the existing stock skyrockets.
Do you self a favour and look at building costs, labour costs, land costs, finance holding costs, etc. Inflationary levers have created these high prices so simply applying a random rent, or sales price is farcical.

In this scenario, apartments would have to sell for R200k (assuming levies at 15%) in order to meet the requirements. This is certainly possible on 15m2 units, but this will lead to an overcrowded building, and them a slum, very quickly.

Perhaps the DA should start thinking a bit more long term, as these “low hanging fruit” will come at a very hefty price.

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