Presentation to the Port Folio
Committee
An overview of the current
Inclusionary Housing Policy
and its development progress
POLICY INTENT
To achieve a more balanced outcome of
built environment creation in the
direction of more racially integrated and
income inclusive residential
environments
Scope of the Policy
• A cross-cutting initiative embracing a wide
scope of activity.
• A general shift in imagination in terms of
which Housing practitioners in both the
public and private sectors should consciously
be striving to avoid racial and class exclusivity
in all projects that they conceive and initiate.
• Aiming for a socio-economic mix in all
projects.
KEY CONTEXTUAL CONSIDERATIONS
• Inclusionary housing in South Africa cannot be
primarily about trying to leverage scale delivery of
affordable housing as a by-product of the
production of houses for middle and higher income
sectors of the market by big developers.
• The limited scale of delivery by private developers
overall in responding to what is a relatively small (in
proportional terms) market for middle income and
up market housing. In the midst of a property boom
South Africa has averaged 40 000 private sector per
annum
KEY CONTEXTUAL CONSIDERATIONS
• South Africa has levels of income inequality
which are among the highest in the world.
• Steep “income cliffs” can be expected
between rich and poor and these cliffs are
likely to be much steeper in the average
inclusionary housing project in South Africa
than in the USA or the UK.
• It is harder to achieve inclusionary outcomes
and retain project viability in South Africa
than elsewhere.
KEY CONTEXTUAL CONSIDERATIONS
• Processes of built environment creation
in South Africa are still extremely
segregated in race and class terms.
• Spatial polarization has very negative
practical implications for lower income
households but also subverts the very
important national process of building a
single nation.
OBJECTIVES
• To make a contribution towards
achieving a better balance of race and
class in new residential developments.
• To provide accommodation
opportunities for low income and lower
middle income households in areas
from which they might otherwise be
excluded because of the dynamics of
the land market.
• To boost the supply of affordable
housing (both for purchase and rental).
OBJECTIVES
• To mobilise private sector delivery
capacity for the provision of affordable
housing.
• To leverage new housing opportunities
off the existing stock of sites at the
same time contributing to the
densification of South African cities.
• To make better use of existing
sustainable human settlements
infrastructure.
PRINCIPLES
• “Win-win” arrangements wherever
possible
• In principle there should be no
mandatory inclusionary requirement
unless this is supported by reasonably
proportional incentives
• Flexibility is essential to accommodate
project specific circumstances
PRINCIPLES
• Best place for decisions on the extent of
the incentives to be provided and the
proportional inclusionary requirements
is at the local level.
• Avoid fragmentation and confusion
associated with different authorities
taking different approaches – stick to
the same principles.
PRINCIPLES
• Existing development/use rights are
protected by law and need to be
treated with respect.
• Due process will need to be followed
in the pursuit of all objectives which
potentially impinge on existing
development/use rights.
WHO WILL BE ASSISTED ?
• Must be older than 18 years of age.
• Must be lawfully resident in South
Africa
• Must not have benefited previously
from access to an inclusionary housing
unit.
THE ESSENCE OF THE POLICY
• Two distinct but complementary
strategies are proposed:
1. A voluntary Pro-Active component (VPA).
2. A compulsory but incentive-linked
regulation-based component - referred to
below as the Town Planning Compliant
(TPC) approach.
VOLUNTARY APPROACH
Municipalities:
•
•
•
Identify inclusionary housing projects that they
wish to actively pursue with private sector
partners.
Bring local government-owned land to the process
as well as other incentives.
Require the provision of a proportion of the units
as affordable stock which will vary depending on
the extent of the incentives provided and what a
mixed income project will tolerate to make it
viable.
COMPULSORY APPROACH
Key national inclusionary housing parameters:
• Do not apply in low income areas and in
projects supported by subsidies made
available in terms of the programmes
outlined in the National Housing Code.
• Affordable units should be similar in style
to the more up-market units, be integrated
into middle and upper income
developments and not located in separate
areas.
COMPULSORY APPROACH
•
•
Rezoning or subdivision approval is made
contingent on meeting specified inclusionary
requirements in return for being awarded certain
development rights.
“Win-win” opportunities:
–
–
–
Public investment in bulk and connector infrastructure
as an incentive.
Density bonuses.
Allow for multi-story units and some commercial rights
but may require that 30% of the units in the project
must be affordable.
COMPULSORY APPROACH
Key national inclusionary housing parameters:
• Compulsory prescriptions will vary between
10% and 30% of housing units developed.
• Will apply to all private residential
development projects of 2 or more units.
• Maximum proportion of affordable /
inclusionary units in any single project
should not exceed 60% of all units.
COMPULSORY APPROACH
• The compulsory approach is currently under
evaluation against the recent Appeal Court
ruling regarding the unconstitutionality of
Chapters V and VI of the DFA
• We may have to reconsider the programme
and convert it to guidelines for incentive
driven outcomes through the VPA option
On-selling
• In the first 5 years the owner of an
inclusionary housing unit can sell the unit at
original price plus building inflation (except in
the case of hardship that can be proven
objectively in which case the unit can be sold
at market price).
• Improvements can be factored in at cost plus
escalation
• After 5 years the unit can be sold at market
price
On-selling
• If any unit is sold within 5 years the new
owner must be eligible for inclusionary
housing purchase and will be subject to the
same restrictions for 5 years after date of
purchase.
• On-selling of sites only will be subject to the
same provisions as those that apply to the
sale of an inclusionary housing unit.
DEALING WITH STEEP INCOME AND
PRICE CLIFFS
•
•
In projects where the average price per unit
exceeds the top of the range for affordable
housing as defined by the FSC + 40% x 3 (at
present R1,050 million) the top of the affordable
housing range can be increased to the current cutoff for the waiving of transfer costs on purchase
(currently R500 000).
Local authorities can in such instances (and at
their discretion) require that up to half of the
inclusionary units be below the top of the
affordable housing range +40% (currently
R350 000).
•
DEALING WITH STEEP INCOME AND
PRICE CLIFFS
In instances where the average price per unit
exceeds the top of the range for affordable housing
+ 40% x 6 (at present R2,1 million) inclusionary
requirement can:
– Be met off-site, but only in another inclusionary
housing project (where more inclusionary
housing is provided than is required).
– Be met on-site in terms of the current transfer
fee waiver cut-off (R500 000) .
– Be met by paying a fee in lieu of inclusionary
provision
FEES IN LIEU OF MEETING INCLUSIONARY
REQUIREMENT ON SITE
•
•
If a developer is required to provide 20 units to
meet inclusionary requirements then the fee in
lieu of will be equal to 20x (the top of the FSC
range + 40%).
The amount to be paid per unit by the developer
as each of the first 20 units is sold is:
•
Total Fees in-lieu-of owed – 20% (paid up-front)
20
MINIMUM PHYSICAL SPECIFICATIONS
• Minimum floor area of 40m².
• Internal bathroom and kitchen area.
• Building standards set by regulatory
authorities.
• May relax the above specifications provided
in the opinion of the official the aims and
objectives of inclusionary housing will be
advanced by such relaxation.
INCLUSIONARY HOUSING CREDIT
SCHEME
• Under construction
INCENTIVES
• Possible introduction of Tax Credit Scheme
along the lines of similar schemes in the USA?
• Energetic efforts will be made to mobilize,
acquire and free-up State (include land
owned by SOE’s), Provincial and Local
Government Land for inclusionary housing
purposes in suport of the voluntary process.
INCENTIVES
• Fast-tracking of development approval
processes will be an incentive which can
generally only be offered in deal-driven
initiatives. It should used sparingly since, in
principle, all developers should be able to
have their development proposals processed
expeditiously?
INCENTIVES
• Incentives are the basis of the Town Planning
Compliant component of the IHP. Particularly
important are density bonuses/allowances
and in certain instances use rights.
• Provision of bulk and link infrastructure could
be a powerful incentive if linked to
inclusionary housing provision.
INCENTIVES
• A wide range of government subsidies will be
available to support developers in fulfilling
inclusionary housing requirements. These
include but are not confined to Credit Linked
Individual Subsidies and Social Housing
Subsidies .
LEGISLATION REQUIRED
New legislation will be created to operationalise the
National Inclusionary Housing Policy if the
compulsory option is retained. Such legislation will:
• Require municipalities, as the main implementing
arm of the TPC component, to draw up and
implement local IHP Plans.
• Require all spheres of government to apply IHP
schemes in line with National Policy and
parameters (and prescribe clearly where such
parameters are articulated)
• Specify reporting requirements and responsibilities.
Work in Progress
• A recent workshop was conducted and the
comments received are being assessed
• Inclusionary housing legislation
• Implementation guide-lines
• Discussion with Treasury re. Tax issues and
Inclusionary Housing Credits
• Constitutionality of the TPC is being
investigated
Summary of the feedback received
•
•
•
The 40sqm size norm should be
reconsidered as smaller units are also
feasible;
A major concern is that very few
municipalities have the required capacity to
administer this very complex programme;
The 5 year restriction on the sale of
inclusionary units was both supported and
apposed
Summary of the feedback received
The envisaged impact of the Policy:
1 The uneven application of the policy may lead to
withdrawal of developers from an area and focusing on
another more favourable area;
2 It may bring the private sector housing development market
to its knees;
3 Market forces should determine values and it should be
flexible;
4 The incentives must be clearly defined and published;
5 The financing of bulk and connector services is a major
concern; and
6 The policy may be unaffordable to the target group.
CHALLENGES
• High amount of effort with limited potential
impact.
• Level of sophistication required to model
viable projects and implement them
successfully may not be readily available –
Hence, may want to pilot the roll out.
• Negative impact on residential development
sector – risk of withdrawal of private sector –
need further consultation and “buy-in”.
Conclusion
• There is considerate concern regarding the impact
of the policy on the private sector development
market;
• The capacity of municipalities to implement the
policy is a major concern;
• The Appeal Court Judgment on the DFA may have
implications for the obligatory provision of the
policy
• Further consultation is required
• Ministerial support for the programme is pending
THANK YOU