Inclusionary Housing: Home brew

Nov 10, 2016 | Features

Talk about inclusionary housing first started in SA in the early years of the new century and recent countrywide commitments to a national spatial revolution are again bringing the concept to the fore.

Talk about inclusionary housing first started in SA in the early years of the new century and recent countrywide commitments to a national spatial revolution are again bringing the concept to the fore.
No newcomer to the international market, where it has proved largely successful, inclusionary housing aims to achieve a conscious and better balance of race and income groups in areas that are well located and well serviced by jobs, social services and public transport. The goal is to provide lifestyle and accommodation opportunities for low and lower-middle income households in areas from which they might otherwise be excluded because of the dynamics of the property market.

Integration

The premise is involving the private sector in actively contributing to the delivery of affordable housing and promotion of greater integration by including affordable housing within higher income housing developments.

Although Johannesburg’s Inclusionary Housing Policy is being reviewed, the interim policy incentivises private developers to allocate a minimum percentage — currently proposed to be between 10% and 30% — of the total number of units of their development to the construction of affordable housing. This is defined as housing targeting households with a monthly income of R3,500-R7,000.

There are several projects nationwide that have been inclusionary in nature, Jerusalem in Fairland and Fleurhof along Main Reef Road, both in Johannesburg, among them.

Incentive on Offer

No incentives were offered at the time Simon Waner entered unchartered territory in the Western Cape developing incremental houses at Westlake Village, near the high-end Nieuwe Steenberg Estate in Tokai, developed by Waner’s Warner Projects.

“The property we purchased for development in 2008 in Tokai had an entrenched zoning condition which specified that of the 30 approved units, 20% be allocated for inclusionary housing,” says Waner, founder of Warner Projects. “With some reservation — most specifically because the units we planned to develop would be sold at around R4m-R5m and the incremental units would be sold at around R400,000, making the project unviable — we decided to embrace (and subsequently subsidise) the incremental houses and ultimately the thrill and wonderment at seeing someone move from a shack to a beautiful home was beyond gratifying.”

A forerunner in this type of development, Waner points to the overwhelming number of candidates in dire need of housing. While home ownership is first prize, promoting social upliftment and buy-in, inclusionary housing developments “offer consumers a range of options with regard to tenure, providing ownership and rental opportunities”, says Wikus Lategan, Calgro M3 group MD. “Calgro’s wide range of housing typologies caters for various income levels, targeting households with combined incomes ranging from below R3,500 up to around R15,000 per month and we have found that people of different income segments within the same developments create stable communities.

“The real current barren space in outright homeownership, however, is really the band of income earners between R3,500 and R9,000 per month, simply because they are mostly disqualified from obtaining a first mortgage loan over the property due to affordability issues. If a price of R345,000 is assumed for a basic entry level apartment of 40m², then a purchaser will have to be able to prove to a bank that he has an available income for a mortgage payment of R3,561 each month, but will have to earn at least R10,791 per month.”

However, this market sector is generally good payers and long term tenants, says Michelle Dickens of TPN Credit Bureau. Century Property Developments has inclusionary developments in Riversands and Linksfield, both in Johannesburg, planned for 2017. Says Century agent Jessica van der Walt: “There is huge demand for homes in this sector. For investors it’s a numbers game. Those who can extend their portfolios to include multiple units in this price bracket price could well ultimately enjoy a higher return on investment (both through rentals and sales) than someone who had invested the same amount in one single property.”

Coastal Complex

After 10 years of planning, work recently began on eLan’s Blythedale Coastal Resort on the KwaZulu-Natal North Coast, which will consist of an anchor 1,200 sleeper resort hotel, a 3,600 sleeper resort hotel villa complex, a retirement village, 250 sectional title flats, 2,400 freehold homes and 709 affordable homes linked to some 600 homes for gap housing. The Blythedale Hills Village hosting the gap and affordable homes will be anchored by a shopping centre, an agri village, commercial, retail and residential living, and educational and sports facilities. Owners in Blythedale Beach Resort, Ocean, Golf, Equestrian and Forest nodes will pay a contributory levy to subsidise infrastructure at Blythedale Hills. The village will be promoted as a secondary tourism node with cultural dancing, music, street cafés and the like, stimulating a united community, wealth creation, investment and business opportunities, and lifestyle.

Says Riaan Roos, CEO of Multi Spectrum Property: “There is a huge demand for housing in the R3,500-R12,000 per month price bracket and many advantages will come out of investing in inclusionary developments” “While the perception may be that these houses will bring property values in the rest of a development down, many studies both in SA and internationally have shown that integrated developments are more sustainable and that they don’t affect property values at all.” The company is the developer of Cape Town’s Buh-Rein Estate, among others.

Any advantages?

Says Roos: “There is a huge demand for housing in the R3,500-R12,000 per month price bracket and many advantages will come out of investing in inclusionary developments. In the old regime people were shunted to the periphery by apartheid from where they had to travel into the CBDs and towns, leaving them with minimal disposable income, a large percentage being spent on public transport. With people living closer through integrated or inclusionary developments, they have more disposable income and can afford a bigger home. Within the larger integrated developments people also have proper access to amenities such as libraries, schools and shops. There are so many advantages that come out of this.”

There are gaps in the legislation that need to be addressed. Says Van der Walt: “Building contributions payable to council are the same for a 400m2 home or an inclusionary unit, making costs a challenge for developers. We hope to see incentives countrywide that include fast-tracking the planning process for developers, clearly defining the long-term operations of the units and a legislation drafted for developers who do want to provide inclusionary units, as we believe this will create certainty in the market and will attract buyers who want to invest and rent the unit out.”