Affordable housing in Cape Town’s CBD isn’t just possible, it is something that should be actively pursued for the benefit of an integrated city and a thriving local economy, wrote Cape Town Partnership researcher Andrew Fleming in the latest edition of Ndifuna Ukwazi’s People’s Law Journal, “The Urban Land Question”.
Government and private developers say that the high price of land and input costs in the Central Business District (CBD) stops them from building affordable housing. This often stops them from exploring options for affordable housing development.
Sometimes, government can use incentives to encourage private developers to fulfil housing policy. In the case of low income housing there are few incentives to explore opportunities. As a result, Cape Town’s CBD still does not have any integrated and affordable housing opportunities.
However, when investigated further, Cape Town’s CBD provides a very good opportunity to turn this situation around. Affordable and inclusive housing is not only possible in the CBD, but is necessary. It would help to reverse the history of spatial apartheid that has shaped our social and economic lives. On that basis alone, affordable and mixed-income housing in the CBD must be a priority for all spheres of government and the private sector too.
Affordable housing in the CBD has significant economic benefits as well. People want to live closer to the places that they work. This has fuelled the growth of other commercial centres around the Cape Town metro-region, such as Century City and Bellville. One of the most strategic and straightforward ways to maintain the CBD’s economic draw would be the addition of affordable housing. This would not only bring in more people, but it would also help to enhance the local economy by offering more opportunities for more people.
More and more people are buying houses in the CBD. At the same time, demand for residential properties in the CBD is rising. Between 2001 and 2011, the CBD’s total population increased from 1,570 to 5,286 people.
According to the State of Cape Town Central City Report, every year more money is being spent on residential properties. The total amount spent increased from R115m in 2011 to R249m in 2013. In 2013 alone, there were a total of 163 residential unit sales in the CBD, at an average price of R1.428m each.
Renting in the city
In 2013, the average monthly rental rate in the CBD was:
Studio/bachelor: R4 739
One bedroom: R7 272
Two bedroom: R12 896
Three bedroom/penthouse: R14,000
People have to compete for rental properties. There is a very high demand for rental properties.
Vacant office space for housing
The City of Cape Town’s latest business location intelligence initiative, called ECAMP, shows that the CBD is in a strong phase of economic and infrastructural growth. There is a high demand for residential property. More people are buying and there is not enough rental houses.
Together, the high demand for residential spaces, along with the high vacancy rates in the lower end of the office market, shows us the benefits of more affordable housing coming into the CBD – property owners and developers are motivated to fill their buildings to get rent, and residents want places to live in the CBD in order to be near to the CBD’s economic and social benefits.
The key is to merge these two demands in a way that will also have the effect of transforming Cape Town into a more racially and socioeconomically inclusive space.
According to the South African Property Owner’s Association’s latest Office Vacancy Report, published in July 2014: Cape Town’s CBD has 1,012,642 square metres of total rentable office space. This is split across different property grades (Premium, A, B, and C grades). Premium is the highest quality property and price. C-grade is the lowest. 9% of offices overall are vacant or empty. But 25% of C-grade category has been vacant in the past nine months. There is a chronic lack of demand for C-grade office space.
Creating more residential units does not have to be as costly as you might think. Converting existing properties in homes is a cheap way to create affordable housing. Retrofitting existing C-grade buildings into affordable student housing, for instance, can be done relatively easily, when you think that the walls of a building don’t have to be changed dramatically for students. Students often share bathrooms and kitchens. For building owners, this would be a good way of using older buildings that have high vacancy rates while providing new opportunities for younger people especially.
A tax incentive called the Urban Development Zone (UDZ) rewards property owners and developers if they upgrade or build properties in some urban areas around the country, such as Cape Town’s CBD.
This is a very good incentive to encourage developers to retrofit office into affordable units in the CBD. This benefits both residential and business tenants because the building is being used and improved.
Another strategy is to have zoning requirements and incentives that require developers to include a percentage of affordable housing in their developments. In exchange they get some privileges. Cities like Toronto, Amsterdam and, more recently, New York have all implemented creative zoning policies to encourage affordable and lower-income housing in central urban spaces.
Social Housing Movement
The social housing movement is an example of a successful affordable development. Social housing provides well-managed and privately developed rental housing for people and families who earn between R3 500 and R8 000 per month. It is funded through government grants and incentives. The private sectors invests and managed the housing. Social housing could be built in Cape Town’s CBD on land currently owned by the government and in various privately-owned buildings throughout the area. It would provide homes for nurses, police officers, and other public and private employees who earn regular salaries and want to live in the CBD.
What’s happening in the rest of the world
Bringing residents closer to the city centre makes sense. Benefits to affordable housing in the CBD include residents using underground infrastructure (like the sewage systems) at night while workers and visitors use it during the day, use of existing underground infrastructure rather than building new infrastructure, and reducing metro-wide carbon emissions because less people are using cars.
- Toronto: Toronto Community Housing, the largest social housing provider in Canada, is addressing affordability in the city centre through the revitalisation of downtown land and provision of rental housing. One example is Regent Park, where engagement with the community over four years has resulted in a revitalised neighbourhood where rental housing for a diverse population blends incomes, use and culture through proactive development policy.
- New York City: As the United States’ most congested city, NYC does not have issues with low population density. However, it does have affordability issues, which its past two mayors have taken head-on. The city has required property developers to include affordable housing units in new projects in order to gain access to additional FAR (Floor Area Ratio). The City aims to create 200 000 new units of affordable housing in the next 10 years.
- Bogotá: Known around the world for its leadership in inclusive transportation and public infrastructure, Bogotá has recently taken inclusive development a step further by linking expanded transportation funding with the direct provision of lower-income, inner-city housing. By doing so, the city is helping residents gain better access to more jobs, services and cultural offerings. This approach also shows innovation in bridging funding for additional infrastructure, which go a long way towards promoting an inclusive urban city.
- Johannesburg: Well-located affordable housing in Johannesburg’s CBD has been at the heart of driving a more integrated urban space. Private companies such as the Johannesburg Social Housing Company (JOSHCO), supported by National Government grants and financial incentives, are converting vacant and unoccupied buildings into affordable rental housing with regular community programming and ongoing maintenance. High levels of demand and rental payments make these developments a success for the owners and tenants alike, bringing better housing into the realm of possibility for more people.
This article was originally published in The People’s Law Journal, a publication of Ndifuna Ukwazi that brings that brings to life South African law and jurisprudence in an accessible format with articles, opinion, resources and analysis. It is hoped that it will be used by lawyers, activists and social movements to forward the struggle for equality and social justice and the fulfilment of our Constitutional rights. At least two editions are published annually, free. Copies available at firstname.lastname@example.org or download from nu.org.za/publications.
“The Urban Land Question”, the latest issue of the journal, “helps to present a few areas relating to the urban land question. It explores the law on housing in a simple and straightforward way, together with articles on evictions, the sale of state land and opportunities for expropriation and densification”. Download and read it for free here (PDF).
Read more about housing and density in Cape Town
- Njabulo Ndebele writes: The how of an inclusive Cape Town
- Affordable housing in the Cape Town central city: frequently asked questions
- We ask: Can new infrastructure encourage more residential diversity in the inner city?
- Bulelwa Makalima-Ngewana: Towards a 24-hour city for Cape Town
- Density’s promise for Cape Town: reflections on the African Centre for Cities’ Density Syndicate