The City of Joburg’s proposal to compel private developers of residential complexes to reserve 20% of developments with more than 10 units for “inclusionary housing” could deter the private sector from developing residential units, according to the South African Property Association (Sapoa).
Sapoa represents the biggest property developers in the country, most of them operating in Johannesburg.
The organisation issued a statement about the proposed city policy, which would cap the rental income from such units. Sapoa will also formally submit its comments before the deadline on April 30.
The Citizen yesterday reported that property expert Erwin Rode also warned against the unintended consequences of the scheme.
According to Sapoa CEO Neil Gopal, the draft policy does not address the complex matters associated with affordable housing and inclusionary housing, including residential market realities, or what the financial and social consequences may be.
In terms of the draft policy, the inclusionary units should provide rental accommodation for households with a total income of R7 000 or less per month if privately managed, or should fit into published social housing bands.
Sapoa says if implemented, the scheme may impact the feasibility of residential developments and is potentially burdensome to private developers experiencing declining returns and profit margins.
An inclusionary housing obligation that does not take into account the prevalent economic conditions and health of the residential property market, and could negatively impact on housing delivery, Sapoa says.
“Affordability requirements thus influence the feasibility of inclusionary projects from a developer’s viewpoint,” the organisation says. “Also, the city is proposing an income range (monthly household income of R7 000 and less) that is fixed for the entire city, which, according to Sapoa, does not consider the spatial fluctuations in land costs. This fixed affordability income threshold may open private developers to revenue loss and risk.
“The draft policy states that any residential development of 10 or more units is subject to inclusionary housing requirements.
“However, research suggests that the scale of developments substantially influences the feasibility of including affordable rental units.
“Based on the decreased feasibility of inclusionary housing provision and management of units in smaller developments, the addition of developments consisting of 10 or more units in the framework of inclusionary housing may prove challenging to successfully implement.
“The proposed inclusionary housing policy may isolate low-income households in high-income, market-related developments, with inadequate access to social facilities.
“This is in addition to the challenges related to cross-subsidisation among housing consumers [and the] capacity of the City of Joburg to monitor mandatory compliance of private developers in this regard,” said Sapoa. “In its current form, it will possibly deter the private sector from developing residential units.”