The City of Johannesburg’s draft Inclusionary Housing Policy, which is currently out for public comment, is not a workable solution and may, in its current form, deter the private sector from developing residential units, says the South African Property Owners’ Association (Sapoa).

Sapoa CEO Neil Gopal explains that the draft does not address the “many complex matters associated with the question of affordable housing”, including residential market realities, or the financial and social consequences of such a policy.

The policy is meant to be financially sustainable and profitable for private developers and financiers while still creating integrated, affordable, low-cost housing for residents, according to the office of executive mayor Herman Mashaba.

The draft policy proposes that every new development of ten dwelling units or more must include 20% inclusionary housing. 

Incentives in the form of proportional bonuses in development controls, reduction in parking requirements, reductions in parks and bulk infrastructure contributions, and a rates rebate for the inclusionary units have been proposed.

The city’s vision is that inclusionary housing, when managed privately, should cater for households with an income of R7 000/m or less or should fit into published social housing bands.

Sapoa believes the proposed mandatory 20% inclusionary housing requirement may negatively affect the feasibility of residential developments and is potentially burdensome to private developers already experiencing declining returns and profit margins.

Further, the organisation suggests that inclusionary requirements which are inflexible to the underlying economic conditions and health of the residential property market may have a detrimental impact on housing delivery.

Affordability requirements, therefore, influence the feasibility of inclusionary projects from a developer’s viewpoint.

Moreover, Sapoa notes that the city is proposing an income range that is fixed for the entire city, which does not consider the spatial fluctuations in land costs. “With the implementation of inclusionary housing, this fixed affordability income threshold may open private developers in certain areas to revenue loss and risk.”

Sapoa states that research suggests that the scale of developments substantially influences the feasibility of including affordable rental units, as such the suggestion that developments comprising ten or more units include inclusionary housing may prove challenging to implement.

“In terms of potential social impacts, the proposed inclusionary housing policy may isolate low-income households in high-income, market-related developments, with inadequate access to affordable social facilities,” the organisation adds.

Further, the city’s capacity to monitor mandatory compliance of private developers is an additional concern in determining the success of the envisioned inclusionary housing policy.

In terms of incentivising the developer, Sapoa believes that limiting the availing of incentives to merely the inclusionary units has little cost-reducing effect for the developer.

“To incentivise the developer, one would expect the inclusionary units to be entirely or largely free from any contributions,” the organisation states.

Sapoa recommends the city increase emphasis on a negotiation-based approach to inclusionary housing provision and incentives, rather than a mandatory, blanket approach to implementation.

Further, it suggests that the policy be limited to selected large housing developments, the scale of which supports the feasible inclusion of housing units for low-income households. The inclusionary housing requirements must also be flexible based on the underlying economic and residential property market conditions.

Lastly, Sapoa suggests that the target affordability threshold must be location flexible and incorporate a broader income range to increase economic feasibility. The organisation believes this will ensure smaller income differences between affordable and market units, mitigating potential private developer revenue loss.