Framework for an Inclusionary Housing Policy (IHP)

Introduction:

In the first half of 2006 the NDOH commissioned and reflected on international experience regarding inclusionary housing Policy Since then the NDOH has been engaging with the private sector to try to find a way of implementing inclusionary housing thinking in way which is appropriate in the South African context and which constitutes a “win-win” scenario for citizens, government and developers Several options have been presented.

The contract basically states that “every commercial development including housing developments that are not directed at those earning R1500 or less, spend a minimum of 20% of project value on the construction of affordable housing (currently defined as housing targeting households earning between R1500 and R8000 per month) No position has however been legislated and no formal national policy framework exists.

• Many different policies can cause confusion in the marketplace both with respect to consumers and suppliers.

• Ill-considered/naive policies could potentially lead to developers choosing to exit the market (many localities don’t have the capacities to develop appropriate policy).

• Onerous local policies could cause developers to “flee” to other localities.

Inclusionary Housing Policy: Definitions:

Inclusionary Housing Policy:

Inclusionary housing policy in South Africa means the harnessing of private initiative in its pursuit of housing delivery to middle higher income households to also provide (include) affordable housing opportunities in order to achieve a better socioeconomic balance in residential developments and also contribute to the supply of affordable housing.

Affordable Housing:

Specifically for the purposes of inclusionary housing affordable housing is defined both with respect to ownership and rental.

Affordable housing for ownership:

Affordable housing for ownership is the range between the current cost of a fully subsidized RDP house and the top of the “affordable housing range” as defined in the Financial Sector Charter + 40%.

Objectives Of Inclusionary Housing Policy In South Africa:

In the light of the above contextual considerations it follows that the objective of inclusionary housing policy is primarily to promote greater social inclusion/integration and to break with the highly segregated processes of built environment creation in South Africa Boosting the supply of affordable housing is a secondary objective but an important one.

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).

To mobilize private sector delivery capacity to provide affordable housing.

To leverage new housing opportunities off existing stock at the same as contributing to the densification of South African cities.

Dealing With Steep Price And Income Cliffs:

Reference has already been made to the fact that South Africa has one of the most polarized income distributions of any country in the world And it has also been noted that such a skewed distribution also manifests itself in steep price cliffs The top of the affordable housing range as defined here is at present of the order of R350 000 On the other hand it is not unusual for new residential developments driven by the private sector to exhibit average unit prices which exceed R2 to R4 million per unit (6 to 11 times the top of the affordable range)

The Inclusionary Housing Policy Prescription:

The primary concern regarding the use of total project value is that because of steep income cliffs such a prescription may make projects unviable economically Imagine a project in which 20 up market units at an average price of R4 million are to be built Assume also that the inclusionary prescription is 20% of total project value Twenty per cent of R80 million is R 16 million which in turn translates into 80 units of R200 000 It will unquestionably be an unviable proposition to have 20 up market units side by side with 80 affordable units In order to ensure project viability the Oh of project value would have to vary depending on the average value of the “upmarket” units This is an unwieldy proposition,

Conclusion:

The key principle to be observed is that the strict separation in space of affordable units from market units should as far as possible be avoided Ideally the affordable units should be integrated into the projects and blend in with the surroundings This implies that as far as possible architectural styles should be similar.

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