Blog

August 28, 2018

Clawing at the heels of the housing market - Gritty ‘micro-units’ of Cape Town

Author: DAG Admin, DAG

Against a backlog of 193 000 households in Cape Town on the waiting list, for many, the delivery of dignified housing remains a pipe dream. Whilst the backlog is staggering, it doesn’t convey the complexity of the housing debate.

Firstly, the state has been at the centre of delivery - either as a developer (for low income subsidised BNG type housing), property manager (for approximately 50 000 rental housing units) or as an investor/financier (in the form of social housing) for subsidised housing. Despite all the resources invested in housing, Cape Town trends indicate that we are decades from delivering any form of sustainable housing solutions for the city. This state centred approach has precluded, and often discouraged, any form of private investment in low income and affordable housing from both individuals and equally from financial institutions such as banks.

Equally concerning is that most housing developments for the poor are located far on the on the periphery of the city. This form of delivery on the margins of the city must be resisted and curbed in all respects, based on its significant implications on infrastructure, costly transport costs for poor and working class households living on the periphery, climate change mitigation, scarce economic opportunities and general wellbeing of citizens. The Social Housing projects in Woodstock and Salt River are a great start, but they are only a drop in the ocean of housing demand.

Thirdly, given that it currently takes the City of Cape Town approximately seven to eleven years to upgrade one informal settlement, it would take close to a century to upgrade all 204 informal settlement. This is without factoring further land occupations, urbanisation and resolving the issues relating to backyard renters.

Amidst this apparent doom and gloom, there are small scale entrepreneurs and developers that are delivering small scale rental ‘micro-units’. These micro-developers are true entrepreneurs - property owners, developers and property managers operating as one, operating with a shared vision to address market and housing gaps. Driving through Du Noon, Illitha Park, Milnerton Joe Slovo and Delft, one can see these new double and sometimes triple story buildings mushrooming. They are offering studio rental accommodation for anywhere between R1 500 to R2 500. In 2018 alone, Development Action Group (DAG) has supported and documented a growing number of such ‘micro unit’ schemes that are either already constructed or being planned at the moment. Each new development reinforces the message that small scale developers are delivering in the market segment at a rate much faster than the than the state, whilst at the same time providing locally relevant affordable housing solutions to a market segment that is under-catered at the moment. Given that the estimated average rental for a one bedroom apartment in Cape Town is R7 000, more than double of what an average South African earns on a monthly basis, it is no wonder that these units have a 30-minute vacancy rate. The micro-units are in high demand and suit the needs of people earning incomes from R5 000-R10 000 that don’t qualify for a BNG subsidised house or likely for bank finance.

Whilst this new form of micro-units present many opportunities, they also present many risks. There is clearly a niche in the low income market for such developments, however, these developments need to be aligned with bulk infrastructure capacity (in the form of sewer, water, electricity etc.). Simultaneously, the over-regulation of such developments can inadvertently push the developers to cut corners and build illegally- often leading to building collapse or substandard housing stock.

The Development Action Group believes that providing core technical support and encourage this form of densification could relieve the significant pressure of housing. They are also now in the process of establishing a Developer Academy to assist small scale developers in delivering such housing at scale. Financing such developments, remain at the heart of such housing delivery. Creating mechanisms that can provide low interest equity for small scale developers will go a long way in creating meaningful housing stock across the city. Finally, providing property management and maintenance support is essential to ensure that exorbitant rent escalation and evictions can be avoided at all costs.

If we have to move beyond the state centred approach to housing, a complete overhaul of the National Housing Code and current subsidy schemes is needed. This has to be in recognition of enabling small scale developers to provide affordable rental housing at scale.