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Low-cost housing raises hackles

Posted On Wednesday, 22 March 2006 02:00 Published by
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Goverment’s proposal for 20% of new residential property developments to be set aside for low-cost housing has raised a number of questions and challenges for developers.

Lindiwe Sisulu

Although nothing has been set in stone, developers are concerned that such proposals could put additional pressure on already squeezed profit margins.

At last week’s plenary session on rapid housing delivery, hosted by the housing department in Kempton Park, Thozamile Botha, adviser to Housing Minister Lindiwe Sisulu, said one of the issues raised at a housing indaba in Cape Town in September last year was the proposal that 20% of new developments be set aside for low-cost housing. With the proposal it is hoped to integrate South African communities alienated economically and geographically by apartheid.

Botha said the implementation of the 20% issue remained unresolved. He said research had been conducted by both government and commercial property association Sapoa to look at how this principle was implemented in other countries.

“Everyone is asking if we are talking about 20% of the cost of the development, or 20% of the actual land. Or does it mean that if there are 200 stands in a development, 40 must be made available for affordable housing?”

Chris Renecle, a director of Johannesburg-based developer Renprop, said that while government wanted to integrate communities with this proposal, a number of problems lay ahead.

The basis for the allocation and the price of these special housing units was in question. “If the developers have to dispose of these units at a discount, then that amounts to a tax, which puts residential developers at a disadvantage,” said Renecle.

“Who would qualify for these properties? How would government determine which people qualified for the units?” Another challenge will be the allocation of the units.

Renecle said government had suggested that the local authority administer the allocation of such units. But local authorities are not functioning at full capacity as it is, and are not coping with rezoning and township applications. “How are they going to cope with this?” he asked.

The proposal could curb residential developments as developers would not want to get involved. “Developers do not want to take on inordinate risks,” said Renecle. “If government does not create incentives for developers by way of subsidies or another means to ensure they make the same profits, they will shy away from residential developments.

“Profit margins are already under pressure because of increased building costs and the lack of land brought on by the long process of getting development rights approved.”

Renecle said most new residential developments were developed on a sectional-title basis and this created another set of problems.

It was not likely the low-income earner who obtained a low-cost unit would be able to afford the regular levies due to a body corporate. “If they (low-income earners) can’t pay, will the state subsidise the levies? If the state doesn’t, the solvency of bodies corporate will be put under pressure,” he said.

Although more discussion is needed between government and developers on how to tackle the problem of delivering affordable housing, it has decided there is a need to integrate communities. National housing department spokesman Ndivhuwo Mabaya said last week the plenary assembly agreed there was a need for integration.

He said Sapoa and government acknowledged that individual developers had started allocating some form of percentage to affordable housing.

Last modified on Saturday, 08 March 2014 10:54
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