The City of Johannesburg Inclusionary Housing Policy DETERMINING - - PowerPoint PPT Presentation

The City of Johannesburg Inclusionary Housing Policy

DETERMINING THE POLICY EFFECT ON THE RESIDENTIAL PROPERTY SECTOR JULY 2019

• 1. Introduction

 Review dynamics surrounding inclusionary housing policy in the

City of Johannesburg

 Examine proposed approach to policy implementation  Gather input from property sector stakeholders  Determine the effect of the policy implementation on

developers, residential property market, property development, local economy

• 2. Impetus for implementation
• Private sector participation in affordable housing
• Affordable housing supply in well-located areas
• Integrate peripheral communities in formal areas
• Unique spatial, social, human settlement context

Segregated urban spaces Isolated human settlements Affordable housing backlog

Inc Inclusionary ho housing as as int interventi tion

• 3. Overview of inclusionary housing

1 2 3 4

Mandatory ry

• Developers obliged to

include units deemed affordable

• Blanket approach to

implementation

• Compliance required to gain

development rights

• Certain cost offsetting

measures availed by public sector

• Developers incentivised by

public sector to include affordable units

• Incentives to induce developer

participation

Volu luntary ry Ta Targ rget eted

• Mandatory requirements

applicable for developments in areas specifically delineated for inclusionary housing

• Area delineation in line with

development objectives

• Outside these areas, voluntary

implementation may still take place

Neg egotia iated

• Requirements are negotiated
• n a project-by-project basis

between developer and public sector

• Determined by the unique

financial considerations of the project

3.1 .1. Im Implementatio ion approach

3.2 .2. Poli licy ele lements

a b c d

Mode e of f pro rovi visio ion

1. On-site 2. Off-site 3. Fees in-lieu 1. % units 2. % of RFA

Inclusionary re requirem ements Aff Affordabil ilit ity defi efiniti tions

1. Homogenous 2. Differentiated

Aff Affordabil ilit ity mec echanis ism

1. Price and rental restrictions 2. Dwelling unit size restrictions

3.3 .3. In International case studies

• Context; approach; mechanisms; justification; incentives; requirements
• Developing countries: Brazil; Colombia; Turkey
• European countries: Spain, Ireland, England
• North American countries: USA & Canada
• Gro

rowing demand for for inc inclusionary ho housing im implementa tation

• Identify approaches; instruments; and mechanisms
• Determine factors which influence implementation
• Relevant approach transferable to local urban context
• NB int

internati tional cas ase stu tudies

3.3 .3. In International case studies

Measure toward protecting development feasibility ✓ Refraining from a blanket, city-wide implementation of rigid inclusionary requirements ✓ Inclusionary requirements are flexible based on the local context relating to the economic and property market conditions ✓ A spatially flexible approach to inclusionary housing implementation, taking cognisance of differing land values and property market conditions ✓ Provision of cost-offsetting measures and incentives to offset increased expenditure imposed on private developers ✓ Spatial flexibility in the affordability mechanism and target recipient households of the affordable units ✓ Limiting inclusionary requirements to large residential developments ✓ Feasibility of private developer participation is considered through alternative options in the provision of inclusionary housing based on the unique context of the development ✓ Consideration of the negotiation-based approach to implementation

• 4. City’s implementation context

Options Inclusionary requirements Typology details Incentives Option 1

• 30% of all units are subject to price/rental

restrictions

• Social housing
• FLISP housing
• Housing with a rental cap of

R2 100 (2018 prices)

• Increased FAR
• Increased density (du/ha)
• Reduced parking

requirements Option 2

• 10% of the total residential floor area is made up
• f smaller units
• 30% of all units are subject to size restrictions
• Minimum size: 18m2
• Maximum size: 30m2
• Average size: 24m2

Option 3

• 20% of the total residential floor area is made up
• f units that are 50% of the average market unit
• 30% of all units are subject to size restrictions
• Minimum size: 18m2;
• Maximum size: 150m2

Option 4 To the satisfaction of City Transformation and Spatial Planning, City of Johannesburg

4.1 .1. Poli licy overvie iew

4.2 .2. In International benchmark comparis ison

Voluntary approach Mandatory approach

Blanket inclusionary housing approach: Land-value recapture by public sector Mandatory inclusionary requirements Free market status quo: Private developer profit maximisation Zero inclusionary requirements Private sector carries no cost of affordable housing provision

City of Johannesburg:

• Mandatory inclusionary requirements
• Condition to planning approval of development
• Land-value recapture
• Cost-offsetting measure to support feasibility
• Price/rental and unit size restrictions
• Various implementation options

4.2 .2. In International benchmark comparis ison

Measure toward protecting development feasibility City of Johannesburg policy Refraining from a blanket, city-wide implementation of rigid inclusionary requirements No Blanket, City-wide implementation Inclusionary requirements are flexible based on the local context relating to the economic and property market conditions No Rigid inclusionary requirements A spatially flexible approach to inclusionary housing implementation, taking cognisance

• f differing land values and property market conditions

No Rigid inclusionary requirements Provision of cost-offsetting measures and incentives to offset increased expenditure imposed on private developers Yes Cost-offsetting measures provided Spatial flexibility in the affordability mechanism and target recipient households of the affordable units Yes Different affordability mechanisms Limiting inclusionary requirements to large residential developments No All new developments larger than 20 dwelling units Feasibility of private developer participation is considered through alternative options in the provision of inclusionary housing based on the unique context of the development No On-site provision Consideration of the negotiation-based approach to implementation Yes Implementation option 4

4.3 .3. Urban and human settle lement context

• Low-income human settlements on periphery
• Middle- to high-income areas in central areas
• Established economic nodes, with economic opportunities

and access to quality social facilities spatially concentrated

• Objective to improve access to housing for households in

periphery, increasing proximity to economic opportunities and social infrastructure.

4.4 .4. Housing context

245036 279002 312213 339282 100000 200000 300000 400000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

4.5 .5. Economic and sectoral l growth

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 South Africa 4,9% 4,9% 5,4% 3,3%

• 1,4%

2,9% 3,2% 2,2% 2,6% 1,9% 1,1% 0,5% 1,5% 0,7% City of Johannesburg 5,6% 7,1% 6,9% 4,9%

• 0,6%

3,4% 4,1% 3,3% 2,9% 2,7% 1,4% 1,6% 1,2% 1,4%

• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7% 8% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 South Africa 11,9% 10,4% 15,5% 9,9% 8,5% 0,7% 0,4% 2,6% 4,6% 3,5% 1,8% 1,2%

• 0,6% -1,2%

City of Johannesburg 12,7% 12,0% 16,2% 9,7% 10,5% 2,3% 0,3% 2,5% 4,5% 4,4% 1,8% 1,3%

• 0,5% -1,3%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

• Economic growth
• Sectoral growth

4.6 .6. Property develo lopment in industr try context

May 2014 May 2015 May 2016 May 2017 May 2018 May 2019 SA listed property 5,3% 38,3% 11,0% 3,7%

• 12,7%
• 4,8%
• 20%
• 10%

0% 10% 20% 30% 40% 50%

4.7 .7. Residentia ial property market context

4,5% 3,4% 3,5% 2,1%

2016 2017 2018 2019Q1

• Annual growth in nominal house prices in the City of Johannesburg

• 5. Inclusionary housing and the private sector

5.1. Research methodology

 Primary sources:

• Data collected from property sector stakeholders (including consultants, property

developers, etc.) through targeted questionnaires and engagements.

 Secondary sources:

• Secondary academic sources; existing SAPOA report

5.2. Sample overview

42% 5% 45% 8% 0% 10% 20% 30% 40% 50% Property development Legal Consultancy Other

92% 8% City of Johannesburg Other

8% 47% 76% 55% 0% 20% 40% 60% 80%100% Relevant other Low-income housing Middle-income housing High-income

Property sector stakeholders Professional activities Relevant residential market segment

Property ty sec ecto tor sta takeholders:

• Property development
• Legal (Conveyancer, etc.)
• Consultancy (Town planning,

architecture, etc.)

• Other (Property related)

5.3 Private sector policy reception

Questions Private sector response

1.

Should the priv private sec sector r pl play a a more re pr prominent role le in alleviating the affordable housing backlog? Yes 65,8%

2.

Should private developers be man andated to to pr provide affo afford rdable ho hous using as part of market-orientated residential developments? Divided 44,7% 3. Will the implementation of this policy have a positive or negative eff ffect on n the the residentia ial pr propert rty mar arket? Negative 55,3%

5,3% 65,8% 44,7% 28,9% 47,4% 52,6% 55,3% 39,5% 31,6% 0% 10% 20% 30% 40% 50% 60% 70% None of the above Increased developmental “red-tape” Mandatory inclusionary housing implementation Requirements applicable to developments with 20 or more units Blanket, City-wide inclusionary housing requirements Minimum of 30% of the total units to be inclusionary housing Inability of offered incentives to offset increased costs to developers Social factors that influence implementation (e.g. NIMBYism) Inclusionary housing objectives not achieved

5.4. Implementation options

10,5% 18,4% 21,1% 23,7% 36,8%

Option 1: Price and rental restrictions Option 2: Size restrictions Option 3: Size restritions Option 4: To planning authorities' satisfaction None of the above

• Preferred options of implementation

Option 1: Price and rental restrictions

Typology Monthly household income Maximum affordability threshold Rental Capped rental R3 500 – R7 000 R2 100 Social housing R1 500 – R15 000 R5 550 Bonded FLISP R3 500 – R22 000 R410 000

52,6% 52,6% 57,9% 26,3% 10,5%

Predetermined maximum affordability thresholds Price and rental restrictions Management cost of affordable units Potential partnerships with SHIs None of the above

Options 2 and 3: Size restrictions

Options Inclusionary requirements Typology details Option 2

• 10% of the total residential floor area is made up of smaller units
• 30% of all units are subject to size restrictions
• Minimum size: 18m2
• Maximum size: 30m2
• Average size: 24m2

Option 3

• 20% of the total residential floor area is made up of units that are 50% of

the average market unit

• 30% of all units are subject to size restrictions
• Minimum size: 18m2
• Maximum size: 150m2

44,4% 30,6% 25,0% Yes Not sure No

a) Dwelling unit size and financing access b) Market demand c) Construction cost d) Contrary to policy objectives

Do size restrictions add to development feasibility?

Option 4: To the satisfaction of Council

Implementation mechanism Property sector response 1. Opt ptio ion 1: Price and rental restrictions in perpetuity 11,4% 2. Opt ptio ions 2 an and 3: Restricting the size of residential units 17,1% 3. Opt ptio ion 4: Negotiation-based approach on a project-by-project basis 60,0% 4. None of f the the abo above 22,9%

a) Time delays of negotiation process b) Degree of negotiability c) Lack of guidelines

5.5. Cost-offsetting measures and incentives

19,4% 16,7% 63,9% Yes Not sure No

• Increased development costs
• Bulk services contribution
• Parking requirements
• 1. Increased FAR
• 2. Increased density (du/ha)
• 3. Reduced parking requirements

Sufficient incentives?

• 6. Potential effect of implementation

8,8% 17,6% 17,6% 11,8% 17,6% 52,9% 20,6% 29,4% 0% 10% 20% 30% 40% 50% 60% NONE OF THE ABOVE VOLUNTARILY INCORPORATE REQUIREMENTS FOR INCENTIVES INCORPORATE MANDATORY REQUIREMENTS NON-COMPLIANCE WITH REQUIREMENTS INVEST IN NON-RESIDENTIAL PROPERTY MARKETS INVEST IN EXTERNAL PROPERTY MARKETS INCREASE THE PRICE/RENTALS OF MARKET-ORIENTATED UNITS DECREASE FUTURE RESIDENTIAL PROPERTY INVESTMENT

6.1. Stakeholder reaction to implementation

6.2. Potential effects of implementation

34,2% 57,9% 34,2% 31,6% 21,1% 44,7% 15,8% 39,5% 10,5% 5,3% 0% 10% 20% 30% 40% 50% 60% 70% DECREASED MARKET-ORIENTATED HOUSING SUPPLY DOWNTURN IN THE RESIDENTIAL CONSTRUCTION SECTOR ECONOMIC GROWTH DOWNTURN INCREASED HOUSE PRICES DECREASED HOUSE PRICES DISPLACEMENT OF INVESTMENT FROM THE LOCAL RESIDENTIAL MARKET INCREASED MARKET-ORIENTATED HOUSING SUPPLY INCREASED AFFORDABLE HOUSING SUPPLY IMPROVED RESIDENTIAL CONSTRUCTION SECTOR INFLOW OF INVESTMENT TO THE LOCAL RESIDENTIAL MARKET

Negative Positive

• 7. Towards feasible policy implementation

7.1. Preferred implementation

Policy feature Stakeholder input

• 1. Approach
• Vo

Volu lunta tary ry app appro roach (65,8% of stakeholders)

• Tar

argeted app appro roac ach (42,1% of stakeholders)

• 2. Inclusionary

requirements

• Negotia

iatio ion-based (52,6% of stakeholders)

• Fle

Flexible le require rements ts: Spatial fluctuations in market and economic conditions (39,5% of stakeholders)

• 3. Incentives
• Re

Reduced bu bulk lk serv services co cont ntri ributions (76,3%); reduced municipal rat ates (73,7%); de decreased bu bulk lk infra rastru ructure co connection ti time (44,7%); fa favo vourable lending rates (42,1%); and bu bulk lk serv services infra rastru tructure pay payment t ho holi liday (34,2%)

• 4. Delivery of

inclusionary units

• Stakeholder identified on
• n-sit

ite pr provis ision (34,2%), off ff-sit ite pr provision (39,5%), an and fe fees in-li lieu (28,9%) as possible modes of delivery

• 5. Affordability

thresholds

• Spa

Spatia ially fle flexible based on fluctuations in land and property values, market characteristics, and economic conditions (65,8% of stakeholders)

• 6. Typology
• Co

Combinatio ion of f rental an and bo bond nded un unit its (39,5% of stakeholders)

• Additional incentives as cost-
• ffsetting measures
• Housing mechanisms to support housing

affordability

• Context-driven inclusionary requirements
• Flexible affordability thresholds