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Towards affordable accommodation in the Cape Town CBD

Towards affordable accommodation in the Cape Town CBD

18 Jul 2017 Tags: residential resilience

There has been much talk about rising prices in the Cape Town Central City and surrounding areas, as residents desire and developers deliver the dream of an urban lifestyle.

As pressure mounts from government to insure inclusivity and downtowns struggle to incorporate homes for their own workforce, the question that now needs to be answered is how to begin to understand and deliver on a more inclusionary model that will be embraced by both the public and the private sectors while also addressing the “missing middle” vital to a downtown’s residential resilience.

Addressing the CCID’s business breakfast on 28 July, guest speaker and chairperson of the Western Cape Property Development Forum Deon van Zyl noted that the property industry seemed to not yet be clear on the concept of what could be deemed to be affordable in terms of residential property and, in particular, “the differences between affordable accommodation and low-cost housing”.

Says Van Zyl: “We still feel threatened by the misconception of small boxes on small erven, an idea property economist Professor Francois Viruly calls the 40 x 40 x 40 concept – a 40m2 house situated 40km from work and with transport costing up to 40% of a household’s income.

“The Cape Town CBD currently has the capacity to accommodate around 7 000 residents. That’s a drop in the ocean compared to the around 400 000 estimated to travel into the CBD to work or study here daily. Can we really afford not to use strategically located state-owned land to develop affordable accommodation? In other words, for the creation of accommodation for people who are active in the economy but who cannot pay market prices.”

Many of these people, notes chairperson of the CCID Rob Kane, belong to the “missing middle”: salary earners who earn too much to be considered for government subsidies, but too little to be able to afford anything to either buy or rent in the Central City or any of the surrounding suburbs.

“It is this ‘missing middle’ that so often builds a vibrant downtown community,” says Kane. “Cape Town’s traditional downtown accounts for 25% of the metropole’s entire economy and over 30% of its workforce. As the CCID, we’ve worked incredibly hard with our various public partners to turn the CBD away from the urban blight it was experiencing nearly two decades ago. As a result, we now have a steadily growing residential community and, along with it, a high demand for the apartment stock that is available, which in turn has driven prices up as one would see in any high-demand, low-supply chain.

“This has meant, though, that for most of its workforce, the downtown lifestyle is not something they can afford in terms of residential property. And yet a diverse residential community in which all economic groups have a stakehold is vital to the vibrancy of a downtown if it is to have a life beyond its office hours.”

Van Zyl also believes it is just a matter of time before government begins to legislate the inclusion of affordable units onto all residential schemes on the cards: “It is critical for the private sector to take the lead on this topic and to explore the opportunity. If we do not do it, I have no doubt that government will step up to the plate and start to create inclusionary policies that will force developers to provide housing as driven from a political perspective.”

He was also adamant that affordable accommodation is not charity: “It’s a business opportunity just like student housing became an opportunity when universities could not provide sufficient accommodation.

The golden goose over the last couple of years has been the residential sector, specifically refurbishments of commercial buildings into residential and new constructions supported by the City’s change of view on densification.

“But now, let’s also take a contrarian view and let’s ask some more questions, such as: what happens when only the lawyers, the accountants and the banks can afford commercial space in the CBD? If you refurbish all commercial buildings for residential, where will the office uses go when the market demand increases? If you sectionalise buildings for residential, what are the chances that such buildings will ever be redeveloped? Or what happens when the cost of maintaining sectionalised buildings become excessive and you have multiple owners who cannot agree on a lift refurbishment?

“I think there is an incredible opportunity staring us in the face – affordable accommodation. By converting commercial into residential rental units, we can also ensure the future adaptability of a central business district should the need shift again one day back to commercial. I think there is an opportunity among property owners, particularly with C-grade buildings, to protect certain stock for future redevelopment by converting it for the meanwhile to rental stock rather than selling it off sectional title.

“Plus, when affordable accommodation is able to net square meter rentals of around R200/m2, as has already happened in pockets of Cape Town, and you place these figures before developers, suddenly the penny begins to drop! And yes, there will be teething problems, but is our industry not about risk and reward in any case?”

Therefore, instead of using the phrase “affordable housing”, developers need to think in terms of what Joe Cortight, writing for the CityLab.com, coined as “affordable living” rather than “affordable accommodation”.

Says Van Zyl: “He argues in a similar way to Professor Viruly that the time and money cost of traveling has a fundamental impact on poorer communities. But he illustrates something very interesting when he shows that the sum of accommodation and travel expenses tends to be constant. The less you spend on accommodation the more you tend to spend on travel and vice versa. The pot of money remains constant, the allocation is a balancing act.”

And herein lies the opportunity, according to Van Zyl: “If you could provide affordable accommodation close to work opportunity, you could charge a larger chunk of the available money for accommodation since travelling would be a lessor factor. Secondly, if you provide a quality product nothing prevents you from adding additional services such as hospitality services in the form of laundry and catering services. You could in fact increase the pot of money by delving into the non-accommodation and non-travel related expenditures.”

Agreeing with Van Zyl on the CBD’s need for more affordable accommodation options, Kane notes that the CCID has been very heartened by the City of Cape Town’s proposed Foreshore Freeway Precinct Project, in which it has called for public-private partnership proposals (six of which have already been shortlisted) to develop six hectares of valuable, underused City-owned land in the CBD that would address traffic congestion and also make provision for up to 4 000 affordable housing units.

“However,” says Kane, “it will be some time before this project bears fruit and the question right now, for the more immediate future, is how can we as private developers make use of what is already available to meet a market demand for rental stock that can accommodate families where the parents form a vital part of our downtown economy. How do we accommodate the bank clerk, shop assistant, office worker or teacher? We need to be innovative as South African developers but we also need to remember that there are many international best practice examples for both government and the private sector to draw from.”

Image: one of the shortlisted projects from the City of Cape Town’s Foreshore Freeway Precinct Project that could see up to 4 000 affordable units added to the CBD.