The recent shift in housing focus creates an opportunity to build better cities

On the 16 November 2020 the Minister of Human Settlements, Water and Sanitation, Lindiwe Sisulu, speaking to the National Council of Provinces, announced that housing delivery would now focus on providing land and services.[1] This could be a very significant shift in approach and, although not necessarily new, it appears far more definitive and imminent.

There have been several changes to housing policy since 1994, although this particular move breaks with the central belief that it is up to the state to provide the full package—land, services and a housing unit. It acknowledges that people can and, in fact, have  built their own structures in many instances. By providing a reduced “end-product” the state has the ability to deliver to more people, and the limited resources can go further. It’s a brave move and could see a backlash due to high expectations and the perception of unfairness. However, the reality of the financial crisis facing government doesn’t allow for much space to continue with the current model.

What is being proposed is a “rapid land release strategy” (again not a new policy) which will involve “releasing land, cutting it out, fencing it off and giving it to beneficiaries”.[2] This is no small feat. To get to the point of land being made available and prepared (presumably with basic services and some rudimentary form of occupational rights) is the crux, in fact, of what has delayed the roll-out of most large-scale developments. The basics still need to be done  i.e. acquiring land, drafting layouts and infrastructure plans, initial approvals and basic infrastructure investments prior to occupation (outside of existing informal settlements). Ask any of the big mixed housing developers where the main delays (and therefore costs) lie and they will tell you land preparation (primarily approvals), and budget allocation for infrastructure. These delays affect the actual occupation of the land and ability to complete township establishment which in turn, prevents transferring properties and providing title deeds. Several pieces of research have been done suggesting that it typically takes four years to secure the various regulatory approvals before construction can begin.

In 2015 the Minister declared that the growing demand for housing would be addressed through mega housing projects, the premise being that scale results in efficiencies – financial, time, capacity, and delivery rates. Despite the fact that many of the projects identified and selected flew directly in the face of existing planning frameworks and spatial policies, they were justified in the name of fast-tracking delivery. (Sites identified for these mega projects are generally huge unconnected tracts of land).

Five years on, the vast majority of these projects have never been realised. One reason being that the complexity and scale of these projects requires substantial, multi-year budgets, complex financial management, large-scale contracts, sophisticated contract management and substantial preparation of land, including obtaining a vast number of rights.

The rapid land release approach may still focus on the construction of “large new settlements” which has proven to be very costly and will continue to deliver peripheral, isolated and dysfunctional residential dormitories. Part of the problem lies with government housing being led by subsidised construction and delivery against crude targets, and where costs are not tested against value and benefits to households, i.e. proximity, access to jobs and social amenities and integration into existing urban systems. This subsidised construction/infrastructure-led approach bears little relation to the creation of actual value. When costs need to align to value, especially when operating in the low-income market segment (due to the very tight margins and low affordability levels), value must be derived by exploiting locational advantages and using existing infrastructure and amenities. This should encourage a focus on places that already have infrastructure, amenities and easy access, such as infill sites and brownfields.

In addition, the preferred large-scale, greenfields model will still be plagued by inefficiencies in obtaining the plethora of approvals needed and commitments required to complete these developments. In fact, the scale and location of these makes approval far more complex than in existing urban areas. Inefficiency in land preparation is largely due to a severe lack of capacity, competence and systems at a local and provincial level in both the core functions of planning and infrastructure, and in human settlements departments which are driving the projects. Numerous attempts have been made to build institutional integration and co-ordination including the Priority Human Settlement Development Areas (PHSDA)[3] and to drive delivery through parallel, focused institutions. The establishment of the Housing Development Agency (had) was an attempt to assist municipalities fast-track development. Unfortunately, these strategies still rely on actual capacity being in place and part of the overall functioning of municipalities. Because housing programmes operate through the human settlements departments, they often are not seen as the responsibility of the core functions of planning and infrastructure.

The focus on scale is also one of the reasons that public land, especially in urban areas, has not been accessed for housing delivery. Strategically-located public land, like private holdings, is largely small portions that cannot accommodate the high scale/low density model. However, if the approach changes from a ‘few but large’’ to ‘millions of small’ (or ‘massive small’ as is the common lingo) interventions, and uses high densities, there is opportunity to better use strategically located public land.

A final concern is that government housing programmes have also been one of the most significant conduits for corruption as a result of the substantial financing involved, the complex decision-making and the pressures on awarding contracts. This was illustrated by the recent asbestos roofs scandal in the Free State. The likelihood is that if housing continues to be delivered through large-scale settlements which depend on massive grants to external suppliers, this tendency will continue.

An alternative to the government housing programmes is the burgeoning new market that has emerged as a result of the high demand that has emerged for well-located, affordable rental accommodation. This has spurred household investments and a cohort of entrepreneurs and innovative financiers. This trend demonstrates that lots of small-scale developments are far more likely to deliver and to do so far quicker than government mega-projects. In fact, this new housing market, that largely uses existing residential sites, is one of the fastest growing housing sectors[4] and shows potential to address a substantial part of the demand. The reason is that there are more players with less risk (per development), less delays, available infrastructure, and faster forms of delivery. More players also mean more responsiveness, diversity, creativity and adaption. Delivering at a small scale actually increases the probability of success according to a study conducted by the Urban Real Estate Research Institute at UCT in 2018.[5]

If the focus of government was on boosting the multitude of existing and potential suppliers that use the existing built environment (sites, structures, infrastructure), there would be more chance that delivery would accelerate and increase. A mushrooming of companies entering this market (e.g. Indlu, Bitpop, After 12 in Johannesburg),[6] and many entrepreneurs such as Nhlanhla Ndlovu from Soweto[7] that work with property owners to access finance and build formal rental structures demonstrate the viability, value and opportunities that exist. This form of delivery is able to respond quicker and in well-located areas, covers rental as well as ownership, and operates outside of the cumbersome delivery models of government. It is also a market that is generating jobs and auxiliary industries and is not dependent on budget allocation, project management, and land acquisition by the public sector. At this stage, this form of housing supply may not necessarily be able to deliver formal housing to the poorest of households because it depends on real costs and requires affordability levels that can pay for these. It does, however, have the potential to reach these communities if specific forms of support that reduce costs and target subsidies were to be implemented. The growing trend of building more permanent structures in informal settlements and expanding accommodation using existing sites is evidence that, when the basics are in place, people are willing and capable of investing and creating suitable residential structures.

What’s needed?

Given the growing value and ability of this new housing market and households to use their properties to deliver, a change in government’s role could be far more effective. By using its core functions of finance, regulations, infrastructure and service provision to stimulate, support and incentivise development, government would have far more reach and impact. There shouldn’t be a single or limited supply-side approach adopted even for those communities excluded from the larger formal property markets. Instead it is preferable to stimulate opportunities for multiple suppliers that can broaden the range of housing on offer. By government investing in public goods (and subsidising these specifically for low income families) and households in private goods, greater opportunity is created to deliver to the poorest households.

Furthermore, overall efficiencies in the development process (e.g. approval processes) benefit all forms of development leading to a general decrease in costs and risk. This can stimulate and fast track delivery to a broader market and help boost supply to lower income families. A focus on these functions and systems is more likely to affect delivery than  setting up separate, parallel government programmes.

An example of how housing delivery needs to become part of planning and infrastructure functions is informal settlement upgrading which focuses on putting the basic services and infrastructure and occupancy rights in place as a way of stabilising and managing this form of housing. However the success will be dependent on the speed with which municipalities are able to identify these areas as informal, draft and approve appropriate by-laws that determine service levels, and implement a rudimentary form of delivery and security of tenure. This requires competency, capacity and responsibility of planning and infrastructure departments primarily and integrating these outputs into their general operations so as to ensure ongoing management.

Of course, there will still need to be housing projects that provide land and services to low income households and for this to be more sustainable and effective,  smaller, more integrated portions of land should be considered. If the primary focus (of government in accelerating housing) is to target resources and systems that support, de-risk and reduce costs to a wider number of potential suppliers/developers, the need for state-led greenfield developments will be substantially reduced.

In conclusion, the emphasis being given to providing the basics and supporting community initiatives opens the way to considering new roles for government and potential mechanisms to boost localised forms of supply. A concern, though, is that the new focus remains based on the traditional framework of housing delivery, i.e. a separate delivery programme and building new, large, peripheral settlements that continue to exacerbate spatial inequalities. The new focus is also unlikely to address the speed of delivery.

Instead, government needs to reconsider its primary focus and shift its resources and energy to supporting and boosting a growing housing market and alternative forms of delivery that are proving to be more capable of delivering a wider set of options, faster and in more integrated spaces.

 

[1] Ensor, Linda. “State will give land not houses, says Lindiwe Sisulu.” Business Day, 16 November 2020. https://www.businesslive.co.za/bd/national/2020-11-16-state-will-give-land-not-houses-says-lindiwe-sisulu/

[2] Ibid.

[3] Ministry of Human Settlements. Gazette Notice: Declaration of the Priority Human Settlements and Housing Development Areas (PHSHDAs), 15 May 2020. https://www.gov.za/sites/default/files/gcis_document/202005/43316gon526.pdf

[4] Scheba, Andreas, and Turok, Ivan. “Informal rental housing in the South: Dynamic but neglected.” First published 31 January 2020. https://journals.sagepub.com/doi/full/10.1177/0956247819895958

[5] Urban Real Estate Research Unit (URERU) at University of Cape Town. http://www.ureru.uct.ac.za/

[6] Scheba and Turok. “Transforming backyard shacks into decent flats.” HSRC. http://www.hsrc.ac.za/en/review/hsrc-review-march-2020/transforming-backyard-shacks

[7] Malope, Lesetja. “Nhlanhla Ndlovu: This young entrepreneur is changing the face of the ‘backroom economy’. City Press. 21 June 2019. https://www.news24.com/citypress/business/nhlanhla-ndlovu-this-young-entrepreneur-is-changing-the-face-of-the-backroom-economy-20190621

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