Urban land reform in South Africa: the potential of public property and impact of public investments

At a time when South Africa is experiencing one of the fastest urbanisation rates in the world, together with one of the lowest economic growth rates, and the highest levels of inequality, our cities are fast becoming the centres of conflict and contestation over space and resources. The spatial distortions that characterise these cities act as a physical barrier to accessing public and private resources and continue a system of segregation and economic dysfunction.

Building integrated urban systems has been seen as one of the most critical requirements in resolving and addressing this vast inequality and responding to the pressures of urbanisation. Because most people reside far from strong economic nodes, and urbanisation creates high demand for housing, the approach adopted tends to focus primarily on housing delivery.

Up until now, this has taken the form of providing large scale housing delivery projects on the periphery of urban centres. The argument has been that in order to respond to the massive demand, large numbers of units need to be built rapidly, which in turn means using large portions of land that are unhindered and available. The approach is further justified with the argument that the cost of construction is reduced when delivery is at scale.

The result, however, has been a perpetuation and escalation of spatial dysfunction. The disconnection from functioning urban centres of many of these large-scale housing projects, has forced many families into greater levels of poverty.  Although there are those developments that have become, over time, incorporated into the city and have moved into being functional and effective nodes and settlements. This seems to depend on the ability to which these are connected to existing areas as well as the amount of investments made into infrastructure and social amenities (e.g.Braamfisherville in the Westrand). It also seems to depend on the location of these settlements within a regional development trajectory (Diepsloot, Cosmo City).

Currently, despite the increasing desire to create spatial equality the delivery focus is still of large scale ‘human settlements’. The difference to the 1990’s and early 2000’s is the emphasis on integration within these developments – i.e. in the context of the Breaking New Ground policy launched in 2004, the promotion of ‘mixed use, mixed income’ developments. The general emphasis on ‘sustainable human settlement’ shows a recognition of the need for access to social facilities and economic opportunities. However, this notion of sustainability is negated by the locations and scale of these ‘new developments’. Economic opportunities are not the result of allocating sites for retail; nor is integration created by placing different housing models in one development when these developments are outside of an existing urban system and economic region.

With the evident implications of not addressing the spatial disparity more directly there is a growing demand to use land within the core of cities to provide low income housing. This demand for inclusion in core areas is not new and there have been very important policies (e.g. Urban Development Zones) and urban regeneration projects that have already proven to be instrumental in redefining the property and housing markets and in creating pockets of integration. The most evident of these is the change in the inner cities and secondary nodes throughout the country and the impact of social housing and new market suppliers in these nodes. Government, particularly municipalities have however, not sustained these important areas of integration and urban changes with the necessary social, educational, and service delivery resources and infrastructure. In fact, many of these areas have become urban slums and the potential value of the nodes to be catalysts for urban transformation has been compromised.

There is also a strong bias towards government being the driver of housing delivery and on all public land within cities being earmarked for housing. This assumes, firstly that housing delivery will be the only catalyst for integration and spatial equality; secondly that government is the only entity that can provide housing and thirdly that public property has no other value other than for housing.

We need a shift in approach.

In order to address urbanisation and spatial disparity, the focus should be on building functional cities and neighbourhoods as opposed to just delivering houses. This is already in keeping with our national housing policy framework, but it hasn’t yet found expression in our operations.  The point is: new settlements are not built in a vacuum – they exist in relationship to the existing urban fabric.  To ignore this is to overlook an important asset in realising functional urban systems and economies, which ultimately increase the ability of our cities and its actors (ie. Government, private players, residents and communities) to provide accommodation, employment opportunities, access to social and economic resources.

The emphasis on city-building means that interventions should be specifically targeted at maximising the overall functioning/value of the city and of the local areas, as they exist, and using new capital investment and development to further grow value. This value can be in the form of financial, social, economic and functional benefits experienced by residents, communities, businesses, commuters, users.

Cities are ecosystems that arise from economies. They require a range of supporting instruments to ensure productivity, access, social enhancement and economic growth. Provision of high levels of services and infrastructure, social and recreational facilities and programmes and good schooling has proven to have a substantial effect on increasing the economic and social value of areas. Directing investments towards building neighbourhoods increases the ability of communities and households to live beyond daily survival, to transgress limited locations and to create and retain higher levels of disposable income currently used on transport, health, schooling outside of the area, etc. Other more detailed and localised aspects such as well-designed nodes and urban management can make it easier for people to conduct their daily lives and therefore result in ‘value’ to these communities. Building neighbourhoods has a significant impact on local communities, urban economies, general functioning and attractiveness of cities. It also allows for various players to respond to the needs and pressures of cities by providing, for example, a broad range of housing options that can accommodate the growing urban populations, low-fee paying schools, or social programmes.

Earlier this year, CAHF published four papers exploring these issues which highlight this perspective in various ways.

• Paper 1: Realising social and economic integration in South Africa’s residential property markets establishes a framework where value realization is defined in economic, social and financial terms.
• Paper 2: Key instruments, approaches and strategies to integrate cities explores six integration strategies: transit orientated development (TOD), land development incentives, inclusionary housing, the use of public property as an instrument for transformation and integration through value realisation, a shift from property management to asset management, and the process of realising value.
• Paper 3: Public property release and development for integration looks at how property portfolios owned by government can be used to achieve functional and integrated cities.
• Paper 4: Case studies from Cape Town, eThekwini, and Johannesburg uses the examples to evaluate key factors for success and provide a general set of guidelines on required processes, systems and capacities to ensure implementation and the achievement of intended outcomes.

Examples of how public investment creates and stimulates value includes the‘organic’ densification that occurs along public transport routes resulting from the greater values derived. This, in turn, has increased housing opportunities. The provision of well managed open spaces has led to increased investments of adjacent properties for mixed uses and economic activities. Public investments in major transport hubs has led to safer and more productive environments for informal trading. These are all investments that assist cities to ‘integrate’ and ‘work’. They also allow for a greater participation in the urban economy and housing delivery processes.

When there is a single focus on any one component of that city or when’ settlements’ are created outside of these eco-systems there is an overall breakdown. Without a focus on creating neighbourhoods and functional cities, even the densification of existing areas and the mix of income in wealthier nodes will not address inequality.

To demonstrate this approach, examples of different settlement typologies and different cities are used. Each reflects specific needs, opportunities, potential and roles. For example, housing, in the case of some nodes or settlements, is critical to their functional value whereas in others social and economic activities are far more important. Maximising access to resources throughout a city can have a greater impact on a local community than densification or additional residential development. In other areas densification may be the most appropriate strategy to realise the value of economic opportunities.

What does this mean for public property, integration and the property market?

Property markets operate in all environments, albeit in different ways. From informal settlements, to wealthy residential areas, commercial nodes to low density peripheral communities. The market is affected by various factors including access to schools, economic opportunities, infrastructure, level of service delivery, and safety and security. All of which determine demand. Demand itself differs depending on the area: formal demand in the Inner Cities may be limited but informal housing demand is very high. Property markets simply reflect value or potential that can be derived from demand. One of the most misunderstood issues is the value of public property and spaces. The value of any property including pavements, open spaces, backyards, even air space is derived from its potential to generate revenues, add value to the broader area and/or provide benefits to households and communities. Why this is important to understand is that these spaces are often used in informal ways to derive revenues with the assumption that the property itself has no value. Similarly, housing in low-income areas is seen as having little value. Because the value realised on these properties is often not formal it is difficult to establish, however there is evidence (and from simple economic analysis of activities occurring) that the returns can be significant with little ‘cost to business’. These markets are often responding to demands that are not accommodated in the formal economies but which are nevertheless substantial in their value. There are other instances where public property is not being used for any purpose in which case value is lost.

Whilst private property markets are largely about economic and financial yields, the public property is mostly used for the purpose of delivering a public service. Where this is a straightforward function or infrastructure the value of that property relates to the value of the service (i.e. number of people receiving and benefiting from that service). Where it is used by a third party for social purposes, the value is determined by the benefit to communities and individuals. This means ensuring that the value or benefit is to as wide a group of people as possible or has a substantial impact. Where these properties are used for economic or commercial purposes, the actual values need to be to the benefit of the public owner or in the form of jobs or economic activities.

How then do we use public properties to affect property markets that promotes integration?

If integrating cities is about making them more functional and building neighbourhoods, strategic interventions need to be determined by the specific local and/or city-wide conditions. Public land, in this approach, is a tool as is regulation or infrastructure investment. It’s use, development and or function is then directed by the strategies and plans for that area and in relation to optimising the value it can yield, either directly from the property or in the value created in the broader area. However, it can only be used as a tool if the value of that property is understood and realised.

It is for this reason that the papers argue not to take a standard position on public property. Public property is an asset that should be directed and used to achieving long term value for the city – as a social, economic, financial or ‘functional’ benefit. Considering what is required from a local or city-wide level to best transform that space, allows for greater clarity on the potential role public property can play.

Based on this, how could public property be used to transform the property market?  By determining the potential value that the property can generate and assessing the impact that realising that value will have. The greater the impact, the higher the ranking of that intervention should be.

This value can be the potential yield derived which can be an important source of revenue to the public body, or it can be calculated as the impact the public property has in increasing the average property prices, or providing greater levels of efficiencies, or increasing investments into the area.

Value can be assessed in terms of increasing access to public services and social amenities, or in generating income opportunities, or in determining convenience, or reducing costs to households.  It can be a mechanism of stimulating local economic activities. In other words, there are many different approaches and different ‘value’ outcomes that can be achieved.

Value created or enhanced in a node or area through the development of public property is dependent on the impact that development has and in the ‘form’ that it takes. Public investments that build functional and creative spaces contribute significantly to the value of areas. Ensuring that large scale or important service centres (hospitals, administrative buildings, sporting facilities) are accessible, functional and attractive can transform the broader area.  For example, constructing taxi ranks that are easy to manage, easy to navigate, have required conveniences and are safe contributes to the efficiencies of transporting people and to the economic opportunities these ranks generate. Baracentral in Soweto, Gautrain, the various BRT’s all demonstrate how areas can be transformed and can generate significate revenues, jobs, social benefits from strategic public investments. Public land must be aimed at achieving this value.

Based on the argument that public property be used as a ‘value-add’ or enhancing tool, the paper looks at the practical processes required to achieve this and how best to develop land that is able then to add to the city’s purpose, function, and value. Examples are used from Cape Town, eThekwini, and Gauteng to illustrate different approaches and how these have either been effective in delivering value or limited the impact.

The overarching argument is that public property, as with public investments in infrastructure and operational service delivery, can have a direct impact on property markets and on facilitating greater levels of integration. However, to achieve this requires an approach aimed at enhancing local and city-wide functionality and in being conscious of the value created.