The City of Cape Town Mayoral Committee today adopted the creation of a Development Charges Fund to support micro-developers building affordable housing in lower income communities. The fund will subsidise development charges for small-scale rental unit developments to stimulate the affordable housing market and attract investment in targeted areas. Following Mayco approval, the item will now serve on the City Council’s March agenda.
‘Our aim is to unlock much more affordable housing across the city. This is an important step that has the potential to unlock investment in new affordable housing development far faster than the government can build. This is harnessing the power of private investment to achieve an important public outcome: more affordable accommodation.
‘We are kick-starting this new Fund with an initial R20 million to subsidise qualifying micro-developers on a first-come-first-served basis. Subsidies will be available to stimulate the development of more affordable housing in 194 targeted areas. The subsidy will make it much easier for micro-developers to invest in the small-scale rental unit market, enabling much more affordable accommodation across Cape Town.
‘The subsidy covers up to 90% of Development Charges, which the City generally uses to pay for bulk services to support development, such as roads, stormwater, water, sewerage, public transport and waste removal,’ said Mayor Geordin Hill-Lewis.
The City is doing much more besides this to help micro-developers unlock more affordable housing, including:
- Local planning support offices in targeted areas, for accessible approvals and support
- Developing compliant off-the-shelf building plans to make approval much quicker
- Promoting alternative building materials and practices
- Exploring subsidies, exemptions, and external support from financial institutions
‘Cape Town has a thriving construction industry with micro-developers developing affordable rental accommodation at scale, mostly in formal neighbourhoods. The City now wants to support and encourage the development of affordable rental accommodation in informal areas by targeting micro-developers who build rental units at a smaller scale – this could be any entrepreneur building six to 12 rental units on an erf.
‘A micro-developer could also be a land owner with an erf big enough to build small scale rental units in their backyard that are complying with building regulations, and connected to the City’s services infrastructure. Once the Development Charges Fund has been approved by Council, these property owners can apply to the City for their development charges to be subsidised from this fund, which will significantly bring down the cost of building the rental units.
‘In so doing, the City can assist lower-income families to fully utilise their properties to earn an income from rental units, and at the same time these property owners and other micro-developers will assist with the supply of affordable rental accommodation in areas where it is most needed,’ said the City’s Deputy Mayor and Mayoral Committee Member for Spatial Planning and Environment, Alderman Eddie Andrews.
The City’s Economic Development and Investment Department developed the proposal to drive investment and development in the target areas. The City will execute the project in partnership with the Development Action Group (DAG).
‘The City is always looking for new ways to stimulate investment and development in our city’s communities. We are currently developing a comprehensive economic package that will make it easier for businesses and homeowners to invest in these targeted areas. This initiative aims to increase housing and commercial options in townships by incentivising development through supportive measures such as removing red tape. We believe that these communities have immense untapped potential for growth. However, systemic challenges have hindered investment in the past. We are working on more incentives to attract investments in such areas. Our economic package will tackle the obstacles head-on. It will connect investors with opportunities, provide the tools and resources to navigate the development process, and foster an environment where businesses can thrive. Ultimately, our goal is to create a wave of new housing, retail, and other developments that will bring jobs, amenities, and economic opportunities to residents. This investment is critical to uplift these communities and ensure their continued success. We are dedicated to collaborating with stakeholders to shape policy that unlocks the full potential of our city’s diverse range of communities,’ said Alderman James Vos, the Mayoral Committee Member for Economic Growth.
