City living too costly for middle-income

Average apartment price is more than R2m and they can’t afford it

MIDDLE-income Capetonians are missing out on the CBD’s after-hour offerings as they are unable to afford homes in or close to the city.

According to the State of Cape Town Central City Report, released by the Cape Town Central City Improvement District, the average price of an apartment within the 57 residential complexes in the central city is R2.33 million.

With middle-income earners making between R15 000 and R50 000 a month, according to the Unilever Institute of Strategic Marketing at UCT, they can afford maximum property prices of R1.5m.

The Cape Town CBD is largely unused by middle-income earners outside working hours. This is another reason affordable housing within and near the CBD is such a hot issue, and one which developers are trying to address.

However, a major question is how do developers balance the need for affordable housing with their logical need for financial incentive, particularly in prime property areas carrying high property prices?

Deon Van Zyl, chairman of the Western Cape Property Development Forum, says affordable housing, and the debate surrounding it, occurs wherever the cost of inner-city housing is unaffordable.

He says there are two underlying issues to the problem. The first is the cost of accom- modation, and the second is the proximity of such accommodation to economic opportunities and jobs.

“If one lives far from economic opportunities, the chance of participating in such opportunities is remote. With this point runs the reality of cost, both in monetary terms and time, that people who live far from economic opportunities have to incur to participate in the economic opportunities,” he says.

Quoting Professor Francois Veruli from UCT, Van Zyl says people in poorer areas spend 40% of their income travelling 40km or more to a 40m2 house – a phenomenon referred to in the US as “drive until you can afford”. Even if one had to discount the cost of time, the cost of the physical travel translates into money spent.

Van Zyl says the question to the private sector is: can one transfer the cost of travel into money that can be spent on urban accommodation?

“The opportunity, at least for the private developer, is to direct the cost of travelling into payment for accommodation close to jobs.”

However, he says it is not the job of the private sector to provide essential housing to the indigent. Rather, the oppor- tunity is to provide accommodation against payment of a fair rental.

“(Therefore), the commercial transaction should have the following transactional terms: the developer and/or landlord should provide a reasonable level of accommodation against a fair payment for it,” he says.

Another challenge exists in the affordable housing debate, Van Zyl says, and this, like with any property lease structure, is the importance of securing a “safe” tenant who will meet obligations against the provision of a well-maintained and managed facility.”

Van Zyl believes the City also has a major role to play, and this includes:

Making strategically located land available to the private sector with payment for the opportunity reflected in affordable accommodation units.

Fast-tracking application processes for applications that include affordable accommodation as there need to be practical incentives.

Allowing the relationship between landlord and tenant to follow normal commercial rules of engagement, without political interference.

The City of Cape Town is also attempting to address the dearth of affordable housing and announced last month that 10 municipal sites in the city centre, Woodstock and Salt River would be developed to provide affordable housing options.

This announcement was welcomed by many, with Richard Day, Pam Golding Properties national general manager and Cape Regional managing director, saying: “Affordable housing is critical for the realisation of our vision of Cape Town as a thriving, integrated and cosmopolitan hub that is on a par with global cities such as New York and Sydney.”

Cape Town urban property developers Blok recently introduced Blok Raw, a new range of urban homes in new price bands and locations, and is piloting this development model in the Bo Kaap.

Dubbed the 80: 20 model, this approach depends on unlocking potential bulk on existing sites earmarked for development, which in this case, will add 20% more apartments to the original scheme that will be sold at a more affordable price. The sale of the apartments in the originally planned scheme, accounting for 80% of the total number of units, will be sold on the open market at market-related values to subsidise the land, finance and planning costs of the more affordable 20%.