The City of Cape Town’s Council recently 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.
“The creation of a Development Charges Fund will unlock new investment for much more 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,” said Mayor Geordin Hill-Lewis.
“We are kick-starting this new fund with … R20 million to subsidise qualifying micro-developers on a first-come-first-served basis.
“Subsidies will be available to stimulate the development of … affordable housing in 194 targeted lower income areas. The subsidy will make it easier for micro-developers to invest in the small-scale rental unit market, enabling much more affordable accommodation across Cape Town.
The subsidy covers between 50 to 90% of Development Charges which the City generally uses to pay for bulk services to support new developments, such as roads, stormwater, water, sewerage, public transport and waste removal.
Some of the qualifying criteria:
• The applicant must be a micro-developer, intending to develop between three to 30 units at a site.
• The applicant must provide proof of the submission of building plans to the City for assessment and approval.
• The applicant must confirm that project funding is available before the payment of the development charges from the Development Charges Fund will take place. This is to ensure payments from the DC Fund are prioritised and paid to those developers who are ready to commence with the development. This requirement, however, does not exclude developers to apply for assistance from the fund, it is only a requirement before payment can happen.
The objectives of the fund:
• Stimulate property investments in townships by reducing the entry barriers (including development charges) for micro-developers.
• Attract investors to townships with a suite of financial and other incentives.
• Facilitate the expansion of township businesses and formalisation of township areas.
• Assist with greater compliance with the City’s building plan approval processes.
• Reduce entry barriers for investors in targeted areas.
• Stimulate employment and skills development in the targeted areas.
Estimated to be a multi billion rand sector, the developments are providing much-needed accommodation for the Gap market.
“Ultimately, our goal is to create a wave of new housing, retail, and other developments that will bring jobs and skills development, 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.
Quarterly progress reports will be submitted to the Land Release Mayoral Priority Programme to track the uptake of this pilot initiative. Further funding post the completion of this pilot will require further approval by Council.
The 194 areas to be targeted have been identified by the City’s Spatial Planning and Environment Directorate, and include Beacon Valley, Belhar, Bishop Lavis, Bloekombos, Crossroads, Delft, Dunoon, Enkanini, Fisantekraal, Grassy Park, Gugulethu, Heideveld, Joe Slovo Park, Khayelitsha, Kuyasa, Langa, Lavender Hill, Lentegeur, Lwandle, Mamre, Nomzamo, Nyanga, Ocean View, Parow Valley, Pelican Park, Philippi, Phoenix, Retreat, Seawinds, Sir Lowry’s Pass, Strand, Strandfontein, Steenberg, Scottsdene, Saxonsea, Sun City, The Hague, Valhalla Park, Vrygrond, Wallacedene, Wetton, Witsand and Westridge in Mitchells Plain, among others.