Cape Town’s Mayco greenlights subsidies for micro-developers in low-income areas

Mayor Geordin Hill-Lewis

The City of Cape Town’s Mayoral Committee has 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 to attract investment in targeted areas. Following the Mayoral Committee’s 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,” says Mayor Geordin Hill-Lewis.

This is harnessing the power of private investment to achieve an important public outcome: more affordable accommodation.”

The City will kick-start the 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, making it much easier for micro-developers to invest in the small-scale rental unit market.

According to Mayor Geordin Hill-Lewis, the subsidy will cover 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.

In addition, the City is assisting micro-developers by providing local planning support offices in the targeted areas for accessible approvals and support; developing compliant off-the-shelf building plans to fasten the approval process; promoting alternative building materials and practices and 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,” comments the City’s Deputy Mayor and Mayoral Committee Member for Spatial Planning and Environment, Alderman Eddie Andrews.

A micro-developer could also be a landowner 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.”

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 194 areas to be targeted have been identified by the City’s Spatial Planning and Environment Directorate, and include Beacon Valley, Bloekombos, Delft, Dunoon, Enkanini, Fisantekraal, Gugulethu, Joe Slovo, Khayelitsha, Strandfontein, Steenberg, Scottsdene, Saxonsea, Retreat, Philippi, Ocean View, Nyanga, Nomzamo, Langa, Lavender Hill, Vrygrond, Wallacedene, and Westridge.

More information will be made available upon Council approval.