Inner City Summit Residential 16 February 2007

CITICHAT 6/2007 - 16 February 2007


Residential Development and The Inner City Summit

“We come together in cities for specific reasons. Some of these reasons are the same as they always were, some are different. We come to cities to work. Not, perhaps to assemble cars, or to sew dresses, or to build locomotives, but to do brain work. Cities continue to be the best places for financial work, communications work, and much research work. Creative and artistic work likewise flourishes in cities. So, we need cities with educated workforces that can support those industries. We also come to cities to play, to rub shoulders, to exchange ideas, simply to be part of a crowd (whether we are going to a museum a theatre or a casino) What we need are cities where we can do these things safely and pleasurably. Urban activities require an urban infrastructure. We need cities that work in terms of education, policing, transportation, sanitation. We also need cities with districts that are vital. We are learning that much of urban vitality comes from the physical proximity of commercial, retail and especially residential uses. These types of districts – some have called them 24-hour downtowns – are another characteristic of the type of city we need.”



So wrote urbanist Witold Rybczynski some years back. Those words have been tumbling around in my mind for the past few weeks as I have listened to a wide variety of Joburgers from all walks of life talking about their needs and fears, their frustrations and their aspirations in relation to the Inner City. We have now completed a third of the planned twenty-four stakeholder work groups leading up the Mayor’s Summit and Charter on the 5th May. This week three sessions were held - the first session for both Residential Development (Tuesday) and Economic Development (Wednesday) and the second session for Public and Leisure Spaces, Arts Culture and Heritage (today, Friday). Almost all of the aspects that Rybczynski refers to in answering the question “What kind of Cities do we need?” were inherent in this week’s sessions. And, although one could feel quite depressed at some of the comments and stories that we have been hearing, on a macro level I feel that we are inexorably moving towards the kind of city that Rybczynski sketches. You’ll note for instance that he talks of much of urban vitality stemming from ‘the physical proximity of commercial, retail and especially residential uses.’



If the Inner City is changing at all, and it is, rapidly, it is in this aspect of residential use. I remember writing way back in the mid-‘90s that, over a few decades there was absolutely no increase in the stock of Inner City residential units. On the other hand, there was an increase in numbers of people living in the Inner City but that was due to a massive increase in the numbers of people living in the units.

That has changed and changed dramatically. Scores of commercial buildings have been refurbished into residential accommodation and scores more of existing residential units have been upgraded. For the most part they are being well managed and are an asset to the city. The effect has been to ‘shrink’ the city

Not in terms of geographic spread, but in terms of the numbers of commercial buildings. The rash of empty commercial buildings that once existed through the Inner City has given way to good quality, well managed accommodation and the demand, according to a number of developers, is insatiable. It is quite likely that the numbers of people living in the inner city area has almost doubled in the past five/six years – we are doing some exercises at the moment that will give us a better idea of the actual growth – but it is clear that demand will continue to see an expansion of accommodation.



Of course demand isn’t only related to middle-income housing that the market is quite willing and able to supply. We also have many thousands of urban poor for whom the housing solution is a far greater problem. One of the major difficulties, we discovered, was in relation to the City’s rates and service charges, not just the quantum but also the inappropriateness of the charges relative to the lower end of the market. Here it is generally the public sector that is going to have to come up with solutions although the answer appears to have been found in ‘Europa style’ accommodation. (I described the Europa in a previous Citichat). Certainly the general opinion was that communal accommodation with shared facilities was the answer but still rates and service charges would be problematic. Evidently administered costs amount to about 60% of developers’ operational costs and are a minimum of R550.00 per month based on current City charges. That means that operational costs would be about R900.00 per month. If the rental to income ratio should be not more than 30%, that would mean a monthly income of about R3 000.00. A number of developers expressed an interest at this level suggesting that communal facilities would be a solution, provided that there could be more certainty in regards to rates and service charges. But for earners below that level, or non-earners, the market cannot respond and we have to rely on the public sector to address that need.



On Thursday we met with representatives of the city’s service providers, electricity, water, sewage, refuse collection, etc in order to determine if there was a danger that services won’t be able to keep up with demand. Whilst the jury is still out on that, there is an equal concern that public open space and social services won’t keep up. These are good, positive concerns – not that long ago we were agonizing over the empty buildings!



One of the aspects that we tested at the Residential SWG session was whether developers of middle income accommodation would consider making between 10% and 20% of their developments available for low income families. There was a clear reaction that this would be impractical, on three counts. Firstly, it was claimed, similar units for differing rentals would inevitably lead to disputes. Secondly, if only 10 to 20% of the total units in a development were targeted at low income earners, the time taken to meet the demand would be greatly extended and it would be better to have larger dedicated projects targeting this level. Thirdly, and this did not surface at the session but in private discussions I had with some developers, the class difference between middle and low-income earners is such that the management of the project would be very complex if not impossible.



There are of course many examples of mixed income housing or mixed income districts that do work. Glasgow, Dublin, London come to mind as also Nairobi if we want an example nearer home. But there are some interesting models in the USA that should be looked at not just in relation to the mixed income housing but in relation to innovative funding. Reading up on a couple of examples in Atlanta I was interested to find that the barriers are similar to here. Firstly, finding sufficient sites. Secondly, finding management teams to run such projects, thirdly –as here – the issue of appropriate operating costs. One of the ways that this is tackled is through rental subsidies. The final barrier is evidently the large capital cost of new or substantially refurbished housing relative to the incomes of occupants. In one of the examples the mix is 40% market related, 40% who get rental subsidies (described as the ‘working poor’) and 20% who are classified as public housing. The ethnic mix was 70% African American, 20% Caucasian and 10% Hispanic and Asian. Reasons for success were given as (1) being located in attractive, highly accessible neighbourhoods (2) well designed and visually appealing buildings that do not look like ‘public housing projects’ and (3) projects are well managed particularly with respect to resident screening and ensuring that only applicants with ‘middle-class behaviour patterns’ are accepted irrespective of their income levels. The report that I read concluded as follows: “(the projects) have performed a truly remarkable service in dispelling the entrenched belief that it is not possible to design financially successful projects in which there is income-mixing at the block level. If the families in these projects have similar values, even though their incomes are quite different, then income integration seems possible, at least in the rental sector.”



Finally, these are some of the issues discussed at the session:



1. Access to City’s social package

• A creative plan is required to ensure that non-account holders get access to full social packages.

2. Emergency housing and other measures to enable relocation of people where refurbishment of unsafe buildings is critical

• Proactive interim measures are required to improve health and safety in critical buildings as well as the provision of sufficient emergency/short term accommodation to temporarily house people who have to be removed from unsafe buildings.

3. Inner city housing (for both rental and ownership) that caters to all income brackets

• A comprehensive large scale plan for roll-out of X number of units of new accommodation.(X could be anything from 50 000t0 150 000!)

• A package of incentives to encourage and enable development of accommodation for all income brackets (including for example reconstruction zone subsidies).

• Public Sector must accept the responsibility for providing housing at below the R800.00 per month level and help to make the model viable for R800 to R1000.00 per month communal housing for if the private sector is to react to this sector.

• Consideration must be given to extending the UDZ time period beyond 2009.

• Rates rebates should be considered under certain circumstances – possibly on a stepped basis during the first two to three years of a project coming on stream, whether new or refurbished, and also to incentivise demolitions.

• From a viability point of view, low cost housing will be located in existing buildings, middle and upper end could be in refurbished or new buildings.

• It is impractical to consider mixed incomes (ie low and middle) in the same building.

• The 10%/20% option is unrealistic because it will slow down delivery of lower income – lower income must be a specific focus.

• The CoJ Department of Housing must negotiate the opening of the flow of subsidies with Provincial Government.

4. Better Buildings Programme

• A complete reconfiguration of the Better Buildings Programme is required.

5. Various system blockages preventing development of residential accommodation at scale

• Regardless of package of incentives, removal of key system constraints (clearance certificates, incorrect rating of developments, etc.)

• Clearances take too long and delays promote corruption

• Plan approval to be speeded up

• Billing remains a problem

• Corruption is widespread

6. Targeted measures to prevent hijacking, slumlording, fraud and non-payment crises

• All buildings must be brought into good standing with both regular payments of rates and services and consistent re-investment in building.

• The PIE Act is a major problem that is prejudicial to good management – a system must be found to deal with non-payers that can be implemented rapidly.

• An investigation should be launched into the possibility of establishing a property court – possibly incorporated into the Municipal Court.

• By-laws should be up-dated and into a practical form for easy enforcement.

• The lack of consistency at the Landlord/Tenant tribunal must be investigated

• Managing agents need a charter and business standards

7. Sectional title

• A proactive programme to deal with collapsed sectional title arrangements and poor management by body-corporates is desperately needed.

8. Infrastructure to support massive increase in residential accommodation

• Strategic investment in required infrastructure (water, sanitation, power, waste, roads and stormwater)

• It may be necessary to extend the physical area under consideration to include areas to the South and East of the Inner City.

• Infrastructure must include social infrastructure, clinics, crèches, scools, parks, sports facilities, etc

9. Public environment and security to support increase in residential densities

• A coherent programme of Residential Improvement Districts to be developed.

• CIDs are costly to establish and will need Council support initially

10. Hostels

• An accelerated programme of upgrading is required .

11. Non-performance of Council Departments and Utilities

• There is a major lack of law enforcement

• We need to change the model from ‘blitz’ enforcement to enforcement everyday

• A system of integrated score cards should be investigated to promote measurement and accountability

12. Tariffs

• Tariff system is antiquated and unrealistic providing inappropriate tariffs

• Certain tariffs are counter development, eg don’t facilitate communal living

• Investigate property owners buying services in bulk and on-selling to tenants

• Investigate a fixed rates and services charge for the lower end of the market especially for communal living

• Administered costs are 60% of the problem, everything must be done to reduce this figure

13 Communications

• Investors don’t know who to talk to

14 New Vision & Framework

• We need a framework for management that aligns private and public sectors and that everyone understands; a strategy that aligns with the vision.

15 City Fund

• Investigate the establishment of an Inner City Fund which could assist with issues such as the conversion to pre-paid meters

• Developers want accountability and transparency for issues such as large plan approval payment, advertising income, etc

16. Parking

• Investigate implementing the Cape Town model

17. BEE

• Any residential strategy MUST include BEE as a major component to change ownership patterns in the inner city.



Interesting and very important issues regarding a critical part of the city’s future, regards, neil