Inclusionary Housing – How It Works

The Western Cape Government, led by the City of Cape Town, is the first province in the country who has published an Inclusionary Housing Policy Framework to facilitate affordable housing in high-valued areas.

The policy is an innovative spatial justice tool which aims to address spatial redistribution in towns and cities to create inclusionary housing for all. The policy aims to assist persons earning up to R22,000 per month to also have access to housing in high-value areas.

The policy is not a state housing delivery tool, but is aimed at creating and managing zoning schemes in a way which promotes social inclusion and spatial justice. It is a planning and land use mechanism whereby municipalities can oblige private developers to provide affordable housing at below market rates in new residential or mixed-use developments.

The objective of the policy centres around a “set aside requirement” as a percentage of the additional land-use rights sought in a mixed-use or residential planning application as well as suitable unit sizes. There are three options for developers. The first is to deliver on-site (as part of the development), the second is off-site (on separate well-located land close to the original development) and the third, a fee in-lieu (a financial transfer to a ring-fenced municipal fund for affordable housing).

It is an innovative way to mitigate against an unhealthy pattern of exclusionary development. It is aimed at responsible development which will ensure that working-class people are also able to access housing in well-located economic nodes.

Within the context of Cape Town, there is a considerable shortage of “gap housing”, i.e. housing for those who earn up to R22,000 per month. Gap households comprise 73% of the population, but only 18% of residential properties fit into this segment. There is thus a significant shortage of housing below the R600,000 price range. This gap market is a significant area of demand for developers due to the high demand.