Why the City of Cape Town should introduce an 80:20 Incentive Overlay Zone

by Lauren Hill

Spatial inequality in Cape Town is among the worst in the world, with the poor living in marginalised areas across the city located far away from economic hubs. Areas of fewer economic opportunities tend to contain lower levels of service delivery and are home to lower income earners. What is needed is a means in which to include people of different incomes into well-located areas that offer a better quality of life.

A means to facilitate this process is encouraging the development of 80:20 housing. This concept involves dedicating 20% of a residential development that is accessible to lower and middle-income owners that are subsidised by the remaining 80%, which is offered to the open property market. The 80:20 housing concept therefore presents an opportunity to transform Cape Town into an inclusive city where different income earners can live in well-located areas with greater access to amenities and economic opportunities, as envisioned by the City of Cape Town.

80:20 Housing and Private Sector Delivery

The question is how do we create the right land use development mechanisms that make the 80:20 housing model appealing to developers? The private sector can assist in the delivery of this kind of housing by being incentivized.

The opportunities for development in Urban Development Zones (UDZs) has been well documented and can be used for the implementation of 80:20 housing. They already encourage development in strategic areas in Cape Town by means of a tax deduction benefit. In relation to affordable housing delivery, developers need to either improve low-cost residential units or build new ones in order to qualify for the tax deduction. The City of Cape Town, in association with SARS, has determined where these areas are.

These zones have successfully attracted developers to the area and there is no doubt that they hold potential to be used to incentives 80:20 housing delivery.

The problem however, is that these zones do not apply to other places in Cape Town, but stem only from the CBD towards parts of Klipfontein Voortrekker Roads. They are spatially very limited. What is more, the UDZ tax benefit is set to expire in March 2020, meaning that the benefits offered for affordable housing development will only be available for the next two years.

What is needed is a new mechanism that incentivizes developers to build affordable housing in other well-located areas for the medium to long term, while learning from the success of Urban Development Zones.

Incentive Overlay Zones

Only SARS is lawfully permitted to offer tax incentives for building affordable housing, therefore the City does not have the power to make such benefits available to other areas of the City when the current UDZs expire. However, the City can apply the concept of the UDZ’s by offering another kind of incentive for building within a pre-determined and well-located area and make special provisions that favour 80:20 housing delivery above other kinds of residential development.

The City has hinted at creating a special “Incentive Overlay Zone” (IOZ) in their Municipal Planning By-Law, but stops at stating only that the City of Cape Town has the power to may make use of such a zone. Neither the form that these zones will take, nor their location, has been determined, opening the opportunity to propose that an 80:20 Incentive Overlay Zone be implemented.

The Incentive Overlay Zone: A Case for Wynberg

The Wynberg Main Rd. Corridor presents excellent potential for 80:20 housing and the mixed income-earners who could live there. There are good public transport linkages along a main road which is frequented by pedestrians, taxis and buses, and the southern railway line runs parallel to it allowing residents to easily connect to other parts of the City without the use of private transport.

Residents enjoy several recreational areas including Maynardville Park, the Wynberg Sports Ground and the Wynberg Swimming Pool. There are also a variety of restaurants and fast-food outlets in Wynberg and in the adjacent suburbs of Plumstead and Kenilworth. In addition, the area embraces ethnic diversity with the many different religious institutions within a few hundred metres of the main road. Younger residents are also able to attend several schools nearby.

There are important governmental service delivery institutions in the area including Home Affairs, the Western Cape Government’s Regional Office for Social Development, and Wynberg Magistrate’s Court. Health and safety are also provided for, with Victoria Hospital a few kilometres from the main Road, Wynberg Police Station and Wynberg Fire Station.

Lastly, the Main Road Corridor is a thriving retail hub, presenting a variety of opportunities for skilled and unskilled workers in the formal and informal sector, while also serving the needs to the community. Wynberg is therefore well-located and would be a great place to build 80:20 housing development.

Where Should the Proposed Wynberg IOZ Be Located?

There are several important spacial consideration that are taken for the location of an IOZ. It needs to be positioned so that those that will live within it will be able to access the important services and facilities in the area easily. Existing land use regulations in the area also need to lend itself to higher intensity residential use therefore, areas of higher intensity zonings should be favoured as developers are already able to build larger developments to accommodate more residents.

For this reason, the zone has been created along Wynberg Main Road, with its boundaries roughtly 200m-300m from the main road to the east and to the south, as services and amenities can be easily accessed on foot. In addition, the area includes the higher density zones that have the greatest capacity to accommodate further densification and yield the amount of space required to be able to dedicate at least 20% of it to affordable housing, subsidised by the remaining 80%. The Map titled “Zoning and the Proposed IOZ” illustrates the different zonings in the area and how the boundaries of the IOZ align.

It can be seen that some properties have been excluded despite their having the same high-density zonings adjacent. For example, to the west of the main road roughly half way, there is a large area of General Residential 4 properties which have been excluded. This area is further away from the main road and has a lower-density and quiet neighbourhood feel, with many of the houses being only one or two storeys high. Several of these houses also have historical significance and should be protected. Constructing a building 24m-high would be contextually inappropriate and compromise the character of the area. Therefore, the area is not included within the IOZ.

The map titled “Proposed Wyberg IOZ” shows the boundaries of the IOZ in relation to the important services and amenities in the area. It shows that residents that could live within the IOZ can access these services by foot.

The implementation of the proposed Wynberg Incentive Overlay Zone in this area supports many of the City’s spatial forward-planning policies. The Spatial Development Framework (2017-2022), still in draft form, has identified this area as an economic node where greater land use intensity is encouraged. In addition, one of priorities of the City’s Five-Year Integrated Development Plan, 2017-2022 is to encourage dense and transit-orientated urban growth and development. The City’s Densification Policy seeks to enhance the quality of the City’s built environment in a sustainable manner. It states that regulatory and zoning measures are required to manage densification and that this could be done through the use of an overlay zone. It is clear therefore that the proposed Wynberg Investment Overlay Zone is supportive of these policies and reinforces their spatial and non-spatial visions but what is unique about it is that what is proposed speaks specifically to the provision of 80:20 housing developments.

How would the Wynberg Incentive Overlay Zone Work?

Many of the buildings along the Main Road Corridor are only one or two storeys in height despite the building allowances provided in their zones. This means that these properties have huge potential for further development which is a drawcard for investors who would be able to significantly increase their property values.

On the eastern side of the road, there are many higher density Mixed Use 2 zones which allow a developer to build 25m high (approximately 5 storeys). To the west, there are General Business 5 zones, which allow for developers to build 25m high. Both zones permit the construction of blocks of flats, and can therefore already accommodate higher density residential development. Considering this, there needs to be an additional incentive to developers to build and 80:20 development.

This is where the proposed Incentive Overlay Zone becomes useful. If a developer wishes to include 20% affordable housing, the Incentive Overlay Zone can make an allowance for developers to build an additional storey in both these zones, bringing the total number of permissible floors to 6. In addition, or alternatively, the developer may be permitted to increase the bulk (inhabitable floor space measured with consideration of the property’s size). This kind of overlay zone therefore would work within an area already primed for higher residential development, by incentivising developers to build an 80:20 development.

When calculating the 20% allocation of the building for affordable housing, this should be measured either by floor space or than number of units provided in the building; whichever is most onerous in favour of the provision of the affordable housing. This will ensure that the size of the units is not diminished to make way for larger units comprising the remaining 80% allocation that will be more expensive and unaffordable to lower-middle income earners.

Lastly, the extra allocation afforded by the proposed IOZ should not automatically be granted to developers who wish to develop 80:20 housing. It needs to be at the City’s discretion whether they believe the extra storey and/ or floor space allowance is desirable in accordance with Section 99 of the Municipal Planning By-Law (2012, as amended). The developer therefore would need to prove that the development has a positive socio-economic impact, that it does not adversely impact heritage and biophysical environment, that it will not cause traffic problems, and that, among others, the development will not exceed the capacity of the external engineering services.

Incentive Overlay Zones Across the City?

IOZs can be a powerful tool to encourage 80:20 housing development in many parts of the City through incentivising developers so that they might increase the value of their properties. They would be an excellent replacement of the Tax Incentives offered by SARS for affordable housing development within Urban Development Zones, by creating alternative incentives. This would ensure that the progress gained through development incentives in the Woodstock-Salt River corridor and sections along Klipfontein and Voortrekker not halted.

Areas that do not yet hold any such incentive, such Blue Downs, Brackenfell or Somerset West, can also benefit from a similar IOZ as proposed for Wynberg. Good locations for IOZs that are designed to accommodate 80:20 housing should, as in the case of the proposed Wynberg IOZ, reinforce the City’s spatial vision for the area in accordance with the City’s Spatial Development Framework, and where possible, include areas with already high-density zonings.

Brownfield sites, or areas showing signs of urban decay, should also be included to revitalise these parts of the City, while also thereby steering development away from environmentally sensitive greenfield sites. Lastly, they should be transit-orientated to connect their residents with the rest of the City and its opportunities.

Incentive Overlay Zones hold huge potential to fast-track the delivery of 80:20 housing development. With proper land use planning and development control, they can be a very useful tool to create a spatially equitable and inclusive City.

Image credits

Cape Town Urban Development Zone: City of Cape Town
Photo of Wynberg Main Road: Google Earth
Location of Wynberg IOZ in Cape Town: Lauren Hill
Zoning and the proposed IOZ in Wynberg: Lauren Hill
Proposed Wynberg IOZ: Lauren Hill

Credits

City of Cape Town: The Urban Development Zone
South African Revenue Service (SARS)
South African Revenue Service (SARS) (2017), Guide to the Urban Development Zone (UDZ) Tax Incentive (accessed 13-9-2017)
City of Cape Town (2017). “Cape Town Municipal Spatial Development Framework 2017-2022”. City of Cape Town Urban Development Authority: Cape Town
City of Cape Town (2017), “Five-Year Integrated Development Plan” (accessed 1-11-2017)
City of Cape Town (2012), “Densification Policy” (accessed 13-9-2017)

Lauren Hill is an experienced and registered Professional Planner with the South African Council for Planners (SACPLAN). She holds a Master’s Degree in City and Regional Planning from the University of Cape Town with a background in History and Social Anthropology. She is particularly interested in socio-economic drivers of spatial development and how new technology can shape urban development and performance.

Lauren believes that to move South Africa forward, we need to stop ‘othering’ and start engaging. Inclusive spatial reform in our towns and cities is essential to enable this.

All content and views expressed in this article remains the property of the author(s) and does not constitute an endorsement by Future Cape Town.

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