From Shacks to Skyscrapers - how are we going to solve the affordable housing crisis in SA???

I am tired of hearing people talk about premium, luxurious developments in Sandton and on the Atlantic Seaboard as if they make up the majority of living spaces.?

South Africa has a serious affordable housing problem. Many people seem not to realise that the affluent areas, which receive most of the attention, represent only a tiny portion of the available housing.?

I had a conversation with Francois Viruly , a property economist and professor I admire and respect, on the topic of affordable housing in South Africa.?

He said that 75% of all residential title deeds in South Africa are for accommodation worth less than R1.2 million. Furthermore, 70% of Capetonians can afford a home worth up to R1 million.?

This means that the majority of South Africans won’t be buying an apartment above this price in Sandton or on the Atlantic Seaboard or, for that matter, in any well-located areas in Cape Town.?

This article was first seen in the Mail & Guardian click here to read it: https://mg.co.za/thought-leader/opinion/2025-02-02-building-solutions-to-the-affordable-property-backlog/

The majority of South Africans struggle to secure affordable housing. When we refer to the population that needs housing, we are not talking about just a segment of the market, we are addressing the needs of the market as a whole.

When we criticise the developments being built in more affluent areas of South Africa, we tend to focus on the top 30% of the market. This is especially true when we discuss property in Cape Town, because most of the value is concentrated in that segment.

South Africans have waited for four years for the human settlements department to develop a white paper on housing. It was finally released in December. It suggests the government’s delivery of housing has been dwindling and that it does not have the revenue to get a grip on the crisis.?

It is also a policy that seems to place little emphasis on creating an environment that will support private-sector players.

Regarding the lower end of the market, we need an effective policy to recognise the role of the market in meeting supply, because it is clear that the government does not have the financial resources to address the housing crisis.

The City of Cape Town is pretty productive and progressive in this regard. The amendment to a municipal by-law is out and the commenting period has closed. The by-law will allow up to eight residential units on a single erf. Previously, it was only one or two units, depending on the interpretation of the by-law.?

This means, with the proper zoning, you can demolish a single residential home and develop multiple units on one site. This will allow for increased density in suburban areas.

With by-laws such as the above, the possible solution to the affordable housing problem will be small-scale developers — those who develop six to eight units valued at R300?000 each, which will have affordable rent.?

Because we have to rely on small-scale developers to serve this market, we need to construct an environment that makes it easy for them to operate.?

The City of Cape Town has allocated R20 million for small-scale developers to tap into to reduce their contribution. The city has also created a small-scale rental unit programme that should reduce some of the red tape these developers face.

On the not-so-positive side, there are problems that make it difficult for these smaller developers to do what they need to do. The time-consuming process of jumping the hurdles of regulations and securing funds remain problems.?

Banks need the developers to be compliant to finance them. And many financiers choose not to finance them because they are considered high risk.?

The government needs to shift its policies to make it easy for small-scale developers to operate so we can open this market.

We can no longer rely solely on the government to solve South Africa’s affordable housing crisis.?

Time and time again, the RDP house offering does not meet market requirements and there is a housing backlog. Our state cannot meet its housing needs, so partnering with, and supporting, small-scale and larger developers seems like a start.?

Building regulations are very stringent and too overwhelming for smaller developers to respond to. Regulations need to be realistic about what is required, while ensuring that what is delivered is safe for habitation. We need to create a productive environment in which small-scale developers can operate.

Viruly says we underestimate the role of property entrepreneurship in South Africa. Entrepreneurship and the property market can increase jobs while simultaneously delivering housing units.?

President Cyril Ramaphosa has said that the problem is that South Africans are asset-poor. He failed to mention that real estate is everywhere — worth billions of rand.?

The challenge lies in unleashing the value of properties for all South African households.?

If you’ve taken the time to read the economist Hernando de Soto’s The Mystery of Capital, you will understand the concept of “dead capital” and that is the potential of small informal businesses and homes in the townships that are essentially economic assets with huge potential.?

About 1.5 million individuals live informally in Cape Town but you won’t see this market on property sites. Why do we know so little about the South African property market?

Viruly says that the human settlements department has yet to sort out about 1.64 million title deeds.?

We are denying South Africans their deserved right to own property. While players in the upper segments of the market have all the rights associated with ownership, this is not the case for many households in the lower market segments.?

It is evident that the government will not solve the housing problem on its own. We do not see a change even with property ratepayers who fund large portions of municipality budgets with their contributions each month.?

The national government must introduce progressive policies and remove the red tape that obstructs those who can operate in this sector.?

Municipalities sit on a lot of land and need to ensure availability in well-located areas.?

Viruly came up with the concept of the 40-40-40 problem. A normal South African has a 40m2 house, 40km away from work and spends 40% of their income on transport. That is far too much. You should spend 30% of your income on your home, not on transport.?

Individuals are being pushed too far away from areas where there is work, which leaves very little of household income to secure a home. The high cost of transport in South Africa continues to be a serious issue.

I then posed the 20-20-20 question to Viruly. What if you were to convert inner-city buildings to residential, thus offering 20m2 units that are much closer to places of work??

You could counter this argument with the viability of office-to-residential conversions. Are the buildings optimal in design for this exercise??

Every unit needs a toilet, so how would the plumbing conversion work on larger office floor plates with one central bathroom??

Perhaps office-to-residential conversion is not always the best option due to the difficulties and costs.?

Europe is well known for high-density buildings with five or six storeys, not 30, as we often see in the more prominent developments sprinkled around affluent areas of South Africa.?

There is demand for housing — for those who want to rent and buy. The developers are there and they want to develop. South Africa is not short of entrepreneurs bursting with great ideas. But we are missing something.?

For far too long, the property game in the lower segments of the market has relied on government subsidies. The income bands for these subsidies have not shifted enough to reflect rising building costs and income creep.?

Small-scale developers are eventually priced out of the market.?

And let’s not forget when you break ground on a construction site, it’s like opening Pandora’s box. You never know what surprises are under the ground and then, suddenly, your building costs rise, with miscellaneous expenses eating into your bottom line.?

Due to South Africa’s history, property in the past was a “white man’s” game. The Group Areas Act clarified who and could own property and where.?

Fast forward to today and the property environment is rapidly changing. More and more South Africans are looking to invest and own properties. Mortgage financier Ooba’s home loan stats show that many buyers are young, most in their thirties.?

We need to serve first-generation property owners who strongly emphasise ownership. This wave of new property owners is excited and eager to learn about the space.?

We all know what will happen if we do not create an appropriate environment for small-scale developers to operate and serve this exciting new market of homeowners. In true resilient South African style, things will happen anyway — but they will be unregulated.?

So, with this growing realisation (and to avoid cowboys going at concrete like it was the Wild West), we need appropriate regulation now more than ever.?

It’s essential that we reduce the barriers to operating so that individuals can work optimally, and legally, to solve the housing issues that our government cannot.?

With seven million title deeds in the South African residential market — and of those 75% below R1.2 million — we can’t call it the affordable housing market — it is the market.?

Do not confuse owners of high-end real estate with the average real buyers in the property market.

Ash is a content creator, public speaker and property broker. She has over 10 years of experience when it comes to negotiating property deals and managing tenant-landlord relationships in South Africa.

Email Ash for collaborations. She usually responds within a few hours and looks forward to making strong, lasting connections.

??[email protected]