Rapid urbanisation has created a high demand for affordable housing in cities around the world. According to a recent report by the World Economic Forum, 90% of the 200 cities included in a survey were considered unaffordable. This was when you applied the widely-used standard of average house prices being more than three times the median income. The report also highlighted that the affordability of housing goes beyond the ability to buy or rent a home. It also means meeting expenses related to living there, for example, transport, access to social infrastructure and services.
South Africa is facing a massive urban housing crisis. The United Nations estimated that 68% of the world’s population will be living in urban areas by 2050, but South Africa is ahead of that curve. Government’s development plan acknowledges that 70% of our population is expected to live in urban areas by 2030. To eradicate the urban housing backlog and provide homes to cater for the increasing demand, an estimated 460 000 housing units would need to be built every year for the next decade.
A lack of housing is one of the most pertinent legacies of apartheid. Housing is also a fundamental need and is recognised as one of the United Nation’s 17 sustainability goals. So how do we solve the problem? Is corporate and private investment one of the solutions?
It might be. There is a powerful global trend of companies and investors realising the importance and need for impact investing (i.e., investments made with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return). There is no doubt that investment in quality, affordable housing fits this bill.
In South Africa, government agencies like the PIC and Development Bank of Southern Africa have invested significantly in housing, mainly because it is a great vehicle to facilitate environmental, social and corporate governance (ESG) investing. Other current impact investors in the property market in South Africa include life insurance and asset management companies.
But meeting the demand for housing goes beyond just building shelters. If we want to make a real impact, we have to go about it the right way. Part of that is to purposefully design and build quality housing that will serve the life stages of the people who will live in them.
There are a number of factors that impact both the affordability of homes and the ultimate success of housing developments, including location, design, developmental and operational costs.
The location is a major determining factor. We have to be critical when it comes to the location of any new development and we advise our clients not to develop or invest in marginal sites. Great locations are where the people are; close to schools, work, public transport, social and other public amenities. If people can see themselves living there, we know it will not be a struggle to sell or rent out homes built there.
It’s also imperative to take a long term view when it comes to design and development – is the home to be sold or rented? How are operational costs impacted? It is especially important to be cognisant of operational costs when developing Build-to-rent (BTR) opportunities. Each element in the design has the opportunity to influence the ongoing operational cost, but it does provide opportunities to innovate on an ongoing basis. Costs also have to be strictly controlled to ensure that affordability is not only in terms of purchase or rentals, but also bears in mind living costs. This is where heat pumps, smart meters, solar energy and utility management software comes in.
It will take major investment and a concerted effort from a number of role players to transform our cityscapes with visionary placemaking, providing affordable homes to buy or rent that are fit for the needs of its residents. Cooperation and understanding is required as delays in, for example, getting approvals and then stalling contractors negatively affect both the cost and delivery of homes.
There is no easy one-size-fits-all answer to the challenge of providing affordable housing. It takes a layered approach, but we have seen that it can be done. It has to be done and we have to invest wisely to create communities where the people who keep this country going can afford to live, feeling safe and at home.
Harold Spies is the CEO of Similan, a property development company specialising in residential developments for the middle-income market.