Dear Premier Zille,
I am a resident in Cape Town and involved professionally in the development of affordable housing in South Africa and Sub-Sahara Africa. I am writing to lend my voice to the others that have suggested using the Tafelberg School site (Sea Point) for affordable housing, which would benefit the Western Province. If the government would be willing to sell the land at a discounted price, the housing should be able to built at an affordable price point. We have seen this done at other sites in Cape Town. Moreover, it is likely the units could be “greened” which would benefit the long-term environmental and energy challenges we face in South Africa – any such investment would provide the double benefit of reducing energy consumption and reversing unemployment in the construction industry.
A house (or flat) is the most expensive asset that most families possess. Housing impacts on the economy in a number of ways; from generating employment opportunities (majority of jobs are for unskilled, PDA men and women) but also through the use of professional services from real estate brokers, lawyers, and engineers, to assessors and advertisers. It has a strong catalytic role in supporting businesses and other key sectors such as construction, health and education. A skilled labor market allows for productivity and a pool of skills which are critical drivers of economic prosperity hence it is important that this is supported particularly in times of economic instability. Its purchase usually requires external financing in the form of a mortgage. The mortgage market, in turn, accounts for a significant portion of the funds intermediated by financial institutions. Crisis notwithstanding, mortgages provide a key source of stable income for the financial sector.
De Soto (2000) has argued that establishing secure property rights in developing countries would allow houses to be used as collateral to generate finance for the householder’s economic initiatives. This is consistent with literature for both developing and developed countries indicating that home ownership is important as collateral for small business loans (Tabaijuka 2009; Black, de Meza, and Jeffreys 1996). This type of housing can be a family’s first chance to finally get on the “property ladder” and begin to see the types of benefits as noted above.
In addition to the benefits of building for-sale units as noted above, there may also be an opportunity to create safe, affordable rental units on this site. Fewer consumers will be able or willing to buy homes in the current tentative economic times, thereby increasing demand for properties to let. According to latest figures from credit bureau Tenant Profile Network (TPN), the percentage of tenants in good standing (those who pay on time) is still a relatively strong 85%, which is much better than the 71% low recorded during the recession in early 2009. Research shows there isn’t a major divergence in gross yields across the various cities – but the size and value of properties do play a role. Typically, mid-sized flats and townhouses at the lower end of the market offer better income returns than larger, more expensive units. Rental units create jobs during the development phase, but also provide jobs in perpetuity to manage the rental enterprises going forward.
For these reasons, I would strongly urge the government to consider seriously the proposal to build affordable housing on this site for both the short-term and long-term benefits to the community and South Africa.
Please do not hesitate to contact me if you have any questions about this letter.