Cape Town has given the green light to a new initiative aimed at facilitating the construction of rental units in lower-income communities. The City of Cape Town Mayoral Committee (Mayco) has approved the establishment of a Development Charges Fund, designed to support micro-developers in the construction of affordable housing within economically disadvantaged neighborhoods.

The fund is set to alleviate development charges for small-scale rental unit projects, with the objective of stimulating the affordable housing market and attracting investments in specific targeted areas. Following Mayco’s endorsement, the proposal is now slated to be included in the city council’s agenda for March.

Mayor Geordin Hill-Lewis expressed the city’s commitment to unlocking more affordable housing opportunities across Cape Town. He emphasized the significance of this initiative, noting its potential to expedite investment in new affordable housing developments more efficiently than traditional government-led projects.

Hill-Lewis highlighted the strategy of harnessing private investment to achieve a public goal, stating, “This is harnessing the power of private investment to achieve an important public outcome – more affordable accommodation.”

To kick-start the fund, the Cape Town city council plans to allocate an initial R20-million to subsidize qualifying micro-developers on a first-come, first-served basis. The subsidies will be directed towards encouraging the development of affordable housing units in 194 specific areas, including Beacon Valley, Bloekombos, Delft, and various other neighborhoods.

The subsidy is expected to cover up to 90% of development charges typically allocated for bulk services such as roads, stormwater, water, sewerage, public transport, and waste removal. Mayor Hill-Lewis explained that this financial support aims to significantly reduce the cost of constructing rental units.

In addition to financial aid, the city is taking steps to support micro-developers further. Local planning support offices are being established in targeted areas to ensure accessible approvals and support, while compliant off-the-shelf building plans are being developed to streamline the approval process. The city is also promoting alternative building materials and practices to enhance efficiency.

Deputy Mayor and Spatial Planning and Environment MMC Eddie Andrews highlighted the city’s intention to encourage the development of affordable rental accommodation in informal areas by supporting micro-developers operating on a smaller scale. This includes entrepreneurs building six to 12 rental units on a property or landowners with sufficient space for small-scale rental units complying with building regulations.

Once the Development Charges Fund gains approval from the council, property owners in these categories can apply for subsidies to cover their development charges. This initiative aims to empower lower-income families to generate income from rental units while addressing the demand for affordable housing in critical areas.