Richard Tomlinson
CROSSFIRE
South Africa’s cities are notorious for the exclusion of a significant proportion of the population from economic opportunities and social services. This exclusion has, in part, to do with the apartheid form of our cities: low- density, high-income, well-serviced, formerly white suburbs close to work opportunities; and large, impoverished, sprawling, poorly serviced and still black townships and informal settlements on the urban periphery.
The government’s aim to build compact and integrated cities is intended to remedy the disadvantages and neglect characteristic of the apartheid city, and ensure that the basic needs of all South Africans are provided for. Under the mantle of the Reconstruction and Development Programme, the government provides housing subsidies and grants for investment in municipal infrastructure. And for indigent households, calculated as households with an income of less than R800 a month, the government has introduced an “equitable share” subsidy to municipalities intended – but not always used – to pay for services these households consume.
These objectives contrast with the urban breakdown being experienced by most other middle-income countries. As is the case in South Africa, a large proportion of the population can never hope to find a job in sectors deemed to be competitive in the global economy. A “marginal mass” emerges as a permanent feature, never to be employed in the formal sector, not even during periods of economic growth.
People are pushed to the urban periphery. Because they lack skills, do not know about possible jobs and are distant from employment centres, they become cut off. Worse still, because they are irrelevant to a country’s economic success, governments often see little reason to provide them with adequate municipal and social services.
Can we expect a different urban outcome in South Africa?
In calling for compact and integrated cities, the government is working towards desegregation and high-density, mixed-use development. It is anticipated that a mix of residential, economic and social activities will enhance access to jobs and social services and reduce the cost of transport and the installation of municipal infrastructure. It can also increase the participation of women in the labour force by bringing jobs closer to home.
-It is ironic, therefore, that the urban dimension of the government’s subsidy and grant programmes has had the opposite and unintended consequence of exacerbating isolation.
-It is now commonplace that an obsession with delivering a million houses in five years has led to the neglect of development considerations and exacerbated urban sprawl, taking the poor ever further from economic and social opportunities.
-Since infrastructure grants serve new housing development, and since education and health services – often long delayed because of budgetary constraints and pre- existing backlogs – follow the decentralising population, it is apparent that housing leads the present aggravation of our inequitable cities.
It is difficult to see how things could have been different. High land prices and rents, well-orchestrated opposition from potential black and white neighbours and social stigmatisation drive low-income housing projects to the urban periphery.
But if things are to be different, we need to reshape the way in which the cities are being built, how government grants are delivered and the way the property market works. In particular, we need to link the location of low-income households with the location of jobs, education and health facilities.
There are at least six ways the government can restructure our cities to achieve its aim of equity. It will be necessary, however, for municipalities to play an active role in influencing the way the subsidy regime works. And municipalities will have to create a predisposition among property developers to locate new investment near transport routes, and where there is already some infrastructure: internal (reticulation of water and electricity, and roads within townships); bulk (major roads, treated water, outfall sewers, waste-water treatment); and connector (main pipelines, reservoirs, sewers, distribution roads).
1. Focus subsidy on land
The way in which the housing subsidy works cannot lead to urban integration. In the first place, the R15E000 subsidy cannot meet the high cost of land close to employment centres. Indeed, R15 000 is not available for this purpose since typically 40% of the subsidy is used to provide internal services.
Instead of aiming to use the R15E000 for the acquisition of a site, the installation of internal services and the delivery of a small top structure, the R15E000 should be wholly dedicated to the acquisition and servicing of sites. The outcome will be a greater amount available for the purchase of better- located land.
2. Let municipalities decide
This is the key to the effectiveness of a programme to promote urban integration centres on the location of new housing projects. Provincial housing boards have been responsible for approving housing projects and, consequently, also their locations, as well as internal services to be provided. A senior housing official said the decisions of the boards have been “wild and woolly”, showing little regard for the location of new housing and the ability of households to afford the services.
Instead of relying on provincial housing boards, the second proposal is that all provinces adopt the process recently introduced in Gauteng, where the provincial housing department divides up the housing budget among municipalities in terms of their housing backlog, past access to the subsidy (ensuring a fair spread of new housing), and past success with using the subsidy. Municipalities will then be able to plan for a given number of housing units that will be subsidised in the forthcoming years. They will be able to locate housing in terms of integrated development plans (known as IDPs) which all municipalities are obliged to prepare.
-What is being proposed is not the common practice of municipalities using public land for housing projects, since the availability of the land then determines the location of the housing project. The use of public land also constitutes a hidden subsidy, which is unfair to other subsidy-dependent households that do not benefit from free land. If municipalities choose to use public land for low-income housing, they should charge a fair market price for the land.
3. Increase the subsidy for
internal services
A third proposal concerns the 40% of the housing subsidy that is used for internal services. Since the subsidy is at present only available for new housing projects, it means that municipalities have considerable difficulty in providing these services elsewhere in their jurisdiction, even where there are extensive service backlogs.
This proposal therefore consists of adding resources to the Consolidated Municipal Infrastructure Programme (run by the Department of Provincial and Local Government, and known as the CMIP) for the delivery of internal services.
At present the primary function of the CMIP is to make grants of R3E000 per indigent household to municipalities to cover the provision of bulk and connector infrastructure at a “basic-services level” – for community standpipes, ventilated improved pit latrines, gravel roads and so on – for new, subsidised housing developments. The CMIP will then serve as the vehicle for municipalities obtaining subsidies for households that are not at the receiving end of a housing subsidy and lack adequate internal services.
Again this proposal is not novel. The government may well change the focus of the CMIP from bulk and connector services to the provision of internal services. However, if this change comes about it will spread the current budget of the CMIP ever more thinly.
The proposal therefore involves significantly increasing the resources available to the CMIP and augmenting its role in service delivery. This will enable municipalities to address service backlogs throughout the city and not solely among new housing developments. The municipalities can also deliver services at a level they and communities prioritise and can afford.
4. Densification
The fourth proposal is that the resources of the CMIP be further increased to enable municipalities to rehabilitate and upgrade bulk and connector services within already built-up urban areas. The subsidy is needed to enable water and sewer mains and roads to cope with the higher levels of demand that will result if densification occurs. Densification is a key characteristic of a compact city, but in many areas it will overload existing bulk and connector infrastructure and lead to the degeneration of these services.
Densification enables households to move into more expensive neighbourhoods, but with smaller residences than the norm among their new neighbours.
Those moving up will leave behind residential space that will enable others to filter up into what is, for them, more desirable living conditions. And some of the housing space left behind as a higher-income family moves out can be subdivided, a process that enables lower housing prices and rents.
5. Private developers to
cross-subsidise housing
projects
A fifth proposal again involves a subsidy, but this time it is to be paid by private developers. This subsidy would occur through the auction of development rights for large, new and high-income property developments. The revenue so generated should be used to cross- subsidise the cost of land for low-income household projects, bringing them close to employment centres.
The supply of development rights will take into account the increase in demand for space and be offset by the present availability of space, for example, in the inner cities. The cost of development rights should increase with the distance from existing bulk infrastructure and employment centres. This will create a predisposition in the market to proximate development, reduce the burden to government of investing in bulk infrastructure and reduce the burden to low-income households of getting to work.
This process of limiting development rights sustained property values in San Francisco when, in other American cities, the combination of an oversupply of space and an economic downturn led to a property market crash.
6. No rates exemptions
The sixth proposal, also intended to reshape the way in which the property market works, is to ensure that all owners of urban land are caused to pay rates and that the rates discount presently available to private residences be reduced. The objective will be the same as that in Singapore, where taxes on vacant land are used to increase urban density. These changes will increase the expense of holding on to low-density residential properties. They will also particularly affect the mining companies, who do not pay a tax on their substantial holdings of unused mining land south of the Johannesburg city centre and are therefore able to withhold land from the market for speculative purposes.
These six proposals will set in place
three mutually supporting forces. The first enables municipalities to locate infrastructure and housing in locations that better serve the needs of low-income households. The second causes property developers to locate new projects on or close to major transport routes, which improves access to the jobs created by the developments, and to pay a cross- subsidy for the purchase of land for low- income housing projects. And the third increases the supply of land and helps to drive down land prices, causing closer-in land to become cheaper. Were this to happen, we would be well on the way to building more integrated cities in South Africa.
Professor Richard Tomlinson is an urban economist at the Graduate School of Public and Development Management, University of the Witwatersrand