This image shows the city of Cape Town

How a New Land Policy Could Help Unwind Apartheid in Cape Town, South Africa

Inclusionary Housing is a Form of Land Value Capture, or Land Value Return
By Will Jason, October 18, 2019


Looking at the South African government’s map of “the social tapestry of Cape Town,” it’s not difficult to see the legacy of apartheid. The map shows many pockets of racial integration, but most nonwhite residents live in the Cape Flats, an expansive area southeast of downtown that extends far out to the urban fringes. This area includes the city’s infamous townships, built in the twentieth century to segregate black and mixed-race residents.

Whites, who make up only 15 percent of the population, occupy the northeastern and southwestern suburbs, the Atlantic shoreline, and much of the urban core, or City Bowl, so-named because it is surrounded by Devil’s Peak, Lion’s Head, and the iconic Table Mountain, the latter of which was voted one of the world’s New Seven Wonders of Nature.

The City Bowl is where Amazon recently moved into a new eight-story office building. Developers advertise newly built projects in the neighborhood like the 17-story Sentinel, “a super-modern glass and aluminum building offering the most contemporary architectural statement in the City Centre,” and the Onyx, an 11-story “jewel in the crown of Cape Town” featuring “hotel-style residents’ amenities in the form of a gym, outdoor cross-training track, a day spa with sauna, bar, and kitchen, as well as a sky terrace with dramatic harbour, city and mountain views.” Two of the Onyx’s penthouses came accessorized with a Jaguar SUV.

In Cape Town and the rest of South Africa, formal racial exclusion—enforced under centuries of colonial rule and sustained during the mid- to late-twentieth century by apartheid—has given way to economic segregation. Whites make up only a tenth of South Africa’s population, but nearly two thirds of its elite, according to the World Bank, which designates the country as the world’s most unequal. The top 10 percent of households possess more than 70 percent of the nation’s wealth.

Land is at the core of the problem, and one potential solution

After centuries of deep social divisions, Cape Town’s jobs, schools, and efficient transportation—sources of economic opportunity—are concentrated downtown and in affluent suburbs. Most residents can’t afford to live in those areas, and endure long commutes from townships and other far-flung neighborhoods, many lacking parks, hospitals, or, in some cases, basic infrastructure for water and sanitation.

Reversing such entrenched inequality will require a massive effort with many different solutions, but the city is poised to adopt a new policy that could help. Known as inclusionary housing or inclusionary zoning, the policy originated as a way to combat segregation in another nation with a history of racial oppression—the United States.

The mechanics of inclusionary housing are simple: owners of real estate projects are required to sell or rent some of the new homes or apartments to lower-income residents at prices they can afford. In some cases, property owners can provide the affordable housing at a nearby location or pay into a housing fund. Cities can specify how much affordable housing is required, and exactly how low the rent or sales prices need to be.

Inclusionary housing is a form of land value return, or land value capture, a type of policy that allows the public sector to tap the gains from rising property values that result from public sector actions—construction of a new road, for example—rather than those of the individual property owner, and use the value increase for the public’s benefit. One common source of property value increase is a change in the density of a neighborhood or individual property.

Inclusionary housing is rooted in the understanding that much of land’s value is generated by actors other than the property owner,” said Enrique Silva, director of international initiatives for the Lincoln Institute of Land Policy.

Willard Matiashe, a researcher for the Development Action Group, a housing policy organization in Cape Town, described inclusionary housing as “one way of sharing the land value windfalls linked to additional development rights that the city gives to developers.”

Inclusionary can be a tool for spatial justice

Now used in more than 800 U.S. communities, inclusionary housing first gained traction in the 1970s, partly in response to a practice known as exclusionary zoning, by which cities used land-use regulations to prevent less affluent, often nonwhite renters or home buyers from moving to desirable neighborhoods. Common exclusionary measures include prohibitions of apartments or smaller homes.

South Africa enforced its segregation through more explicit land-use laws, most notoriously the Group Areas Act, which established different sections in cities for each race. Beginning in the 1960s under this law, Cape Town forcibly removed 60,000 nonwhite residents from an area near the city center known as District 6, bulldozed their homes, and relocated them to the urban fringes.

Cape Town under the Group Areas Act. Illustration by Myriam Houssay-Holzschuch, Olivier Ninot, and Emma Thébault

Cape Town under the Group Areas Act. Illustration by Myriam Houssay-Holzschuch, Olivier Ninot, and Emma Thébault

After the end of apartheid in 1994, the new democratically elected government immediately recognized the importance of land in addressing inequality. In an early white paper, the government committed to establishing “socially and economically integrated communities, situated in areas allowing convenient access to economic opportunities as well as health, educational, and social amenities.” Two years later, it enshrined these ideas in the new constitution.

But breaking the cycle of segregation has proven difficult. In response to an urgent need for basic housing, the post-apartheid government has built millions of homes for low-income South Africans, but they are located mostly at the urban periphery where land is cheap. These homes provide shelter but little access to opportunity.

“South Africa has acknowledged in law that they need to have a strategy for desegregation and they’re in search of practical tools to achieve that goal,” said Rick Jacobus, who has studied inclusionary housing and recently traveled to South Africa on behalf of the Lincoln Institute to learn and advise public officials.

Momentum behind inclusionary housing in South Africa is building

South Africa’s policy makers first put inclusionary housing on the agenda in 2004 as part of a national housing plan, and in 2007 the Department of Housing produced a framework for national legislation. However, these efforts fizzled in the face of opposition from the real estate industry, a downturn in the housing market, and technical concerns.

In the absence of a coherent national policy, cities have experimented with their own policies. The country’s largest city, Johannesburg, adopted the country’s first municipal inclusionary housing policy in 2008 for high-priority transportation corridors, although the policy was rarely used. Johannesburg recently adopted a new citywide policy, but it allows developers to meet the requirements simply by building market-rate homes or apartments of a smaller size—an indirect way to reduce the rent or sale price.

These initial efforts have been relatively modest, but there is now a stronger legal foundation for inclusionary housing in South Africa, thanks to another piece of legislation enacted a few years ago. In 2013, South Africa’s parliament enacted the Spatial Planning and Land Use Management Act (SPLUMA), which established spatial justice as one of the core development principles that should guide local land use, stating that “past spatial and other development imbalances must be redressed.” Now advocates in Cape Town are relying on that law to push for more aggressive affordable housing policies.

In Cape Town, momentum behind inclusionary housing has been fueled by a real estate boom that began in the early 2010s. Home prices have increased faster in Cape Town than elsewhere in the country, in part because of a strong luxury market and demand from foreign buyers, who are drawn to the dramatic landscape and Mediterranean-style climate. The market has cooled recently amid a national economic slump and a 2018 water crisis, but prices in some neighborhoods are still double what they were just five years ago. Only a fraction of Cape Town’s households can afford the average-priced house in the city.

The central business district in Cape Town. Photo by Amy Cotter.

Building on the legal foundation of SPLUMA, an activist group called Ndifuna Ukwazi (“Dare to Know” in the regional Xhosa language) began in 2017 to file objections against real estate projects for which developers sought changes in the regulations—to build above the allowable height, for example. These challenges have led some developers to voluntarily add affordable housing to their projects, but the process has been ad-hoc, often with weak enforcement.

Last month, Ndifuna Ukwazi escalated its campaign with a lawsuit against the city over its approval of a proposed mixed-use tower called The Vogue, which would become one of Cape Town’s tallest buildings and promises to be “iconic in both form and function,” with “undulating balconies and roof gardens” and “top-level penthouse apartments which will all enjoy panoramic views over the Atlantic Seaboard.”

Among the handful of Capetonians who could afford an apartment in the development, nearly half are white, Ndifuna Ukwazi said in its lawsuit, even though whites make up only a sixth of the city’s population.

“Every new exclusive development that is approved by the city without affordable housing entrenches a system of racial segregation and unequal access to services,” the group said in a statement.

Developers are at the table

Such pressure has made developers more open to an inclusionary housing policy. Last year, developers sat down with advocates, experts, and city officials in a series of dialogues, hosted by the Development Action Group and the Lincoln Institute. Developers said they would prefer the certainty of a citywide policy if it could eliminate the risk of challenges to individual projects, which can create costly delays.

“Developers in the room were saying, ‘give us the number so we can factor that into our proposals,’” said Matiashe of the Development Action Group.

Nigel Burls, a Cape Town planning consultant who works on behalf of developers but did not participate in the dialogues, said developers might support an inclusionary housing policy if it doesn’t make projects infeasible.

“If it seems to be addressing a problem and it’s not seen to be penalizing developers, the developers will jump on the bandwagon,” Burls said. “It has to be carefully structured and it has to be carefully thought through. It has to be done in a manner that it doesn’t kill development.”

The city is making efforts to enact such an inclusionary housing policy. In a concept document released last year, Cape Town proposed to tie inclusionary housing to zoning change or additional development rights that increase property values. A draft policy is expected sometime in 2020.

“If we can get a policy together that speaks to more equitable ownership and benefit from the land and land value, it’s an incredibly important moment,” said Gail Eddy, a research officer for the city of Cape Town who is helping to craft the new policy.

By itself, inclusionary housing would not solve Cape Town’s problems of segregation and unaffordable housing. The policy would only work in neighborhoods that can attract market-rate development, which excludes large swaths of the city where infrastructure is poor. It would not produce nearly enough homes and apartments to meet the needs of the poorest residents.

Nevertheless, an inclusionary housing policy would establish the principle that the whole community has a claim on land and its value, and that the city can use land to redress its inequalities.

“Inclusionary housing is a statement that land should be used for the benefit of the public—in the case of Cape Town and South Africa, to help reverse longstanding patterns of exclusion,” said Silva of the Lincoln Institute.



Will Jason is associate director of communications at the Lincoln Institute of Land Policy.

Photograph: Cape Town, South Africa, with Table Mountain as the backdrop. Credit: kavram/iStock via Getty Images.