The City of Cape Town’s council has adopted the creation of a Development Charges Fund to support micro-developers building affordable housing in lower income communities. The fund will subsidise development charges for small-scale rental unit developments.

The creation of a Development Charges Fund will unlock new investment for more affordable housing development far faster than the government can build, says Mayor Geordin Hill-Lewis.

The City is kickstarting the new Fund with an initial R20 million to subsidise qualifying micro-developers on a first-come, first-served basis. Subsidies will be available to stimulate the development of more affordable housing in 194 targeted lower income areas.

“To further drive investment and upgrading of Cape Town’s fastest growing and poorest areas, a full 75% of the City’s record R12.1 billion infrastructure budget in 24/25 will directly benefit lower income communities and households, including better water and sanitation, roads, community facilities, and public transport infrastructure,” he notes.

The subsidy covers between 50% to 90% of Development Charges which the City generally uses to pay for bulk services to support new developments, such as roads, stormwater, water, sewerage, public transport, and waste removal.

The qualifying criteria includes:

• Applicants must be micro-developers, intending to develop between three to thirty units at a site.
• Applicants must provide proof of the submission of building plans to the City for assessment and approval.
• Applicants must confirm that project funding is available before the payment of the development charges from the Development Charges Fund will take place. This is to ensure payments from the Fund are prioritised and paid to those developers who are ready to commence with the development. This requirement does not exclude developers to apply for assistance from the Fund. It is only a requirement before payment can happen.

The objectives of the Fund are to:

• Stimulate property investments in townships by reducing the entry barriers (among which development charges) for micro-developers.
• Attract investors to townships with a suite of financial and other incentives.
• Facilitate the expansion of township businesses and formalisation of township areas.
• Assist with greater compliance with the City’s building plan approval processes.
• Reduce entry barriers for investors in targeted areas.
• Stimulate employment and skills development in the targeted areas.

“Cape Town has a thriving construction industry with micro-developers who are already developing affordable rental accommodation, mostly in formal neighbourhoods. These entrepreneurs are well-placed to provide this type of accommodation at scale, and to contribute to a more densified and inclusive housing market. Also, we are committed to supporting these micro-developers and property owners to build safer and better-quality homes,” comments the City’s Deputy Mayor and Mayoral Committee Member for Spatial Planning and Environment, Alderman Eddie Andrews.

“A micro-developer is a landowner in one of these identified areas with an erf big enough to build small scale rental units on their land that are complying with building regulations and connected to the City’s services infrastructure. Now that Council has approved the creation of the Development Charges Fund, these property owners can apply to the City for their development charges to be subsidised from this fund, which will significantly bring down the cost of building the rental units.”

The City’s Economic Development and Investment Department developed the proposal to drive investment and development in the target areas. The City will execute the project in partnership with the Development Action Group (DAG).

Quarterly progress reports will be submitted to the Land Release Mayoral Priority Programme to track the uptake of this pilot initiative. Further funding post the completion of this pilot will require further approval by Council.

The 194 areas to be targeted have been identified by the City’s Spatial Planning and Environment Directorate, and include Beacon Valley, Belhar, Bishop Lavis, Bloekombos, Crossroads, Delft, Dunoon, Enkanini, Fisantekraal, Grassy Park, Gugulethu, Heideveld, Joe Slovo Park, Khayelitsha, Kuyasa, Langa, Lavender Hill, Lentegeur, Lwandle, Mamre, Nomzamo, Nyanga, Ocean View, Parow Valley, Pelican Park, Philippi, Phoenix, Retreat, Seawinds, Sir Lowry’s Pass, Strand, Strandfontein, Steenberg, Scottsdene, Saxonsea, Sun City, The Hague, Valhalla Park, Vrygrond, Wallacedene, Wetton, Witsand and Westridge in Mitchells Plain, among others.