Bridging the gap in Cape Town’s housing needs

In Cape Town, and in many cities around the world, there is a gap in the market that divides rich from poor and poor from middle class. The great divide of residents who earn too much to qualify for government subsidized housing, but too little to purchase houses privately, is growing. Thus, the term “Gap Housing” was formed and since 2007, the city of Cape Town has endeavoured to bridge this part of the market, beginning with implementing a strategy to tackle the issue.

How it works

Those who qualify for gap housing in Cape Town typically earn anywhere from R3,500 to R10,000 per month while those who are eligible for government subsidized housing earn R3,500 and less.

John Sterne, project manager of gap housing in South Africa, explains that because of inflation many residents have fallen into this in-between as their rise in salaries make them no longer eligible for government subsidized housing.

“That cap of R3,500 a month has been in place since 1996. So for the last 14 years they haven’t raised it,” says Sterne.

An individual who qualifies for gap housing will own the house and the process of purchasing is the same as a non-gap eligible participant buying a home. The difference is that the government provides the land for developers to build houses upon and at a cheaper price than buying privately owned housing units.
“The purchaser will have to go to a bank and get a loan to buy the plot of land and also buy the house,” Sterne says.

Before gap housing there were no houses in a low price range available for a number of reasons. “There aren’t any houses in that range because the profit margins aren’t big enough for builders and there also isn’t any land available which is cheap enough. We are trying to fix that by making land available for developers,” Sterne says.

However, trying to qualify for bank loans has been a challenge for many residents.“The process of getting banks to loan money takes a long time,” Sterne explains.

“It’s a very lengthy process and a lot of people in that market have been blacklisted because they have not paid an account or loan. This means they can’t get a bond or loan from a bank and that really renders them un-houseable.”

Though Sterne and his colleagues have sought out banks to deal with the blacklisting dilemma, gap housing will only see progress from this problem once banks become more flexible with their lending criteria. As of right now, those who don’t qualify for a bank loan, unfortunately, won’t qualify for gap housing either.
Before gap housing, the majority of residents were renting rooms in apartments or houses from private owners.

Project success—Scottsdene

One of gap housing’s most notable projects includes the Scottsdene “Show Village” which was built in October 2008. The village was created as a cost effective way to utilize innovative building materials and building methods. It was erected to explore the possibilities of low cost housing in great numbers, while still utilizing effective and modern building technologies.

This plot of land where the show village was created was set aside for developers to build housing units that cost less than R200,000. There are nineteen houses in total which have been developed especially for those eligible for gap housing. There are 150 vacant plots left for sale in Scottsdene and those who buy the plot have the choice on the design of their new house.

The plot of land has redefined what is possible for gap housing units and acts as an alternative way for those who don’t qualify for government subsidized housing to own their own home.

The costs per home are affordable for those between the gap housing price bracket.
“The cost varies depending on land and size. They fluctuate. Somebody who makes R10,000 a month can only afford a house of about R250,000,” Stern says.
Although there aren’t a large number of gap housing units built to date, the scheme has done a lot for building up the community. Those within the gap housing market can now own their own home.

“They have security of tenure and they increase the tax base because they pay rights to the municipality,” Sterne clarifies.
The houses are built in a mere three to four months so the turnaround of building is fast. After three years of ownership, the resident can sell the house at their discretion.

Onwards and upwards

An upcoming project to note will be a mammoth group of houses— more than they have ever built previously under gap housing.
“Approximately 2000 houses are going to start being built next year. Most of our projects have been small, a couple of hundred, this is a fairly large project,” says Sterne.

Cape Town has become one of the leaders in gap housing in South Africa. Sterne says,” It uplifts people right from the very bottom into a bracket where they can own their own house and pay taxes.”

Gap housing in South Africa has helped those who at one point had no way of owning their own home. With places like the Scottsdene residence and their upcoming 2,000 home lot, the gap in the market is slowly starting to decrease, thanks to Sterne and his team’s determination.