Appropriating rent from greenfield affordable housing: developer practices in Johannesburg

Abstract

‘Affordable housing’ for Johannesburg’s growing middle class is a developmentalist imperative and potentially lucrative market. However, few greenfield developers have found this market profitable. Fundamental to those who have, is control over land and its development. This paper puts heterodox urban land rent theory to work vis-à-vis the logics and practices of these developers. I illustrate how greenfield affordable housing developers work to (re)produce differential and monopoly rents in this context. Differential rents rely on investing in cheap land produced through the city’s racialised geography, and controlling land’s development through vertical integration, dynamic negotiations with local government and development finance institutions, and steering money and people into developments. Monopoly rents rely on the power of developers to act together as a class to secure land, give the appearance of competition and lobby the state in their interests. This power is built through racialised control over land and long personal connections. It is also consolidated by the state’s own land development bureaucracy and preference for ‘mega’ developments and recognisable developers. Together, these developer strategies to accrue differential and monopoly rents demonstrate their active role in the everyday making of land and housing markets. They also demand extensions of heterodox urban land rent theory: first, a more articulated understanding of how class monopoly power over land is built through race, and second, a more contingent analysis of capital’s relations to other actors and institutions, especially the state.

Public housing, intersectoral competition, and urban ground rent: Iran’s first public housing program that never was

“…Since the 1980s, radical urban geographers favorably draw on Harvey’s and Edel’s reconceptualizations of rent theory for urban research (Anderson, 2014; Butcher, 2020; Charnock et al, 2014; Lauria, 1984; Smet, 2016; Wyly and Hammel, 1999; Wyly et al, 2009). They draw the attention to predatory practices of financier-developers through “risk-based pricing” to extract CMRs (Wyly et al, 2009: 334).…”

Re-directing developers: New models of rental housing development to re-shape the post-apartheid city?

“…In the South African context, affordable housing is a loose term referring to housing for income groups ranging from R3500 to R22,000 per month (around 30% of Johannesburg households 4 ), reflecting a ‘gap’ in the housing market above the R3500 per month cut-off for free RDP housing for which 50% of Johannesburg’s population would qualify, but below that which might enable households to secure mortgage financing (Butcher, 2016, StatSA, 2011). With rents calculated at a third of income, ‘affordable rental’ housing might be as high as R7500 per month.…”

“…This links to wider international trends in which the affordable rental housing sector is being ‘discovered’ as a new source of profitability (Butcher, 2016; CAHF, 2017; Wijburg et al., 2018). In addition to highly localised developer interest we have observed some links from this new sector to global investors exploring a new ‘asset class’ of low-income housing provision.…”

“…However, to date this has not been very successful as plans have not generally been supported by private property investment. Apart from a few innovative firms (Mosselson, 2018; Rubin and Harris, 2018), developers have remained locked into very low density high-end suburban developments, or contributed to new low-income housing, predominantly state-subsidised and poorly located on the outskirts of the city in the same relative location as apartheid era townships (Butcher, 2016; Seeliger and Turok, 2015; Todes, 2014). It can seem as if there is little mutual understanding or synergy of interest between property developers and municipal planners in South Africa (Massyn et al., 2015; Oranje et al., 2008).…”

Comparing the relational work of developers

“…However, in other cases developers had internalised a wide range of functions. Entry-level suburban development in Johannesburg is, in the case presented here, vertically integrated, with developers taking responsibility for land assembly and land servicing, partially financing the costs from their own capital; marketing through in-house sales representatives; building housing through in-house construction divisions; vetting applicants' credit worthiness; providing loans; and collecting monthly payments (Butcher, 2019). These developers manage complexity by offering highly standardised products with no option to customise.…”