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Exploring Mixed-Income Housing as an engine for

Economic Development for Low-Income Households: The

Cosmo City Case Study

A Research Report

presented to

The Graduate School of Business

University of Cape Town

In partial fulfilment

of the requirements for the

Masters of Business Administration Degree

by

Nomzamo Mlungu

December 2013

Supervised by: Steven Nabieu Rogers

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Plagiarism Declaration

I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is

one’s own. Allowing another to copy my work and use it as their own, is also plagiarism.

This assignment is my own work. I have not allowed and will not allow anyone to copy

my work with the intention of passing it off as his or her own work.

I acknowledge that working with someone on my assignment is allowed, but only if a

mutual effort is made and different examples and, where necessary, wording is used.

Signed: Nomzamo Mlungu

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Dedications

This paper is dedicated to my grandmother, Deliwe Mlungu, and my father, Richard Kolekile

Mlungu, who both passed away this year and were both strong advocates of education. Had it

not been for them, I would not have walked this path in my life.

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Acknowledgements

First and foremost I want to express gratitude to my parents, Nomathamsanqa Esther Mlungu

and Richard Mlungu who painstakingly sacrificed so much to carve a better future for their

children. Thanks to the efforts of these two civil servants, my sisters and I all completed our

university degrees. Thank you for blessing this MBA when I announced my intention to go

back to school 2 years ago.

How can I forget my two sisters? Dr Bantukazi Mlungu who held the fort at home during a

very challenging year for our family and Phumeza ‘Zanethongo’ Mlungu who has played a

huge contribution in moulding the person I have become.

I want to thank my cousin, Bukelwa Mgoqi, who was a wonderful caregiver to my daughter,

whilst I roamed the corridors of GSB at unsavoury hours pushing my work. Thank you to the

apple of my eye, Imitha for her amazing maturity at the tender age of 6 who endured a year of

a ‘barely-there-mother’.

I want to thank my two field research assistants: my nephew, Kwakhanya Mlungu and

Mthethwa Gqongo (a Cosmo City Community Development Worker)

And lastly, I’d like to thank my research supervisor, Steven Nabieu Rogers for constantly

reminding me of the significance of this paper for the housing sector and for believing in my

capabilities as a researcher.

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Glossary of terms

ANC African National Congress

BNG Breaking New Ground Policy

CBD Central Business District

CODEVCO Cosmo City Developer- a Basil Read subsidiary

HOPE VI Housing Opportunities for People Everywhere

LIH Low-income Household

NHBRC National Home Builders Registration Council

PPP Public Private Partnerships

RDP Reconstruction and Development Programme

RDP Housing Generally accepted term to describe government subsidised low-

income housing

Shebeen Private house selling alcohol

Spaza shop Informal shop trading in consumer goods from home

U.S. United States of America

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Abstract

Since 1994, the underlying philosophy for South African Housing Policy was that of using

housing as a vehicle to lift the previously disenfranchised poor out of poverty. However the

emphasis on meeting ‘delivery’ targets compromised the policy’s ability to contribute

towards poverty alleviation. Instead it was accused of perpetuating the economic

marginalisation of the poor by delivering housing developments that were displaced from

socio-economic opportunities reminiscent of the apartheid township. With the enactment of

the BNG policy in 2004, a new direction in housing policy emerged that recognised access to

‘well-located’ land and socio-economic integration as key components of meeting the

poverty alleviation agenda. Cosmo City, an integrated housing development, which is widely

recognised as pioneering in embracing the principles of BNG, set the stage for undertaking

this study. This study thus evaluates the extent to which the mixed-income housing

component of Cosmo City has facilitated economic development for low-income households.

The study findings reveal the emergence of a unique economic development model in Cosmo

City for low-income households that is driven by internally generated economic activities.

This model addresses the shortcomings of mixed-income housing theory which relies on

access to external job opportunities to drive economic development. More importantly, the

study findings provide a South African context for mixed-income housing and have potential

implications for shaping the future direction of housing policy in the country.

Keywords: Mixed-income housing, Cosmo City, low-income households, BNG policy,

economic development

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Table of Contents Plagiarism Declaration ................................................................................................................ i

Dedications ................................................................................................................................ ii

Acknowledgements .................................................................................................................. iii

Glossary of terms ...................................................................................................................... iv

Abstract ...................................................................................................................................... v

Chapter 1. Introduction .......................................................................................................... 1

1.1 Problem setting ............................................................................................................ 1

1.2 Research questions and scope ..................................................................................... 3

1.3 Research assumptions ................................................................................................. 4

1.4 Research ethics ............................................................................................................ 4

Chapter 2. Literature Review................................................................................................. 6

2.1 Backdrop of South African housing policy ................................................................. 6

2.1.1 Post-apartheid housing policy: 1994- 2004 ......................................................... 6

2.1.2 Implementation of policy ..................................................................................... 7

2.1.3 Shortcomings ....................................................................................................... 7

2.1.4 Summary .............................................................................................................. 8

2.2 A new housing ethos: Breaking New Ground policy- 2004 ....................................... 9

2.2.1 Policy vision......................................................................................................... 9

2.2.2 Implementation of policy ................................................................................... 10

2.2.3 Shortcomings ..................................................................................................... 10

2.2.4 Summary ............................................................................................................ 11

2.3 Mixed-Income Housing............................................................................................. 11

2.3.1 Mixed-income housing defined ......................................................................... 11

2.3.2 Origins of mixed-income housing ..................................................................... 12

2.3.3 Mixed-income housing at project level: U.S. Case Studies ............................... 13

2.3.4 Mixed-income housing at policy level: Other Countries ................................... 16

2.3.5 The case for mixed-income housing in South Africa ........................................ 18

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2.3.6 The mixed-income housing debate .................................................................... 20

2.4 Cosmo City ................................................................................................................ 23

2.4.1 Vision and objectives ......................................................................................... 23

2.4.2 Development conception ................................................................................... 23

2.4.3 Development details........................................................................................... 24

2.4.4 Development Analysis ....................................................................................... 25

2.4.5 Cosmo City: Findings from other studies .......................................................... 26

2.4.6 Conclusion ......................................................................................................... 28

2.5 Literature Review Summary ..................................................................................... 29

Chapter 3. Research Methodology ...................................................................................... 31

3.1 Research Approach & Strategy ................................................................................. 31

3.2 Research Design, Data Collection Methods and Research Instruments ................... 31

3.2.1 Research Design................................................................................................. 31

3.2.2 Research Themes ............................................................................................... 32

3.2.3 Data Collection Methods ................................................................................... 33

3.2.4 Research Instruments ......................................................................................... 34

3.3 Sampling.................................................................................................................... 36

3.4 Research Criteria ....................................................................................................... 37

3.5 Data Analysis Methods ............................................................................................. 39

3.6 Limitations ................................................................................................................ 39

3.6.1 Subjectivity ........................................................................................................ 39

3.6.2 Data collection methods ..................................................................................... 39

Chapter 4. Findings and Analysis ........................................................................................ 41

4.1 Summary of Findings ................................................................................................ 41

4.2 Main Findings ........................................................................................................... 42

4.2.1 Locational Economic Consequences ................................................................. 42

4.2.2 Emergence of internally generated economic vehicles ...................................... 44

4.2.3 Infrastructure catalyst for economic development ............................................. 47

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4.3 Discussion of Findings .............................................................................................. 48

Chapter 5. Conclusion ......................................................................................................... 51

Chapter 6. Recommendations .............................................................................................. 53

Chapter 7. Future Implications ............................................................................................ 55

7.1 Research areas ........................................................................................................... 55

7.2 Policy and implementation ........................................................................................ 56

Bibliography ............................................................................................................................ 57

Annexure A: Semi-structured open-ended questions .............................................................. 61

Annexure B: Research themes and sub-themes ....................................................................... 62

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List of Tables Table 1: Housing subsidy income bands (Source- Wilkinson, 1998, p.225) ............................. 7

Table 2: Mixed-income housing- Development purposes- U.S. Case Studies- Brophy &

Smith (1997) and Rosebaum et al (1998) ................................................................................ 14

Table 3: Mixed- Income Housing Model- Viability Factors- U.S. Cases Brophy & Smith

(1997) and Rosebaum et al (1998) ........................................................................................... 15

Table 4: Affordable housing Quotas (Smit & Purchase, 2006) ............................................... 17

Table 5: Relevant Situations for Different Research Strategies- Source (Yin, 2002, p. 5) ..... 32

Table 6: Success factors- Locational issues pertaining to medium density mixed-income

housing- Source (Landman, 2010, p.12) .................................................................................. 33

Table 7: Research themes: Economic issues pertaining to mixed- income housing – Adapted

from Landman (2010) and Lebeta (2009) ................................................................................ 33

Table 8: Research Findings - Core Themes ............................................................................. 41

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List of Figures

Figure 1: Graphical depiction of BNG policy ............................................................................ 9

Figure 2: Role players in Cosmo City, with the extent of the model indicated by the dotted

line- Source- Urban Landmark (2011, p.4) .............................................................................. 25

Figure 3: Mixed-income housing- proposed policy framework developed from literature..... 30

Figure 4: Locality map and research study area ...................................................................... 37

Figure 5: Comparison between economic development models for low-income households in

mixed income development- Theory vs. Cosmo City ............................................................. 52

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List of Photos

Photo 1: House with Backyard rooms ..................................................................................... 45

Photo 2: Businesses enhanced by electrical infrastructure: Sewing (left) and Motor spray

painting equipment (right) ....................................................................................................... 48

Photo 3: Contrast between original RDP house (left) and upgraded RDP house (right) ......... 49

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Chapter 1. Introduction

1.1 Problem setting

The year 1994 signalled the dawn of a new era for South Africa. The African National

Congress (ANC) had been elected as the governing party and the majority of the population

were in expectation of the economic prospects that would follow as entailed in the economic

clause of the Freedom Charter (the governing document for ANC policy) which promised

equal access to the country’s wealth for the vast majority of South Africans previously

marginalised under apartheid (Murray, 2008). This led to the formulation of the

Reconstruction and Development programme (RDP), the 1994 ANC election manifesto later

adopted as government policy, which aimed to redress the socio-economic imbalances

attributable to the apartheid era (Murray, 2008) . Under RDP, the ANC government looked

to housing as a vehicle for redistributing economic wealth to the previously disenfranchised

poor in the form of transferring a tangible asset with the potential to lift them out of poverty

(Pottie, 2003; Charlton & Kihato, 2006).

Since then, the ANC government has been widely criticised for failing to use housing

provision as a mechanism for redressing apartheid’s social, economic and spatial legacies

(Wilkinson, 1998; Huchzermeyer, 2001; Charlton & Kihato, 2006; Landman, 2010). Instead

housing developments that were implemented post-apartheid conformed to the previous

regime’s housing delivery norms; thus perpetuating the economic marginalisation of the poor

and have been labelled as ‘poverty traps’ (Huchzermeyer, 2001, p. 306).

The above led to the enactment of the Breaking New Ground policy (BNG) in 2004, which

aimed to create sustainable human settlements thus contributing to poverty alleviation and

economic development for low-income households. Under this policy, access to ‘well-

located’ land as well as socio-economic integration within the settlements were seen as

integral in meeting this imperative (;Charlton & Kihato, 2006; National Housing Code,

2009).

This paper is a case study analysis of Cosmo City, an integrated housing development located

in the north-west of Johannesburg which has been hailed as pioneering in embracing the

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principles of BNG. Although the development is integrated across a number of facets such as

mixed-income bands of households, multiple land uses, mixed tenures, mixed finance options

and collaboration between the public and private sectors; the research interest for this paper is

the mixed-income aspect of the development hence the paper mainly uses the term mixed-

income in describing the development (Cowden, 2006; Onatu, 2010; Urban Landmark, 2010;

Urban Landmark, 2011). In the context of this paper, mixed-income housing relates to

housing developments that integrate government subsidised low-income housing in higher

income market-driven developments thereby enabling the mixing of multiple income groups

in the developments (Brophy & Smith, 1997; Smith, 2002; Berube, 2005; Smit & Purchase,

2006; Landman, 2010; Onatu, 2010).

Mixed-income housing is a worldwide phenomenon that has underpinned housing policy in

many countries in the effort to address socio-economic inequalities (Berube, 2005; Smit &

Purchase, 2006). The potential economic transformation for low-income households resulting

from mixed-income housing has been widely documented (Brophy & Smith, 1997; Berube,

2005; Smit & Purchase, 2006; Fraser; 2007; Onatu, 2010). Notwithstanding the above, the

mixed-income housing model has not consistently yielded positive economic outcomes for

low-income households leading to questions on its effectiveness as a poverty alleviation

measure (Brophy & Smith; 1997; Fraser; 2007; Joseph et al, 2007; Joseph, 2010).

Similarly, the limited research studies that have been conducted on Cosmo City

(Leteba,2009; Landman, 2010; Onatu, 2010; Ruiter, 2010) present an opportunity to examine

the effectiveness of the mixed-income housing model within the South African context .

Given the industry status of being a model for mixed-income housing, further studies on the

Cosmo City are warranted to establish whether this is an appropriate solution for the housing

challenges the country faces (Cowden, 2006; Onatu, 2010; Urban Landmark 2010, Urban

Landmark 2011).

A study undertaken by Landman (2010) on eleven mixed-income housing developments

including Cosmo City provides a solid foundation to expand upon. Landman (2010)

performed a needs based analysis of the importance of proximity of housing to socio-

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economic opportunities for residents. Landman’s (2010) study adds some valuable insights

on the housing discourse and goes a long way in establishing the social perceptions around

this ‘golden goose’ of mixed-income housing. The study revealed that proximity to socio-

economic opportunities was important to the households, which suggests that ‘current

government policies are in line with user needs and preferences’ (Landman, 2010, p. 15). The

study however fell short of establishing whether proximity translated to better economic

prospects for low-income households. This paper provides a platform to expand on the work

done by Landman (2010) by investigating this aspect in relation to Cosmo City.

1.2 Research questions and scope

The main thrust of the study is to determine whether mixed-income housing provision can be

used as a mechanism to generate economic opportunities for low-income households. The

overarching research question:

How has the adoption of the mixed- income housing model in Cosmo City driven economic

development for low-income households as hypothesised by the BNG policy and proponents

of mixed-income housing developments?

In an attempt to respond to this question, the study has the following objectives:

a. To delve deeper into the inherent shortcomings of post-apartheid housing policy that

rendered it incapable of translating housing into economic wealth in low-income

housing developments

b. To explore how the BNG policy purports access to well-located land and socio-

economic integration in housing developments will contribute to poverty alleviation

and to evaluate its effectiveness in this regard

c. To analyse mixed-income housing’s effectiveness as a mechanism for poverty

alleviation and economic development

d. To evaluate Cosmo City’s effectiveness in alleviating poverty and promoting

economic development based on criteria derived from similar studies.

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1.3 Research assumptions

The paper makes the following broad assumptions:

a. The data collection methods have been effective in soliciting authentic responses from

participants

b. The skills profile of residents have not changed since relocating to Cosmo City

c. The secondary research data has correctly depicted the data from the primary research

sources especially where government policy documents are concerned

1.4 Research ethics

O’Leary (2004, p. 93) states that any research study that involves ‘interaction with human

participants’ should be ethical for it to be ‘doable’. Research integrity emerges as a key

aspect and concerns producing research that is reliable and dependable (O’Leary, 2004; Yin,

2011). Further, Yin (2011) recommends disclosure of personal characteristics that may

interfere with the research process including capturing and interpreting data. Similarly this

study involves engaging with residents from low-income households in Cosmo City as a

result the researcher complied with the above throughout the research process.

In addition the literature reviewed suggests that the following ethical requirements be adhered

to during engagements with the participants (O’Leary, 2004; Gurthie, 2010; Yin, 2011):

a. Minimising risk of harm to the participants

There was no harm inflicted on the participants as the data collection methods were limited to

verbal conversations in interviews and a focus group. The interviews and focus group were

conducted at the homes of the participants and the Cosmo City multi-purpose centre,

respectively. In this manner, the safety of the participants was not compromised. The type of

interview questions used did not appear to pose any harm to the study participants. In

essence, the questions in the semi-structured interview did not ask any personal identifying

information.

b. Respecting the freedom of participants to partake in the study

Written consents were requested from the participants to proceed with the research

once they had been fully informed of the data collection process. These were signed

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by almost all the participants with the exception of one whose willingness to answer

questions was construed to be tacit consent. Similarly an introductory interview with

the Cosmo City Local Ward Councillor was conducted after explaining the data

collection process.

c. Non-discriminatory selection methods for participants

Selection of participants was based on specific criteria to ensure that the participants

represented the target population group. This is discussed in more detail under

Research Methodology.

d. Respecting the privacy of the participants

The data collection process did not reveal the identities of the participants; the

consent form only requested signatures and participants were not asked to furnish any

personal details. Furthermore, the data is reported in aggregated format in line with

the non-disclosure of confidential and personal information agreement in the consent

form.

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Chapter 2. Literature Review

2.1 Backdrop of South African housing policy

2.1.1 Post-apartheid housing policy: 1994- 2004

`Let us make a better life where you live' – The 1994 ANC election slogan (Pottie, 2003,

p.122)

The 1994 ANC election slogan and manifesto which was later translated to the RDP,

informed the ANC government’s goal to engender ‘economic reform and restructuring’ in the

country and formed the grounding principles for housing policy in South Africa. Under RDP,

housing was considered to be a means for poverty alleviation. Housing provision was viewed

as the only way of distributing economic wealth to the poor in the form of transferring a

tangible asset with the potential to lift them out of poverty (Pottie, 2003; Charlton & Kihato,

2006).

This would be achieved by delivering on the Constitutional right to `have access to adequate

housing’, ‘articulated in the ANC's RDP’ (Huchzermeyer, 2001, p.305). At the time,

adequate housing entailed the provision of a ‘permanent residential structure’; provision of

services (‘potable water, adequate sanitary facilities including waste disposal and domestic

electricity supply’; and the creation of ‘viable, socially and economically integrated

communities, situated in areas allowing convenient access to economic opportunities as well

as health, educational and social amenities’ (Huchzermeyer, 2001, p.305 and Onatu, 2010,

p.209). In this manner the ANC would eradicate poverty by meeting basic needs of which

housing was one of them.

The basic needs approach informed the ANC housing agenda of ‘delivery’ as echoed in The

Housing White Paper of 1994 preamble: `The time for policy debate is now past; the time for

delivery has arrived’ (Huchzermeyer, 2001, p.304).

This ‘delivery’ focus was reinforced by the commitment to deliver one million houses in five

years under the National Housing Policy of 1995 (Huchzermeyer, 2001; Charlton & Kihato,

2006; Wilkinson, 1998). This reduced the government’s housing provision strategy to no

more than a mass housing roll-out programme.

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2.1.2 Implementation of policy

The key element of the post-1994 housing policy was a Housing Subsidy Scheme which

entailed a ‘once-off’ ‘capital subsidy’ targeted at low-income communities (Wilkinson, 1998;

Huchzermeyer, 2001, p.306; Pottie, 2003; Charlton & Kihato, 2006; Onatu, 2010). The

rationale for the subsidy scheme was to leverage off the private sector’s capacity to deliver

the housing considering government’s limited capacity at the time (Charlton & Kihato, 2006).

The subsidy scheme presented a shift in housing philosophy as access to housing was based

on income as opposed to race (Pottie, 2003). The amount of the subsidy was determined

based on household income as per sliding scale of prescribed income bands (see Table 1)

(Wilkinson, 1998; Charlton & Kihato, 2006).

Table 1: Housing subsidy income bands (Source- Wilkinson, 1998, p.225)

Under the subsidy scheme housing provision was based on an incremental approach

(Huchzermeyer, 2001; Charlton & Kihato, 2006). The idea was to provide low-income

households with a starter unit which they could expand upon incrementally. Also, the

assumption was that the starter units would serve as a catalyst for access to mortgage finance

for larger units (Huchzermeyer, 2001; Charlton & Kihato, 2006).

2.1.3 Shortcomings

South Africa has been praised for rapid delivery of housing under the 1994 housing policy.

‘On average 470 housing units were delivered in South Africa every day between May 1994

and May 2002, affecting the lives of over 6 million people’ (Onatu, 2010, p. 210). By 2010,

2.3 million subsidised houses are reported to have been delivered by government (Tissington,

2011). The policy has at the same time received massive criticism for this focus on rapid

delivery as it overlooked other critical factors originally embedded in policy formulation.

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Charlton & Kihato (2006) simplistically and eloquently encapsulate the major weakness of

the housing policy in the phrase: ‘(it) was framed around the assumption that infrastructure

provision contributes to poverty alleviation’ (p.262), after all there were no changes in the

character of the housing product being delivered from the apartheid norms. In the interest of

closing the housing backlog, the ANC government was imprisoned by the ‘known’ apartheid

housing practices thus falling short of addressing the complexities of poverty (Wilkinson,

1998; Pottie, 2003).

The policy was criticised for failing to integrate housing provision in overall urban

restructuring let alone ‘provide the poor with greater access to socio-economic opportunities’.

It was described as a ‘replication of apartheid spatial planning’ which perpetuated the

economic marginalisation of the poor (Huchzermeyer, 2001; Pottie, 2003; and Charlton &

Kihato, 2006; Landman, 2010, p.10). The ‘dormitory’ style ‘large-scale developments of

uniform, free-standing, mostly one-roomed houses’ ‘on the urban peripheries’ were

reminiscent of the apartheid ‘township’ and failed ‘to address the social and spatial legacy of

apartheid social engineering in South African cities’ (Wilkinson, 1998, p.215; Huchzermeyer,

2001, p.306; Charlton & Kihato, 2006).

Moreover, the ongoing quantitative delivery targets used by government as a measure of

poverty alleviation were found to undermine the multi-dimensional nature of poverty

(Charlton & Kihato, 2006). Further, the premise that the government subsidised housing

would give low-income households an opportunity to access finance and enable upward

mobility failed to materialise as government struggled to reach consensus with the financial

sector on the issue (Charlton & Kihato, 2006).

2.1.4 Summary

From the above, it is clear that the ANC government housing policy was founded on two

distinct polarised ideologies of ‘poverty alleviation’ and ‘meeting basic needs’. Given the

complexity of meeting the pressing delivery objective of clearing the massive housing

backlog coupled with capacity and budgetary constraints; the ANC government was soon

blind sighted by the latter. Supposedly the motions of achieving economies of scale soon set

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in invariably leading to a compromise on the quality of the product being delivered. In the

process, the ANC government settled for the ‘known’ apartheid rooted housing solution. In

hindsight, it is evident that the meeting of the basic needs approach was an incompatible tool

for poverty alleviation.

2.2 A new housing ethos: Breaking New Ground policy- 2004

2.2.1 Policy vision

The poverty alleviation ideology permeated to the BNG policy (enacted in 2004) framed as

creating sustainable human settlements. The backbone of BNG is the establishment of

socially and economically integrated settlements. In this regard, the importance of sourcing

well-located land for these settlements is emphasized. This enables delivery on the economic

objectives of ‘utilising the provision of housing as a major job creation’; ‘ensuring that land

and housing can be accessed by all as an asset for wealth creation and empowerment’;

‘leveraging growth in the economy’; addressing the duality of the residential property market

reflected in the ‘first economy residential property boom and the second economy’s property

slump’ and using housing as a mechanism for spatial restructuring (Charlton & Kihato, 2006;

Tissington, 2011; National Housing Code, 2009, pp. 18-19). In essence, BNG purports that

access to well-located land as well as the establishment of integrated settlements will create

economic opportunities for poor communities which will contribute to creating sustainable

human settlements.

Figure 1: Graphical depiction of BNG policy

Socio-economic

integration

Well located

land

Economic opportunities

Sustainable

Human

Settlements

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2.2.2 Implementation of policy

Under BNG, socio-economic integration is facilitated through inclusion of ‘social and

economic infrastructure’, which include ‘medical clinics, community halls, community

parks/playgrounds, taxi ranks, sport facilities, informal trading facilities, and basic ablution

facilities for the aforementioned infrastructure’ as well as incorporating complementary land

uses (‘social and rental housing, commercial and institutional land uses’); and different house

typologies and price ranges (Landman, 2010, p.15; Tissington, 2011, pp. 76 & 81).

Well-located land in the context of housing is defined as having ‘convenient access to urban

amenities, including places of employment’. In this regard the BNG policy responds to the

growing need of locating low-income housing close to urban opportunities as opposed to the

previous practice of displacement on urban fringes away from social and economic

opportunities. It is generally accepted that the ‘correct’ location of low-income housing will

translate to greater urban benefits such as promoting urban densification, reducing urban

sprawl and encouraging greater ‘socio-spatial interaction’ thus leading to more sustainable

cities. Notwithstanding the above benefits, the BNG policy highlights access to affordable

well-located land as the key impediment in achieving this objective (National Housing Code,

2009; Landman, 2010, p. 8; Tissington, 2011, p.81).

In addition, the capital housing subsidy has outlasted the 1994 housing policy and has been

carried to the BNG policy. The subsidy scheme includes the following notable changes: the

‘merging of the subsidy bands’; extension of the subsidy to households earning a monthly

income between R3501 and R 7 000 (‘the gap market’ which is excluded for the formal

market driven housing market); and annual adjustment of subsidy quantum for inflation

(National Housing Code, 2009; Tissington, 2011, p. 41).

2.2.3 Shortcomings

The major criticism of the BNG policy is that it overlooks the complexities of the

institutional challenges that define the housing market and therefore impact on the

government’s ability to deliver on its objectives. For instance, Charlton & Kihato’s (2006,

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p.259) criticism of the policy is the absence of a defined strategy on accessing the ‘well-

located’ land citing the ‘difficult political issues of land ownership, the land market and rights

around property values’ as challenges. The objective of using housing as ‘an asset for wealth

creation and empowerment’ overlooks the complexities of accessing finance by poor

households (Charlton & Kihato, 2006). This objective is further restrained by the five year

sale restraint on subsidy housing thus the potential for capturing the housing value and

thereby upward mobility is hindered (Ruiter, 2009). Moreover implementation and

performance measurement remains largely rooted in meeting quantifiable delivery targets

(Charlton & Kihato, 2006).

2.2.4 Summary

It is evident that the BNG policy is a more comprehensive plan for poverty alleviation. The

key factor in the realisation of the policy objectives is access to well-located land. This access

to land and finance (to make inroads in using housing for wealth creation) calls for innovative

solutions. However, this cannot be a government-only solution but rather a joint effort with

relevant stakeholders who are representative of the private sector and civil society. Perhaps

government incentives are warranted to garner policy support from the financial sector and

land owners.

It is apparent that, nine years into the BNG’s existence, government remains challenged in

closing the housing backlog reported to be 2.1 million (News 24, 2013). This shows that the

progressive housing policies have not been sufficient in resolving the country’s housing

challenges. Perhaps the answer lies in Wilkinson’s (1998) summation on the state of housing

in South Africa. His statements suggest that the answer lies in addressing the structural

factors that lead to poverty to overcome the dependence on government for housing (seen as

a form of economic emancipation); which will lead to independence and free choice on

houses.

2.3 Mixed-Income Housing

2.3.1 Mixed-income housing defined

In the housing field, the subject of mixed-income housing is quite broad and is understood to

carry various meanings such as racial integrated developments, mixed tenures, mixed house

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types, mixed funding sources, mixed at project or neighbourhood level and mixed-income

profiles of residents (Brophy & Smith, 1997; Smith, 2002; Berube, 2005; Smit & Purchase,

2006; Joseph et al; 2007; Landman, 2010; Onatu, 2010). Joseph et al (2007) defines mixed-

income as a term that ‘covers a broad spectrum of levels of economic integration. At one end

of the spectrum are private-sector, marketrate developments that include a small percentage

of affordable housing, often to qualify for municipal subsidies. At the other end of the

spectrum are developments built exclusively for moderate- and low-income families’ (p.

371). In the context of this paper, the definition is limited to the latter relating to housing

developments that integrate low-income households in higher income market driven

developments resulting in mixed-income households residing in the same neighbourhood.

2.3.2 Origins of mixed-income housing

The United States of America (U.S.) is recognised as the world leader in mixed-income

housing developments and ‘has been prolific in the delivery of both research and innovative

affordable housing development schemes’ (Smit & Purchase, 2006, p.3). Mixed-income

housing developments emerged as a mechanism to redress ‘racial and socioeconomic

segregation’ in the U.S. (Fraser, 2007, Brophy & Smith, 1997; Schwartz & Tajbakhs, 1997;

Rosebaum et al, 1998; Berube, 2005; Joseph et al, 2007; Joseph, 2010, p. 210). Specifically,

it aimed to address the issue of urban ghettos which translated to ‘a lack of capital in inner

city communities, segregated minority neighbourhoods, and minority families being unable

to afford housing in traditionally white suburbs’ (Smit & Purchase, 2006, p.5).

Mixed-income housing was therefore a policy response to escalating poverty levels (Fraser,

2007; Joseph, 2010) transcribed in the Housing Act of 1968 which sought ‘to integrate

affordable housing projects into suburban neighbourhoods housing programmes’ (Smit &

Purchase, 2006, pp.3 & 5). As part of the overall poverty alleviation objective, mixed-income

housing developments were also forged around a strong social interaction agenda between

low-income and higher income households (Brophy & Smith, 1997; Schwartz & Tajbakhs,

1997; Rosebaum et al, 1998; Fraser, 2007; Joseph et al, 2007; Joseph, 2010).

The concept gained momentum in the 1990s and has evolved to become an urban

redevelopment strategy for distressed neighbourhoods by attracting higher income

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households with the intention of creating a platform for upward mobility for low-income

households. It is theorised that this is facilitated through social bonds formed between low-

income households and their higher income counterparts thereby expanding the social

networks of the former and thus enabling access to employment opportunities that would be

inaccessible to them in the poverty stricken public housing developments.

One of the arguments for mixed-income housing was addressing the employment barriers

resulting from ‘spatial mismatch’ between where the job opportunities available to poor

communities were located in areas that were distant from their places of residence (Joseph et

al, 2007, p.374). The spatial mismatch was attributed to the restructuring that occurred in the

U.S. economy resulting in industries moving to suburban areas away from the poverty

concentrated inner city where matching skills were located (Joseph et al, 2007). Under

HOPE VI (Housing Opportunities for People Everywhere), mixed-income housing was used

as a tool to resuscitate distressed public housing developments. The approach was multifold

involving demolitions, upgrades and redevelopment of distressed developments (Brophy &

Smith, 1997; Schwartz & Tajbakhs, 1997; Fraser, 2007; Joseph, 2010; Onatu, 2010). Further

mixing-income housing emerged from the notion that these developments translate to

improved infrastructure and services that would otherwise not be available to poor

communities as ‘higher-income residents’ are able to exert ‘political pressure to which

external political and economic actors are more likely to respond’ (Joseph et al, 2007, p.373).

2.3.3 Mixed-income housing at project level: U.S. Case Studies

Many empirical studies have been undertaken on mixed-income housing developments

considered to be successful in the U.S. Amongst them is a study by Brophy & Smith (1997)

on seven developments across the country. The critical aim was to establish the factors that

defined the success of these developments with the intention to contribute to the body of

knowledge in this subject area. Similarly (Rosebaum et al, 1998) study on Lake Parc Place

fulfilled the same objective.

Contrary to the widely purported poverty alleviation agenda, each development was

conceived to serve a different purpose. Table 2 below depicts the different purposes for the

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surveyed developments. Urban redevelopment and neighbourhood revitalisation appear to be

the most common themes (Brophy & Smith, 1997; Rosebaum et al, 1998).

Table 2: Mixed-income housing- Development purposes- U.S. Case Studies- Brophy & Smith (1997) and Rosebaum et

al (1998)

Development purposes

Development

Urban redevelopment/ Neighbourhood

revitalisation Response to

gentrification Housing Market

Threats

Lake Parc Place

Harbour Point

Jones Family Apartments Residences at Ninth

Square

New Quality Hill

Tent City

Emery Bay Club

Timberlawn Crescent

The developments demonstrated common success factors for project viability (See Table

3).The developments demonstrate that success attracting residents hinges on location in

conjunction with homogeneity in unit design across income groups and good development

management. The common theme is a prime location in highly attractive zones close to

transport nodes and centres for commercial activity. Another success factor is accessibility of

social, recreational and retail amenities or inclusion thereof within the development. In order

to achieve viability on mixed-income housing, the common financial model is that of joint

funding between the public and private sector as well as government tax incentives, although

in Timberlawn Crescent the higher income market rate units subsidised the low-income units

(Brophy & Smith, 1997; Rosebaum et al, 1998). According to Schwartz & Tajbakhs (1997)

the overall health of the housing market is also a factor for development viability. Occupancy

levels are assumed to be a determinant for favourable market conditions (Brophy & Smith,

1997; Rosebaum et al, 1998).

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The economic outcomes for low-income households rested on favourable economic

conditions in the form of a thriving local economy. This was not the case for Lake Parc Place

as it failed to generate formal economic opportunities for the low-income households, in fact

employment declined for both income groups (Schwartz & Tajbakhs, 1997; Rosebaum et al,

1998). Instead economic opportunities were generated inwards by informal employment

opportunities afforded to low-income residents by moderate income households. Similarly

Harbour Point failed to translate its prime location to ‘job development’ for the residents in

the low-income bracket. A success story is Emery Bay Club which boasts close to full

employment for its residents. In the case of New Quality Hill, the development coincided

with a boom in the local economy with jobs reported to increase by 26 000 between 1995 and

1996. The assumption is that its low-income residents leveraged the economic crest and were

absorbed into the job market.

Table 3: Mixed- Income Housing Model- Viability Factors- U.S. Cases Brophy & Smith (1997) and Rosebaum et al

(1998)

Mixed- Income Housing Model- Viability Factors- U.S. Cases

Development

Desirable location

Amenities

Joint Funding (Private/ Private Sector)

Government Incentives (e.g. Tax breaks)

*Favourable Housing Market

Lake Parc Place Harbour Point

Jones Family Apartments Residences at Ninth

Square New Quality Hill

Tent City Emery Bay Club

Timberlawn Crescent

* Based on tenant take up of units

- Aesthetics excluded in the model on the assumption all the developments will be aesthetically pleasing to attract higher income earners

The studies on these developments presented the initial steps in bridging the knowledge gap

that exists in mixed-income housing. In all instances project viability was achieved in terms

of raising development funds and attracting residents to generate the income stream for the

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developments. Even though the developments were successful from an investor perspective,

the above studies show that success for low-income residents with regards to generating

economic opportunities depended on external factors beyond the control of the investors.

Perhaps the results are reflective of the objectives that informed the conceptualisation of the

developments which were not consistently aligned to economic reforms for the low-income

households. Nevertheless, from the above we can generate a simplistic framework that

defined the key elements necessary for the success of mixed-income housing save for factors

beyond the developer’s control (See Table 3).

2.3.4 Mixed-income housing at policy level: Other Countries

The concept of mixed-income housing development is a worldwide phenomenon. The mixed-

income housing philosophy has influenced housing policy in many countries. The common

driver is the need to redress socio-economic inequalities (Berube, 2005; Smit & Purchase,

2006). Smit & Purchase (2006) provide a detailed account on how mixed-income housing is

implemented in other countries. This section is a brief synopsis thereof and outlines the key

factors that characterize mixed-income housing development globally.

In many countries the delivery of mixed-income housing is a collaborated effort between

government (public sector) and the housing developers (private sector).To provide impetus to

development of mixed-income housing, government land supply deals are quite common

where government subsidises the land portion of the development cost through a free issue

land agreement as is the case in China. In Malaysia, this is augmented by providing technical

and administrative assistance to the developers (Smit & Purchase, 2006).

In most instances mixed-income housing developments are managed via a quota system that

obligates the developer to allocate a certain proportion of the housing development to low-

income houses. As seen in Malaysia, inflexibility on the quota system may lead to oversupply

of affordable units translating to high vacancies and abandonment of houses. Below is a table

of the quotas applicable for different countries (Smit & Purchase, 2006, p.22).

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Table 4: Affordable housing Quotas (Smit & Purchase, 2006)

In some cases, governments impose a selling price cap on low-income housing units which is

often below market rates to secure the affordability of the units. In Malaysia, ‘a defined

ceiling price of RM 25,000 is imposed on all private developers when a certain threshold size

of development is reached’. Similarly, the Ireland government requires new affordable

housing units to be sold below market selling price. The selling price caps impact on the

viability of the developments and often lead to developers passing on the financial burden to

higher income households. Also this constricts the developer’s profit margins, and the

developers recoup the losses by using substandard materials and downgrading on building

quality and workmanship (Smit & Purchase, 2006, p. 9).

To steer the development of mixed-income housing, governments often offer incentives

which in Malaysia include ‘faster plan approval; lower land premiums; infrastructure cost

subsidisation; relaxation in planning and housing standards; and concessions from financial

contributions to utility authority’ (Smit & Purchase, 2006, p. 9).

In certain instances, the government funding schemes include a moratorium on sale of low-

income houses. Under the Ireland Affordable Housing Scheme a 20 year restriction on sales

is imposed on social and affordable housing units financed by the Local Authority.

The mixed-income housing models adopted in various countries have received some

criticism. The premium imposed on higher income sales to cushion the additional financial

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burden of incorporating low-income houses has been found to slowdown building activity as

they price out the target market. The sale restrictions imposed on government funded low-

income houses are found to be economically inefficient as they impact on value creation for

the households. The mixed-income housing developments attract higher implementation costs

as the low-income household demand higher building standards to maintain the character of

the overall development. The impact to low-income households is relatively small compared

to the need for low-income households (Smit & Purchase, 2006).

The above accounts demonstrate that mixed-income housing is multi-faceted and necessitates

a shift from the traditional approach of housing development. Furthermore, they provide a

basis for formulating a framework that can be adopted at country level to inform the mixed-

income housing strategy (See Figure 3).

2.3.5 The case for mixed-income housing in South Africa

The Social Contract for Rapid Housing Delivery entered into in 2005 between Minister of

Housing and key role players in the housing segment against the backdrop of the BNG policy

spearheaded the mixed-income housing dialogue for South Africa. The contract called for a

20% allocation of government subsidised low-income housing in market driven higher

income housing developments (Smit & Purchase, 2006). Arguments for mixed-income

housing stemmed from the seemingly non-existed reforms in housing delivery. The gap

between the first and second economy housing markets persisted well beyond 1994; growth

in the former had failed to permeate to the latter leading to further marginalisation of the

poor. The spatial disconnect between residential areas for the economically marginalised low-

income households; and the zones of economic activity continued (Huchzermeyer, 2001;

Pottie, 2003; Charlton & Kihato, 2006; Smit & Purchase, 2006; Landman, 2010). These

alone provide solid justification for mixed-income housing assuming the hypothesized

economic outcomes would accrue to low-income households.

In spite of the perceived relevance of mixed-income housing to the South African situation

Smit & Purchase (2006) and Landman (2010) caution of some contextual factors which they

purport would limit the effectiveness of mixed-income housing in the country. Smit &

Purchase (2006) goes on to add that the proposed mixed-income housing ‘mix’ under the

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aforementioned contract would only make a small dent to the scale of the housing problem.

Given the proposed 20% low-income housing quota and the current housing backlog of 2.1

million (News 24, 2013), the impact of mixed-income housing to the country’s housing

challenges would be minimal. Using the National Home Builders Registration Council

(NHBRC) number of 37 671 housing enrolments in 2012 (NHBRC 2012 Annual Report,

n.d.), the proposed quota translates to the construction of less than 8 000 units per annum

which is far from the government’s annual target of 200 000 (News 24, n.d.).

Smit & Purchase (2006) suggest that volumes in this segment are largely driven by a sizeable

middle class stating that South African’s middle to upper class is relatively small to make a

large scale impact on the housing backlog. As an augmentation measure, Smit & Purchase

(2006) put forward the possibility of linking mixed-income housing to industrial and

commercial developments by introducing a housing quota in those developments to

contribute to the housing delivery efforts.

According to Smit & Purchase (2006), mixed-income housing developments may

additionally face the potential threat of capital flight from neighbouring more affluent areas,

should there be a perception that the ‘neighbourhood is transforming downmarket’. While

there has been evidence of resistance to the BNG policy and Cosmo City based on the same

grounds, the probability of the risk of such flight is unknown (Charlton & Kihato, 2006).

Borrowing from the research done in the U.S. on HOPE VI discussed in the following

section, this probability may be assumed to be negligible (Berube, 2005; Fraser, 2007).

Given the state of the South African housing market, the adoption of mixed-income housing

is warranted. In light of the scale of the housing problem, it is evident that this solution will

not make massive inroads in addressing the country’s housing challenges. It should rather be

viewed as a component of multiple strategies adopted to close the housing backlog.

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2.3.6 The mixed-income housing debate

2.3.6.1 Sustainability vs. Viability

Berube (2005) and Landman (2010) acknowledge that the higher outcome for mixed-income

housing developments is that of sustainability. However the mixed-income housing

developments are accused of being market driven strategies disguised as urban revitalisation

interventions focussed on viability measures of success from which the financial benefits are

often realised by the investors and fail to shift the economic circumstances of low-income

households (Schwartz & Tajbakhs, 1997; Fraser, 2007; Onatu, 2010). The argument is that

the consistent focus on project short term viability takes attention away from the core issue of

urban poverty and therefore negates long-term sustainability (Fraser, 2007).

On the contrary, the view that property investors are purely market and profit driven in

adopting mixed-income housing seems limited considering the fact that they forego higher

market rate rentals to house low-income residents (Brophy & Smith, 1997; Rosebaum et al,

1998; Smit & Purchase, 2006). In the absence of a financially viable development, the

opportunity to contribute to poverty alleviation would be lost. Without instituting the factors

that lead to the desirability of the mixed- income housing developments, such as the attractive

physical characteristics, to lure residency by the mixed-income groups (Schwartz &

Tajbakhs, 1997); then any efforts to drive economical development will be rendered benign.

Thus the mixed-income housing developments provide a stage from which to institute

poverty alleviation measures.

2.3.6.2 Poverty Alleviation

It is generally agreed that mixed-income housing has the potential to be an effective poverty

alleviation mechanism for low-income households (Brophy & Smith, 1997; Berube, 2005;

Smit & Purchase, 2006; Fraser; 2007; Onatu, 2010) and can provide a platform for addressing

broader socio-economic inequalities over the longer term (Berube, 2005; Smit & Purchase,

2006; Fraser, 2007). For instance, the Gatreaux housing mobility experiment in Chicago

found that relocation of black low-income households to white middle class areas resulted in

improved educational and employment opportunities for the households (Smit & Purchase,

2006). Similarly a study of HOPE VI developments in Atlanta, Louisville, Pittsburgh and St

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Louis by Turbov and Piper (2005) revealed that the projects brought about improvement in

‘median incomes and labour force participation’ (Berube, 2005, p.41; and Fraser, 2007).

Notwithstanding these successes, it does not appear that the purported social bonds between

income groups contributed to these economic developments. In fact Brophy & Smith (2007)

demonstrate minimal interaction between income groups as result of mixed-income housing.

Joseph et al (2007, p.386) echo the same view citing this theory is not supported by empirical

evidence which ‘documenting(s) the link between interaction and job attainment in mixed-

income developments’.

Nonetheless, the general consensus amongst scholars is that mixed-income housing cannot be

solely relied upon to transfer economic benefits to low-income communities but should

simultaneously be accompanied with programmes that address the structural barriers that

contribute to poverty such as ‘investments in social services, education, job readiness,

training and placement, and transportation’ (Brophy & Smith,1997; Schwartz & Tajbakhs,

1997; Rosebaum et al, 1998; Smith, 2002; Fraser, 2007; Joseph et al, 2007; Joseph, 2010; p.

223; Onatu; 2010). This was proven in a ‘longitudinal study on the association between

mixed-income development and economic change in high-poverty neighborhoods’ which

found that mixed-income approaches, in conjunction ‘with other investments by the public

and private sectors ‘assisted in promoting revitalization’ (Fraser, 2007, p.12).

Berube (2005) adds another dimension to the poverty debate suggesting that the economic

benefits are not immediate but can rather be realised over a longer term in particular for

children. This corresponds with other studies which suggest that economic benefits may

indirectly be borne by children through better quality of education and exposure to

economically active higher income residents (Brophy & Smith,1997; Schwartz & Tajbakhs,

1997; Rosebaum et al, 1998; Smith, 2002; Berube, 2005; Joseph et al, 2007; Joseph, 2010).

This presents an entire research area on its own and adds to the volume of questions evoked

by mixed-income developments.

To resolve the mixed-income housing’s shortcomings in poverty alleviation expectations,

Schwartz & Tajbakhs (1997) recommend that the effect on employment levels be excluded as

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measure of success for mixed-income housing. The question then becomes how best do you

measure impact on low-income residents if not in employment terms? Are there other

economic parameters that can be utilised in measuring the impact of mixed-income housing

besides employment?

2.3.6.3 Property devaluations

The ‘myth’ often propagated with regards to mixed-income housing of property devaluations

to adjacent neighbourhoods is dispelled by the Urban Land Institute (2003) stating that there

is no evidence that supports this notion (Smit & Purchase, 2006). In fact Berube (2005)

suggests that property value appreciation in neighbourhoods adjacent to mixed-income

housing have been consistent with other neighbours. According to Berube (2005, p.39),

mixed housing developments in ‘moderately deprived’ areas will have an upward

contribution to property values. In Pittsburgh under the HOPE VI programme, home prices

were consistently higher than neighbouring areas (Berube, 2005; Fraser, 2007).

2.3.6.4 Understanding success factors and more questions

While mixed-income housing developments have successfully integrated multiple income

groups, Schwartz & Tajbakhs (1997); Joseph et al (2007) and Joseph (2010); assert that it is a

perpetuation of a system that is a replacement of the undesirable previous low-income

housing policy, without a true understanding of the factors that support its success. Further

Joseph et al (2007) criticise housing policy for progressing with mixed-income housing in the

absence of sufficient ‘empirical justification’, urging low-income households to lower the

expected impact of mixed-income housing. Similarly Brophy & Smith (1997) and Fraser

(2007) echo the same sentiments and raise concerns on the limited understanding of the

factors that characterise success in mixed-income housing development.

Beyond the success factors, numerous questions have been raised on mixed-income housing.

For instance Joseph et al (2007) and Joseph (2010) recommend further investigation on the

outcomes achieved as a result of mixed-income housing. Further Brophy & Smith (1997)

pose more researchable questions such as the ‘connection between job creation and upward

mobility’ for low-income residents. The many questions that have been raised suggest that

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research in this area is still in its infancy and more studies need to be undertaken to help

determine and understand how “success” is defined in mixed-income housing developments.

2.3.6.5 Summary

The above clearly demonstrates that it is very simplistic to assume that housing provision

alone would serve as an economic development strategy. Given the complexities of poverty;

a more holistic approach is warranted. The studies that have been outlined demonstrate that

ticking the relevant checkboxes does not guarantee success as the development remains

exposed to external factors such as the economic climate and general housing market.

2.4 Cosmo City

2.4.1 Vision and objectives

Cosmo City developers aspired to champion the integration and sustainability principles

informing the BNG policy. It aimed to challenge perceptions around integration ‘along racial

and social grounds’ and challenge the ‘not in my backyard syndrome’. Also the development

would both meet housing demand in the north western part of Johannesburg and make

‘political inroads’ in bridging spatial segregation. More importantly the idea was that ‘Cosmo

City would create jobs and stimulate local economic activity’ (Cowden, 2006, pp.1-2).

This would be achieved by integrating different income groups through the provision of

mixed housing tenures and house prices, ‘using schools and public open spaces as integrating

zones’. The integration would extend to include complementary land uses to the residential

component. The above would contribute to value creation in the low-income houses. Further,

Cosmo City would promote sustainability by incorporating natural landscapes in

development (Urban Landmark, 2010, p.15 and Onatu, 2010).

2.4.2 Development conception

Cosmo City was conceived out of a need to relocate the residents of Zevenfontein and

Riverbend informal settlements (Cowden, 2006; Onatu, 2010; Urban Landmark, 2010 and

Urban Landmark, 2011). The informal settlements were characterised by ‘low-income levels,

high unemployment rates and low educational levels’, thus informing the initial development

plan of a low-income housing development in 1997 (Cowden, 2006, p.1). It was only in 2000,

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that the current development philosophy of integration was incorporated into the

development, with CODEVCO being the appointed as the development company (Cowden,

2006; Onatu, 2010; Urban Landmark, 2010 and Urban Landmark, 2011).

Due to bureaucratic delays stemming from the environmental impact assessment, legal

proceedings, resistance from property owners in adjacent neighbourhoods who echoed their

concerns on the devaluation of the properties, and lengthy community participation

processes, the project experienced delays (Cowden, 2006; Onatu, 2010; Urban Landmark,

2010; Urban Landmark, 2011). Construction on site only started in January 2005 and the

first housing units were transferred in November 2005 (Urban Landmark, 2011). The

acquisition of the development land came with challenges where one of the owners refused to

sell a portion of the land leading to the expropriation of the land for public benefit. The

development also encountered other challenges such as managing the relocation of the

residents, ‘untimely budget cuts up to 80%’ and ‘electricity disruptions’ (Cowden, p.2).

2.4.3 Development details

Cosmo City is located in the north eastern part of Johannesburg, 25 km away from the CBD.

The extent of the development is 1 200 hectares and comprises of 5 000 government

subsidised low-income houses, 3 000 low-income bank financed houses, 3 300 bonded

houses, 1 000 high density apartments for rental. With approximately 50 hectares of land set

aside for industrial and commercial purposes including the incorporation of economic

amenities such as taxi ranks, informal trading markets, shopping centres, business nodes and

petrol stations; the development is geared towards stimulating economic activity and

promoting economic opportunities for residents (Cowden, 2006; Onatu, 2010; Urban

Landmark, 2010; Urban Landmark, 2011).

The development costs were initially estimated to be R1,5 billion in 1997 and were projected

to escalate to R4,6 billion in 2011 (Cowden, 2006; Basil Read Developments, n.d.). The

viability of the development was enhanced by the free issue of land by the City of

Johannesburg, favourable development location, savings on existing bulk infrastructure, and

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adoption of lean design and construction solutions (Cowden, 2006, Urban Landmark, 2010

and Urban Landmark, 2011)

Cosmo City was commissioned as a private public partnership (PPP) between the City of

Johannesburg; the Gauteng Provincial Department of Local Government and Housing; and

CODEVCO. Whilst CODEVCO was the principal developer, there were other developers

that were responsible for different aspects of the development. City of Johannesburg was the

land owner and ‘provided top-up funding for infrastructure’. The Gauteng Provincial

Department of Local Government carried the capital cost for the government subsidised

housing units (see Figure 2) (Urban Landmark, 2011, p.4).

Figure 2: Role players in Cosmo City, with the extent of the model indicated by the dotted line- Source- Urban

Landmark (2011, p.4)

2.4.4 Development Analysis

Since then Cosmo City has been widely acclaimed for pioneering the integrated housing

model in the South Africa (Cowden, 2006, Onatu, 2010; Urban Landmark 2010, Urban

Landmark 2011). This development was considered to be a breakthrough for housing

provision in South Africa as it challenged the principles that had historically defined housing

provision informed by racially and economically defined spatial segregation (Huchzermeyer,

2001; Pottie, 2003; Charlton & Kihato, 2006; Smit & Purchase, 2006; Landman, 2010). The

vision of the developers was realised particularly on the aspect of integrating different

income groups, as houses valued in excess of R1million are now in the same locality as low-

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income housing (Urban Landmark, 2011). As a result, Cosmo City perceived success has

informed the development philosophy for other integrated developments (Cowden, 2006).

The positive market response to the development is demonstrated in the immediate sale of the

first batch of credit linked houses and 96% occupancy in the social rental housing (Urban

Landmark, 2011).The lending institutions were also instrumental in supporting the integrated

housing model by offering proactive lending terms (Cowden, 2006). The financial risk was

shared between the PPP parties as City of Johannesburg supplied the land for the

development (Cowden, 2006).

Whilst conforming to the some components of the mixed-income housing model, Cosmo City

is still quite far from Johannesburg CBD meaning that in some instances residents will not be

in close proximity to their places of work and hence will be far away from economic

opportunities.

Further insufficient land has been allocated for commercial purposes with demand exceeding

supply (Cowden, 2006). The view stated by Onatu’s (2010) that suggest the proliferation of

‘informal traders, spaza shops, and illegal land uses’ in Cosmo City may threaten the

‘sustainability of the project’ (p.213) is questionable considering that informal trading

presents as the economic life blood for a vast number of low-income households (Lebeta,

2009).

2.4.5 Cosmo City: Findings from other studies

Landman (2010) performed a needs based analysis on the importance of proximity of housing

to socio-economic opportunities for the residents of eleven medium density mixed-income

housing developments which included Cosmo City. Landman intended to investigate

‘whether the promotion of greater proximity is (was) a mere idealistic policy-driven vision

based on international trends and political intentions or a response to the needs of residents

and other key stakeholders’. In essence, the study sought to establish whether there was

alignment between government policy and the demands of residents in medium-density

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mixed developments. Additionally, it was an inquiry into the appropriateness of the medium-

density mixed-income housing model for the South African housing market.

Some of the important factors highlighted by the residents with economic impact were

proximity to public transport nodes and retail facilities; and being economically active within

the locality of the development in the form of home operated businesses and informal trading

areas. The study confirmed that proximity to socio-economic opportunities ‘is not a mere

idealistic planning vision promoted by national government’ but rather responds to the needs

of the residents (Landman, 2010, p. 15). The findings of the study instil confidence in current

housing policy but the transference of economic benefits to low-income households

emanating from the adoption of BNG policy remains undetermined.

Ruiter’s (2009) study investigated the market value versus the ‘perceived value’ of low-

income houses in the context of a mixed-income housing development using Cosmo City as a

case study. The rationale was to establish whether the low-income houses by virtue of being

located in Cosmo City could ‘command sufficient value’ to use as a stepping stone for

upward mobility to affordable housing (p. 2).

The study revealed that 87% of the low-income residents perceived their houses to have more

value than ‘RDP’ low-income houses. The low-income households perceived the value of the

houses to be 50% more than the capital cost of the units albeit they did not factor the land and

other development costs.

Ruiter (2009) also found that there was distortion between this perceived value, municipal

valuations and replacement costs. Based on the principle of ‘willing buyer’ ‘willing seller’,

Ruiter (2009) highlights the distortion in value may result in residents selling their units at a

fraction of the market value thereby posing challenges for low-income households to use

their houses as a way of accessing the affordable housing market. However the market value

of the housing units could not be established due to a resale moratorium imposed by the BNG

policy thereby yielding inconclusive results for this study. Nevertheless this study

demonstrated that low-income households could derive positive economic outcomes from the

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mixed-income housing owing to the perception that their assets commanded a higher value

than ‘RDP’ houses thus potentially dictating a higher selling price.

Lebeta’s (2009) study aimed to evaluate ‘the extent to which the implementation of

Cosmo City’ had ‘accomplished the intentions of housing policy’. The study findings

revealed the development was weak on the economic front as it emerged that the

development lacked informal trading areas thereby undermining survival strategies for low-

income households; there were no shopping malls on site resulting in a financial burden to

residents for public transport to access the nearest malls; the formal employment

opportunities were limited to construction operations; and the majority of the low-income

residents were not employed in the formal sector.

The shortcomings identified in the study provide an opportunity to investigate whether this is

still the case in 2013 as the economic infrastructure identified as being absent were included

in the development land-uses. In fact, Cowden (2006) suggests otherwise as her review of

Cosmo City identified an ‘informal trading area in the vicinity of the low-income houses’

(p.5) that enabled residents to continue with their small business operations. Notwithstanding

the findings, the research sample size of six low-income respondents on a development of

this magnitude elicits questions on the validity and reliability of the study results.

2.4.6 Conclusion

The obvious dimension that has been satisfied by the development is the mixing between

low and middle income household which under previous housing policies would have been

segregated with the low-income households isolated in economically marginalised residential

zones. The public private partnership between the City of Johannesburg; the Gauteng

Provincial Department of Local Government and Housing; and CODEVCO satisfied the

international norms that call for collaboration between various stakeholders to achieve

financial viability. The rapid uptake of the housing units demonstrates the desirability and

social acceptability of the development by its residents as well as favourable market

conditions at the time the development was launched. The sources used confirm that

government incentives were part and parcel of the financial structuring. The literature has

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shown that in many respects, Cosmo City has been modelled on the BNG’s policy

requirements for social and economic integration and has also conformed to the international

mixed-income housing norms.

2.5 Literature Review Summary

The literature commenced by providing a historical perspective of South African housing

policy and the social, economic and political factors that informed housing policy in 1994.It

gave context to a policy that has been subsequently dubbed ineffective in meeting its mandate

of poverty alleviation. This section shows how the polarised ideologies of delivery and

poverty alleviation found the ANC government settling for the known apartheid housing

delivery methods which marginalised the poor. The main shortcoming that rendered housing

delivery under the policy ineffective in poverty alleviation is the absence of a strategy or

vehicle on how to achieve this beyond the brick-and-mortar solution that was being delivered

at the time.

The BNG policy discussed in the following section proposes a solution that entails access to

well-located land and socio-economic integration as part of the housing development. The

theory is that this will generate economic opportunities for low-income households and

therefore lead to the creation of sustainable human settlements. Similarly failure in defining

the how was the policy’s downfall as it overlooked the complexities associated with access to

land and consequently struggled to untangle itself from the web of apartheid housing.

The next section on mixed-income developments explored mixed-income housing under

different contexts, more importantly the adoption of the concept in different countries which

presented tangible strategies that were found to be useful in generating a framework at policy

level. This in conjunction with shortcomings identified in South African housing policy has

resulted in the depiction of the gaps that have been closed by BNG policy and international

mixed-income housing norms (see Figure 3)

The literature review has been instrumental in generating basic theoretical constructs on

mixed-income housing albeit not grounded on a rigorous empirical process but nonetheless

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provide a foundational tool for development assessment. Going back to the research question

posed for this study, Cowden (2006) eloquently sums up the research concerns: ‘The jury is

out on how successful it (Cosmo City) was towards that (‘creating a working model for

integration in South Africa’) - Cowden (2006, p. 2). With emerging housing developments

being modelled on Cosmo City, it is important to ask whether this is the most effective model

for promoting economic development for low-income households in South Africa. It is

envisaged that the proposed Research Methodology in the next section will be effective in

answering the research question.

Figure 3: Mixed-income housing- proposed policy framework developed from literature

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Chapter 3. Research Methodology

3.1 Research Approach & Strategy

According O’Leary (2004) inductive research approaches are suitable in research studies

which generate ‘generalizations and theory’ (p.7) based on observations made as opposed to

the alternative deductive approach where ‘researchers test a theory and look for confirmation

through observations’ (p.5). Equally this research aims to generate a new theory by

responding to the research question; How has the adoption of the mixed- income housing

model in Cosmo City driven economic development for low-income households as

hypothesised by the BNG policy and proponents of mixed-income housing developments?;

which potentially can be tested on other mixed-income housing developments. This has thus

informed the inductive approach that has been adopted for this study.

In addition, the study has adopted a qualitative research strategy. The main feature of

qualitative research that motivates its adoption in this study is that it ‘favours naturalistic,

non-experimental research where the researcher does not manipulate the research setting or

subjects or put data in pre-defined categories’ (Gurthie, 2010, p. 43). It is an important aspect of

this study to capture the economic conditions of the participants as they manifest in their

‘real-world context’ (low-income households in Cosmo City) (Yin, 2011, p.7).

3.2 Research Design, Data Collection Methods and Research Instruments

3.2.1 Research Design

According to Yin (2011) there are many variations to qualitative research of which a case

study is one of them. ‘A case study is an empirical inquiry that investigates a contemporary

phenomenon within its real life context, especially when the boundaries between

phenomenon and context are not clearly evident’ (Woodside, 2010; Yin, 2002, p.13).

Based on the above definition, a case study is more suitable for understanding the

phenomenon- mixed-income housing as a driver for economic development in low-income

households- within the real life context of Cosmo City. Furthermore the selection was

informed by the nature of the research which was deemed to be evaluative. Evaluative

research is used to ‘describe an intervention and the real-life context in which it occurred’. In

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this case the study aims to describe mixed-income housing (intervention) within the context

of low-income households in Cosmo City (Yin, 2003, p.15).

Using the matrix presented below, this research study satisfies all the requirements for an

explanatory case study. Firstly, the primary research question/ topic has been framed to ask

‘how’ the phenomenon (mixed-income housing) plays out in a real-life context. ‘How’

questions are also ‘explanatory’ as they seek to establish the ‘operational links’ to the

research phenomenon. Secondly, the researcher has no control over the behavioural events as

the data will be defined by individual circumstances of the research participants. Thirdly the

study focuses on contemporary events, in other words the current economic conditions of the

low-income households in Cosmo City as opposed to historical data (Yin, 2002, p.14-15 and

Woodside, 2010).

Table 5: Relevant Situations for Different Research Strategies- Source (Yin, 2002, p. 5)

Strategy Form of Research

Question Requires Control of Behavioural Events?

Focus on Contemporary

Events? Experiment how, why? Yes Yes

Survey

who, what, where, how many, how

much? No Yes

Archival analysis

who, what, where, how many, how

much? No Yes/No History how, why? No No Case study how, why? No Yes

3.2.2 Research Themes

To give the broad topic of economic development definition, it was important to narrow

down the topic into researchable areas within the context of this study. This was done by

developing key research themes. The research themes were borrowed from Landman’s

(2010) study. These were derived from her ‘in depth international and local literature review’

on the success factors for medium-density mixed houses and were framed based on locational

issues (see Table 6 below) (Landman, 2010, p. 11).

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Table 6: Success factors- Locational issues pertaining to medium density mixed-income housing- Source (Landman,

2010, p.12)

Success factors: Locational issues pertaining to medium density mixed-income housing Proximity to places of work

Proximity to schools

Proximity to public transport

Proximity to retail facilities (shopping malls, banks, grocery stores, etc)

Proximity to clinics/ hospitals

The interest of this research paper is the short-term economic outcomes that are

distinguishable at present, so secondary factors such as proximity to schools and proximity to

clinics/ hospitals which were considered to have long-term economic impact were excluded

(Berube, 2005). The themes were then reconfigured to shift the focus from location and were

framed in economic terms as shown in Table 7 below. Other themes that were extracted from

the qualitative responses in Landman (2010) and Lebeta’s (2009) studies were informal

trading areas and cost of municipal services.

Table 7: Research themes: Economic issues pertaining to mixed- income housing – Adapted from Landman (2010)

and Lebeta (2009)

Research themes: Economic issues pertaining to mixed- income housing Access to work opportunities

Access to informal trading areas

Affordability of public transport

Affordable access to retail facilities (shopping malls, banks, grocery stores, etc)

Affordability of municipal services (water, electricity, refuse removal, taxes)

The above themes informed the structure of the research questions discussed in greater detail

below.

3.2.3 Data Collection Methods

To enable triangulation of data and therefore improve the reliability of the data, multiple data

collection methods are proposed for this study in the form of literature review, semi-

structured interviews and focus groups.

The rationale behind the structure of the literature review was to obtain a broad understanding

of low-income housing policy in South Africa, understand how it relates to mixed-income

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housing, explore the history of the concept and the manner through it has been implemented

in other countries and other housing developments and then culminate with identifying the

key components of Cosmo City that are compatible with mixed-income housing. The

literature review is primarily based on secondary data in the form of research studies, journal

articles, book chapters and internet resources and to a lesser extent includes primary data in

the form of government publications.

The use of semi-structured interviews was informed by other studies that have been

conducted on mixed-income housing developments. For in instance in the studies conducted

on Cosmo City, semi-structured interviews were the common form of collecting information

from the participants (Lebeta, 2009; Ruiter, 2009; Landman, 2010). This was also the case

with the study undertaken by Rosebaum et al (1998) on Lake Parc Place.

According to Gurthie (2010) the choice of semi-structured open ended interviews is to solicit

qualitative responses that are not subject to bias by the researcher’s interpretations. The

obvious advantage is validity as the participants express themselves in their own words at the

risk of compromising on reliability due to the subjectivity of the interview process. Semi-

structured interviews also enable standardisation for comparability but still offer flexibility on

the quality of responses (Gurthie, 2010). These create an ideal platform to understand the

phenomenon presented above whilst also providing structure to the process.

The third dimension to the data collection methods were focus groups representative of the

target population. Focus groups are essentially group interviews undertaken using a semi-

structured format (Gurthie, 2010). These have been included to strengthen the reliability of

the data (Yin, 2011). According to Gurthie (2010), this can be an effective tool for getting

general group perspectives and provide additional insight on the subject under review.

3.2.4 Research Instruments

The applicable research instrument to guide the interviews was a semi-structured open-ended

questionnaire set in English (see Annexure A). The questions were generated based on the

themes identified before which were further distilled to sub-themes (see Annexure B). Yin

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(2003) suggests that the line of questioning should not appear to lead to a particular answer

(‘Level 2 questions’ interview questions) but should still be able to extract the information

the researcher seeks to find (‘Level 1 questions’ represented as the sub-themes) (p.74). In this

case, the questions were deliberately structured to solicit answers in accordance with the sub-

themes without directly seeking the information. Further Yin (2003) recommends asking

‘how’ questions as opposed to ‘why’ to appear non-threatening to the participant, which has

informed the style of questions.

In Cosmo City’s case, the focus group and interviews were primarily conducted in isiZulu.

The researcher’s proficiency in conversing in isiZulu facilitated this process. The choice of

language was informed by the poor command of English which for many of the respondents

was not their first language. Similarly Twinn (1997) suggest ‘that where English is not the

first language of informants, it is more appropriate to use the language of the informant’

(p.419). It was found that direct translation of the questions from English to isiZulu was not

always possible. In a few instances, the style of questioning was adapted with the intention to

extract the relevant information. Instead of asking purely open ended questions, the questions

were reframed by presenting contrasting scenarios in order to solicit answers especially when

engaging with less forthcoming respondents. Quite often the respondents would be guided to

build up the story on each theme by asking them follow up questions to their responses. This

was found to be useful in capturing the themes in their fullness.

The field data collection entailed 1 focus group comprising of 6 participants and 15 in-depth

interviews. 11 interviews were voice recorded whilst detailed hand written notes were

captured for the remainder of the interviews and the focus group.

The transcriptions and handwritten notes were then translated from isiZulu to English.

Twinn’s (1997) exploratory study examining the influence of translation on the validity and

reliability of qualitative data in nursing research highlights that translating data in this manner

yields distortion mainly emanating from ‘the complexity of managing data when no

equivalent word exists in the target language and the influence of the grammatical style on

the analysis’ (p.418). Likewise there were phrases articulated by the respondents where direct

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translation would generate meaningless English sentences therefore some interpretation by

the researcher was required.

3.3 Sampling

Purposeful sampling was used to specifically target the study participants (Yin, 2011).

Maxwell (2005) also refers to this method as ‘criterion based selection’ which he advises to

be the most suitable for qualitative research. When using this method ‘particular settings,

persons, or activities are selected deliberately’ (Maxwell, 2005, p. 88).

Within the context of this study, the participants were from low-income households in Cosmo

City and will be defined in accordance with the criteria below. Initially the low-income

households were defined in accordance with the subsidy scheme income band of R0- R3500

per month (Wilkinson, 1998; National Housing Code, 2009; Tissington, 2011). Given the fact

that success in this study is implied to be economic development in low-income households,

there were no exclusions on the basis of income. It was assumed that the qualifying criteria

were met on occupation of the housing. The low-income households were also defined

according to locality and focused on the land portions allocated to the 5 000 government

subsidised low-income houses (Cowden, 2006; Onatu, 2010; Urban Landmark, 2010; Urban

Landmark, 2011).

a. Adults- 18 years of age and above

b. Permanent occupant of government subsidised low-income houses

c. Housing beneficiaries from informal settlements earmarked for subsidised low-

income housing in Cosmo City, not limited to owners but also include other

household members who meet the above criteria

Prior to data collection, the ‘particular’ setting for the study was identified by obtaining a

development layout of Cosmo City that demarcates the location of the subsidised low-income

houses (Maxwell, 2005). This information was sourced from CODEVCO who identified

Cosmo City Extensions 2, 4 and 6 as the relevant localities for this study.

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Figure 4: Locality map and research study area

The sample size was defined by the ability to access the targeted households and time

allocated for the fieldwork. Landman’s (2010) study on 11 medium density mixed-income

housing developments involved 30-60 participants per development depending on the size of

the development. Further Yin (2011) provides a range of 25-50 participants as an indicative

sample size for a qualitative study. Rosebaum et al’s (1998) study on Lake Parc Place had 20

participants. In line with the above, 21 participants for the study spread between interviews

and focus groups were interviewed. In that the study was contained thereby focusing on depth

rather than breadth (Yin, 2011).

3.4 Research Criteria

Yin (2003) states that the research design quality can be tested using the following logical

tests: ‘trustworthiness, credibility, confirmability and data dependability’.

In order to achieve trustworthiness and credibility in qualitative research, Yin (2011)

recommends the following tests: ‘transparency’, ‘methodic-ness’ and ‘adherence to

evidence’ (pp.19-20). Transparency requires detailed description of research procedures to

enable evaluation by others. Throughout the research process, the researcher has endeavoured

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to describe the rationale and the evidence that have informed the processes that have been

followed. For instance the questionnaire themes for the semi-structured interviews have been

substantiated by borrowing from other empirical studies on mixed-income housing

developments. The uniqueness of this study is that it is measures economic development in

mixed-income housing within a South African context which has not be done in previous

studies.

Methodic-ness relates to following proper research methods. The structure that has been

adopted for this research is a linear- analytic structure. According to Yin (2003), this structure

is suitable for explanatory, descriptive and exploratory case studies and is widely used for

academic reports. As the term suggests, the structure is linear, starting with a discussion on

the problem statement, review of prior literature, description of methods to be used, data

collection and analysis and culminates with conclusions and implications from the findings

(Yin, 2003).

Adherence to evidence means minimising distortions in research by basing ‘conclusions on

data that have been collected and analyzed fairly’ (Yin, 2011, p.21). Uniform research

collection instruments in the form of a semi-structured questionnaire were used to meet this

imperative (see Annexure A).

Confirmability requires that steps be taken to ensure that the research ‘findings are the result

of the experiences and ideas of the informants, rather than the characteristics and preferences

of the researcher’ (Shenton, 2004, p.72). Shenton (2004) recommends triangulation as the

ideal mode of achieving confirmability which in this study has been done by using multiple

sources of evidence: literature, semi-structured interviews and focus groups.

Dependability relates to the reliability of the data collected and once again speaks to the

detailed description of the research design (Shenton, 2004). Reliability of the research design

relates to the ability of a different researcher to arrive to the same findings and conclusion if

the adopted process is replicated. Participants were informed of the study’s confidentiality

ahead of the interview/focus group to obtain authentic responses. O’Leary (2004) also adds

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that a dependable study should be auditable which will be facilitated by retaining the voice

recordings, interview transcriptions and research codes which formed the basis of the

research findings.

3.5 Data Analysis Methods

O’Leary (2004) recommends thematic exploration for analysing qualitative data. According

to Maxwell (2005) the process entails the following steps: reading interview transcripts;

categorization analysis to facilitate comparison of the data, off which coding is the most

common; and ‘identification of connections among different categories and themes’. He adds

that the categorization should aim to capture the themes that emerge from the data collected

(‘substantive’ and ‘theoretical categories’) as opposed to the preconceived ‘organisational’

categories (pp.97-98). Similarly the researcher has adopted the same process in an attempt to

allow the data to dictate the emergent categories. As a result the data analysis focused on

emerging themes, which were different from the pre-set themes that were identified prior to

the field research. The interview transcripts were analyzed by creating data displays and

condensing them into a matrix of categories.

3.6 Limitations

3.6.1 Subjectivity

The researcher acknowledges that her mental models and filters cannot be avoided in the

recording and interpretation of the data collected during the study. Accordingly Yin (2011)

describes the researcher as ‘primary research instrument’ whose subjective reality is prone to

biases. Further, the researcher acknowledges that there may have been some distortion in

translating the data from isiZulu to English for the same reasons. In addition, the selection

process was based on available residents as opposed to a particular formula thus posing a

limitation to the study.

3.6.2 Data collection methods

Because the data collection methods (interviews and focus group) captured data that was

relayed conversationally, the data is only limited to self-reports of the participants’

experiences (Yin, 2011). Therefore this study was solely reliant on the participants’ responses

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in establishing whether indeed Cosmo City has been a driver for economic development in

low-income households. This was verified by obtaining external sources of data confirming

neither their employment status, business involvement nor their personal financial

information to verify any claims that have been made regarding the affordability of certain

amenities.

Furthermore, the research study was unable to tangibly establish whether the participants in

the households were legitimately occupying the houses as beneficiaries from the Housing

Subsidy Scheme in accordance with the parameters set therein but relied on the information

received from the participants (Wilkinson, 1998; Huchzermeyer, 2001; Pottie, 2003; Charlton

& Kihato, 2006; National Housing Code, 2009; Onatu, 2010; Tissington, 2011).

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Chapter 4. Findings and Analysis

This section elaborates on key findings from the field research that pronounce the economic

outcomes of relocating the low-income households to Cosmo City. Whilst the questionnaire

had been structured along specific themes, three broad themes emerged from the findings

discussed in further detail below, namely: locational economic consequences, emergence of

internally generated economic vehicles and infrastructure catalyst for economic development.

Although the themes have been discussed under distinct sections, the reality on the ground is

an integrated system where the different elements are interwoven in creating a functional

economic model. The findings are analysed in relation to the theoretical framework presented

in the literature review where correlations and conflicts are depicted accordingly.

4.1 Summary of Findings

The main research findings are summarised in the table below in accordance with the

aforementioned themes:

Table 8: Research Findings - Core Themes

Core Theme Findings

Locational Economic Consequences Low-income households (LIHs) leveraging on the

central positioning and suburban status of Cosmo City

to demand higher rentals for backyard rooms

Argument for location on basis of proximity to

external economic opportunities ( job opportunities)

weakened as economic development driven mainly

by internally generated activities

Emergence of internally generated economic

vehicles

LIHs capitalising on land and housing asset to drive

income generation through leasing of backyard

rooms, home-based businesses and emergence of

property market

Symbiotic relationship between LIHs and bonded

housing in the form of employment opportunities and

support of LIH local business by the bonded housing

residents

Infrastructure catalyst for economic

development

Electrical infrastructure catalytic in enhancing

business operations in existence prior to relocation to

Cosmo City

Electrical infrastructure enhancing LIH’s ability to

budget for household expenses

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4.2 Main Findings

4.2.1 Locational Economic Consequences

4.2.1.1 Location argument in relation to external economic opportunities

The literature demonstrated the generally accepted viewpoint that strategically located

housing developments in close proximity to sources of economic opportunities translates to

economic development for low-income households. This informed the South African post

1994 housing policy definition of adequate housing which included location ‘in areas

allowing convenient access to economic opportunities’ (Huchzermeyer, 2001, p.305; Onatu,

2010). Similarly the BNG policy recognised access to ‘well-located’ land which includes

having ‘convenient access’ to 'places of employment’ as integral to poverty alleviation and

economic development for low-income households (Tissington, 2011, p.81). Likewise the

importance of location was demonstrated in the Gatreaux housing mobility experiment in

Chicago where the relocation of black low-income households to white middle class areas

resulted in improvement in employment opportunities (Smit & Purchase, 2006).

Seemingly the location argument presented in the literature supposes that the purported

economic development in low-income households should be driven by opportunities that are

external to the development. The U.S. case studies of mixed-income housing reviewed also

demonstrated that the ability to derive economic outcomes for low-income households was a

function of favourable economic conditions in the form of thriving local economies thus

further emphasizing this notion that economic success is dependent on external factors

(Brophy & Smith, 1997).

In contrast, the research findings revealed that whilst location plays a pivotal role in the

economic development of low-income households, it did not necessarily translate to

improved access to externally driven economic opportunities. Even though neighbouring Kya

Sands; an industrial area which is reported to attract employees from other parts of

Johannesburg such as Soweto, Midrand and East; presents potential for reaping such

economic benefits; the respondents did not provide evidence of specific job opportunities

created for Cosmo City low-income households. In fact at least half of the respondents

indicated that their current jobs were in existence prior to relocating to Cosmo City. This is

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echoed by the six respondents who indicated that there was no change in their work situation

as a result of moving to Cosmo City. In addition the accounts of three respondents who have

remained unemployed since relocating to Cosmo City suggests that the development has been

unable to make inroads in resolving the unemployment challenges of the low-income

households through the generation of external economic opportunities.

4.2.1.2 Leveraging on central location

The focus group and semi-structured interviews revealed that the low-income households

have leveraged on the central location of Cosmo City between Lanseria Airport (reported to

be upgraded to an international airport in the near future) and the economically active zones

of Randburg, Northgate, Fourways and Kya Sands through the emergence of inwardly

generated economic activities such as the construction of backyard rooms to attract rental

income. Whilst backyard rooms are not a new phenomenon in this segment of the housing

sector, findings from the focus group indicate that Cosmo City’s location has elevated the

development to suburban status thus demanding higher monthly rentals. The upgrades visible

on some of the RDP houses closely match the bonded houses aesthetically thus reinforcing

the suburban image (Photo 3). Accordingly the average room rental in Cosmo City is

reported to R1000 compared to the R300 paid in Soweto.

One respondent argues these rentals are justified considering the efficiency in the transport

connecting to Cosmo City feeder areas which is congruent with the theory that suggests

mixed-income housing attracts improved infrastructure and services for low-income

households as a result of the political pressure exerted on authorities by the higher-income

households (Joseph et al, 2007). Similarly another respondent related that in Zevenfontein

there was no direct public transport route to his workplace at Lanseria Airport whereas taxis

from Cosmo City now offer a direct route to this destination. A few times respondents

mentioned improvements in the direct route to the Johannesburg CBD which translates to

cost savings in comparison to the two taxis that had to be taken from Zevenfontein for the

same route.

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4.2.2 Emergence of internally generated economic vehicles

The literature presented criticism against the BNG policy’s objective of ‘wealth creation and

empowerment’ for low-income households through access to land and housing ‘as an asset’

with Charlton & Kihato (2006) viewing the policy as simplistic in overlooking the

complexities of accessing finance by poor households (National Housing Code, 2009, pp. 18-

19). It went on to present the widely held perspective that mixed-income housing alone is

insufficient to drive the economic agenda but requires the inclusion of empowerment

programmes that address the structural barriers that contribute to poverty (Brophy & Smith,

1997; Schwartz & Tajbakhs, 1997; Rosebaum et al, 1998; Smith, 2002; Fraser, 2007; Joseph

et al, 2007; Onatu; 2010; Joseph, 2010). In both these arguments, the provision of land and

housing is seen as an incomplete solution for promoting economic development thereby

requiring finance or empowerment programmes to achieve this imperative.

However the findings from Cosmo City depict a different picture to this where low-income

households are capitalising on the land and housing to change their economic circumstances.

Here the provision of land and housing appears to have stimulated innovation and self-

generation in low-income households leading to the emergence of inwardly generated

economic vehicles reported by some of the respondents to be a response to the unemployment

challenges in Cosmo City. The said vehicles are discussed in further detail below.

4.2.2.1 Backyard rooms driving economic development

In almost all the interviews it emerged that the main driver for economic development in low-

income households are the backyard rooms. Driving around Cosmo City, the presence of

backyard rooms is a common feature in many of the low-income households. These rooms

are providing a lucrative income stream for households which in the instances observed serve

as supplementary income to augment salaries earned elsewhere. To provide context the

households interviewed with backyards had between 3 to 4 rooms per house which using the

previously mentioned average rental value translates to R3000- R 4000 monthly rental

income. In addition, the backyard rooms facilitate a dual flow of income in the Cosmo City

economy in the form of local construction opportunities mentioned by three of the

respondents as well as the rental income already discussed. Nonetheless two of the

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respondents indicated that the rental income was not always guaranteed as the occupancy of

the rooms was sporadic with always the possibility that a tenant may move out. In two

interviews, the respondents indicated that the ability to build these backyard rooms hinges on

having access to money. One of the unemployed respondents voiced her frustration on how

her unemployment posed a challenge in having access to funding to build the backyard

rooms.

Photo 1: House with Backyard rooms

4.2.2.2 Emerging Cosmo City businesses

In line with Landman’s (2010) study on mixed-income medium density housing

developments which highlighted the importance to residents of being economically active

within the locality of the development in the form of home operated businesses and informal

trading areas, Cosmo City has seen the emergence of businesses that further exploit the

housing infrastructure available. In spite of Onatu’s (2010) attestation that the proliferation of

‘informal traders, spaza shops, and illegal land uses’ in Cosmo City threatens the

‘sustainability of the project’ (p. 213), these initiatives are the predominant drivers of

economic development in the area. As mentioned in the focus group and four other

interviews, it appears that the most prominent businesses in Cosmo City are the shops being

operated by Somalis and Indians from their homes. These businesses are reported to have

been instrumental in improving food affordability in Cosmo City. Examples used by the

respondents are the R400 food hampers that can be bought from the shops and the fact that

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one can purchase a 2litre bottle of cooldrink for R10. The shops provide an alternative to the

local Shoprite which some perceive to be more expensive and a considerable distance from

the RDP section of the development.

4.2.2.3 Emergence of property market

Aligned to the aforesaid BNG objective of using housing ‘as an asset’ for ‘wealth creation

and empowerment’ (National Housing Code, 2009, pp. 18-19), there are also signs of an

emerging property housing market in Cosmo City that enables the aforesaid business

operators to trade in the area. The participants indicated that roughly 50% of property sales in

Cosmo City were to foreign nationals and also mentioned the existence of a rental market

which also partly serves the foreign residents. Evidence of a rental market was also identified

during the field research as some of the households that were excluded in the study were

recently occupied rental by tenants.

4.2.2.4 Symbiotic relationship between income groups

The literature presented a mixed income housing development, Lake Parc Place, where

similar outcomes of inwardly generated economic opportunities emerged in response to the

development’s failure to generate formal economic opportunities for low-income households

who thus looked to the moderate income households for informal employment opportunities

(Rosebaum et al, 1998). Similarly there were accounts of employment opportunities available

from the bonded houses which include garden services, domestic work, and construction jobs

amongst others.

Additionally, it emerged in two interviews that a symbiotic relationship has developed

between the bonded households and low-income households where the former support local

businesses operating in the RDP section of Cosmo City. One respondent who runs a sewing

operation from home reported that the bonded households support her business. Furthermore

two other respondents revealed that the absence of liquor licences to operate taverns from the

bonded houses translated to support for taverns in the RDP section by the bonded housing

residents.

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Unlike Lake Parc Place, the income generation from bonded houses in Cosmo City appears to

be subordinate to other vehicles that have emerged demonstrated in the sentiment shared by

the focus group participants that ‘little has been achieved’ as a result of mixing the income

groups. This view was also shared by three other respondents who reported that there were no

apparent economic changes emanating from being located in close proximity to the bonded

houses.

4.2.3 Infrastructure catalyst for economic development

4.2.3.1 Cosmo City infrastructure enhancing existing economic activities

From the interviews, it is evident that an entrepreneurial culture has always existed for the

low-income households prior to moving to Cosmo City as confirmed by five respondents

who mentioned the prior existence of businesses such as shebeens, spaza shops, construction,

motor paint spraying and sewing. The findings revealed these businesses have been enhanced

by the electrical infrastructure available in Cosmo City which was absent in their previous

areas of residence which were informal settlements. It emerged that the infrastructure has

been catalytic for the continuance of the businesses and the emergence of new businesses that

also place reliance on this infrastructure in order to be operational.

The interviews presented four accounts of improvements in local businesses that have

benefited from the availability of electricity. One respondent who is an aeroplane spray

painter at Lanseria Airport and also runs a motor spray painting operation from home related

the difficulties experienced in sourcing power when he was still residing in Zevenfontein. At

the time, he had to hire a generator in order to perform his operations and the absence thereof

impeded on his ability to work. Another respondent who has a sewing business had to sew in

a public facility in the Johannesburg CBD whilst residing in Zevenfontein. In both these

instances the availability of electricity has enabled the respondents to fully operate their

businesses from home. Two respondents also showed the positive impact of electricity on

food sales like ‘chicken feet and intestines’ in affording the business owners the ability to buy

their produce in bulk and store in the refrigerators.

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Photo 2: Businesses enhanced by electrical infrastructure: Sewing (left) and Motor spray painting equipment (right)

4.2.3.2 Electrical infrastructure enabling budgeting

Upon probing on the affordability of residing in Cosmo City, it emerged from four interviews

that the availability of electricity also contributed to the low-income households’ ability to

budget for their monthly expenses. Three respondents said that with the availability of

electricity they were not living from hand to mouth as was the case in Zevenfontein where

they had to buy food constantly as one respondent captured it: ‘Monday you buy, Tuesday

you buy, Wednesday...’. From the responses, it appeared that this ability to budget was

supported by the fact that the electricity was prepaid which enabled one ‘to control’,

‘conserve’ and ‘be conscientious with usage’ unlike in Zevenfontein where, as one

respondent reports, you had to put aside money for paraffin constantly. Also the seamstress

confirmed that she limits the use of electrical appliances to conserve electricity. In spite of

this, the focus group as well as three respondents revealed that debt was still sought as

supplementary income to finance budget shortfalls on transport and electricity.

4.3 Discussion of Findings

The apparent absence of new external employment opportunities for low-income households

as a result of being located in Cosmo City weakens the argument for well-located land as an

economic driver on the basis of close proximity to external economic opportunities. Instead

the central location of Cosmo City has been instrumental in deriving economic benefits from

within in the form of backyard rooms. Furthermore, the findings demonstrate that the BNG

objective of accessing land and housing as an ‘asset’ has provided a platform for self-

generated economic development. They reveal that providing low-income households with

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the housing infrastructure coupled with a favourable location unlocks the ingenuity and

innovativeness that fosters economic development for low-income households located in

mixed-income developments.

Nonetheless, there still exists a gap in creating economic opportunities for those without

access to the funding required to capitalise on their houses to generate income. The

incorporation of the backyard rooms in the layout of the low-income housing units at

Malibongwe Ridge, reported to be the next phase of Cosmo City (interview), partly provides

a solution but does not entirely address the challenge. Socio-economic inequalities are

already evident in Cosmo City where there is a stark contrast between the houses that have

been upgraded and those that have been left unchanged which may potentially threaten the

sustainability of the development moving forward (Photo 3).

Photo 3: Contrast between original RDP house (left) and upgraded RDP house (right)

Although not explicitly communicated by the respondents, the ability to effect improvements

on the housing units appears to be a function of the type of tenure. Whilst the study did not

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set out to draw comparisons between the tenure structures, it is hypothesised that rental

tenures pose limitations in the household’s ability to use housing infrastructure as a base for

economic development. The difference in tenures possibly explains the contrast between the

predominantly externally driven economic outcomes in the U.S. case studies and the

internally generated opportunities at Cosmo City.

Further, it is clear that the presence of electrical infrastructure is not only facilitating

economic development in Cosmo City but presents a shift in the spending habits of the low-

income households as well as their financial behaviour. Although debt accumulation to

supplement income still appears to be a challenge, this shift presents an opportunity for

financial advancement for the households and the possibility of instilling a savings culture

that should further drive economic development in the area.

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Chapter 5. Conclusion

In line with Cowden’s (2006) rhetoric, the jury is now out on whether this study has

managed to respond to the research question posed: How has the adoption of the mixed-

income housing model in Cosmo City driven economic development for low-income

households as hypothesised by the BNG policy and proponents of mixed-income housing

developments? What is apparent is that there are two economic development models that

have emerged from this study that respond to the research question; one based on the

theoretical constructs developed in the literature review and one that captures the reality that

is manifesting in Cosmo City.

The theoretical model’s argument for poverty alleviation and economic development in

mixed-income housing is the locational benefit to low-income households. Theoretically,

locating the said developments close to external economic opportunities enables improved

access to jobs for low-income households. The environmental conditions enabling the access

to jobs; in the absence of which the mixed-income housing phenomenon as a solution for

poverty alleviation is discredited; includes a favourable economic climate, social bonds

between income groups to expand the social networks for low-income households and

empowerment programmes to address structural barriers inherent in the low-income

households.

In contrast, the emerging Cosmo City economic development model for low-income

households in mixed-income housing has brought to the surface the shortcomings of this

theory which presupposes that the job opportunities available are limitless and that the low-

income households have complementary skills to match these opportunities. The Cosmo City

model expands the economic footprint by incorporating internally generated economic

activities as part of the solution and reducing the reliance on external economic opportunities

for economic development. Interestingly the study has shown how the low-income

households are still able to exploit the benefits of the prime location of the development

whilst remaining inwardly focused in their self-generated efforts. Key to the success of this

model is access to land and housing, home ownership and availability of adequate

infrastructure.

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MIXED-INCOME THEORY COSMO CITY MODEL

Figure 5: Comparison between economic development models for low-income households in mixed income

development- Theory vs. Cosmo City

What is particularly significant about the Cosmo City model is that the low-income

households have not necessarily reinvented the wheel but have built upon existing concepts

for economic development (backyard rooms, spaza shops, etc) which have been enhanced by

deriving the maximum value from the settings of the development. Judging by the success

derived in Cosmo City, the deduction is that the positive economic outcomes in mixed-

income housing are uniquely defined by the prevailing socio-economic context, the outcome

of which cannot be pre-determined but is an organic response. The critical finding is that the

socio-economic dynamics of the housing development shapes the narrative through which the

economic development story is told. It thus becomes important to contextualise mixed-

income housing in devising a solution for economic development.

It is clear that the Cosmo City model contributes towards meeting the BNG objective of

‘wealth creation and empowerment’ through access to ‘land and housing’ as ‘an asset’ and

makes positive strides in using housing as a vehicle to lift people out of poverty congruent

with South African post 1994 housing policy’s agenda.

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Chapter 6. Recommendations

The study outcomes invoke many other questions on the Cosmo City model such as: How to

leverage on the inherent strength of self-generation in low-income households to further drive

economic development in Cosmo City? How to resolve the socio-economic inequalities that

are emerging between low-income households? How to create an enabling environment for

the emergence, sustenance and growth of the internal income generating vehicles? How to

achieve alignment between the economic activities and the land-use regulations? More

importantly how to use this study to inform the development ethos of other mixed-income

housing developments? Whilst the above questions cannot be answered entirely in this study,

they provide a platform for further inquisition into this broad subject area.

Based on the theoretical constructs developed and the Cosmo City emerging economic

development model, there are some factors that are pronounced in achieving success in

mixed-income housing which can be extracted to inform future directions in mixed-income

housing.

a. Juxtaposing international mixed-income housing norms onto South African housing

policy as well as outlining the conception of Cosmo City has provided tangibles that

contribute towards ensuring the viability of mixed-income housing developments. These

emerge as the foundational elements necessary for the effective delivery of mixed-income

housing at policy level and from a project viability perspective:

i. Legislating the requirement for low-income housing quotas in all developments that

are in close proximity to zones of urban economic activity- Given the important role

location played in driving economic development in Cosmo City, efforts needs to be

mobilised towards this agenda. This should contribute towards covering some

distance in closing the current housing backlog of 2.1 million (News 24, 2013) and

conforms to Smit & Purchase’s (2006) recommendation of linking mixed-income

housing to industrial and commercial developments by introducing a housing quota in

those developments to contribute to the housing delivery efforts.

ii. Adopting public private partnerships as the norm for the delivery of mixed-income

housing- Given the capacity constraints in government in delivering on housing

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(Charlton & Kihato, 2006), it is important to capitalise on the capabilities of private

partners in achieving effective delivery.

Similar to international norms, this includes incentivising developers so as not to

compromise the viability of their developments owing to the incorporation of mixed-

income housing therein (Smit & Purchase, 2006). Of particular importance is access

to land which was displayed in how the free land supply in Cosmo City was

instrumental in achieving project viability (Cowden, 2006, Urban Landmark, 2010

and Urban Landmark, 2011).

iii. Supporting the entrepreneurial culture by expanding the land rights in low-income

housing to include commercial uses concurrent with the active business operations

using Cosmo City as an example- Not only will this assist in formalising the income

generation activities but will address the sustainability concerns raised by researchers

such as Onatu’s (2010) regarding the proliferation of ‘informal traders, spaza shops,

and illegal land uses’ (p. 213) in Cosmo City. The proposed solution includes

prescribing preferential property rates for the low-income residents in lieu of the

higher property rates conjoined to commercial uses.

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Chapter 7. Future Implications

7.1 Research areas

During the field study, other themes emerged which fall outside the scope of this study but

nonetheless require attention in future strategies for mixed-housing developments. The

findings revealed broader consequences of the prevailing economic circumstances at Cosmo

City which impacted on other aspects of the development which were not necessarily

economic in nature.

For instance the impact on crime was mentioned a few times although the opinions expressed

differed. Some attributed the high crime levels to the excessive rentals charged for the

backyard rooms suggesting that affordability challenges for some led to crime to support the

higher living cost. Another respondent viewed the crime as a response to poverty resulting

from lack of economic opportunities. Conversely another respondent painted a more

optimistic picture of crime in Cosmo City attributing the relatively low crime levels to the

emerging economic activity in the area. The evidence warrants further investigation into the

relationship between crime and the economic climate in Cosmo City to obtain a broader

socio-economic context of the outcomes of mixed-income housing emerging from the

development.

The backyard rooms in Cosmo City have attracted criticism regarding non-compliance to

municipal bylaws captured in the words: ‘People are coming up with structures that are not

planned, I don’t even think they submit plans to the local authority.’ Owing to this the

backyard rooms have ‘double(d) the number of people than originally planned’(focus group).

The repeated power failures and sewerage blockages bear testament of the constrained

municipal services as a result (interview). Supposedly the constant repairs and possible

upgrades to the system impose a financial burden to the local authority in excess of regular

maintenance. These concerns warrant an investigation on how to better align the development

design and infrastructure to the housing upgrades done by households and expand on the

development ethos informing Malibongwe Ridge.

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Another pertinent study area although not explicitly articulated in the findings is to test one of

the arguments for mixed-income housing which is that of facilitating upward mobility for

low-income households (Joseph et al, 2007). The proposed study could draw parallels to

Brophy & Smith’s (1997) question relating to the ‘connection between job creation and

upward mobility’ by reframing the context to ‘internal income generating activities and

upward mobility’. In the findings and analysis, this research points to houses at different

phases of development, clearly indicating a gap in earning among the low-income

households.

7.2 Policy and implementation

Although the study contributed to the knowledge gap on mixed-income housing, the story

was still told from the perspective of a single development presenting with a certain set of

characteristics that may not be generic for other developments. Nonetheless the evidence

suggests that this study has potential implications for the direction of future housing policy. It

provides tangible outcomes to a policy framework that has largely been conceptual without

substantive evidence to support the effectiveness of mixed-income housing in driving the

economic development for low-income households. The study also provides a South African

context for mixed-income housing which was lacking in the literature that motivates for

mixed-income housing as a poverty alleviation measure. It presents an opportunity to

investigate the possibility of building in the theoretical constructs on project viability and

policy development in conjunction with the emerging Cosmo City economic development

model for low income households.

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Annexure A: Semi-structured open-ended questions

1. Tell me more about how you survived (made money) before you came to Cosmo City.

How has it been since then?

2. Describe the work opportunities that are available to you and other Cosmo City

residents?

3. Describe the business opportunities that are available to you and other Cosmo City

residents?

4. Describe other money-making opportunities that are available to you and other

Cosmo City residents?

5. How would you describe the affordability of living in this house compared to where

you lived before?

6. How would you describe the affordability of public transport compared to where you

lived before?

7. How would you describe the affordability of travelling to work from Cosmo City

compared to where you lived before?

8. How would you describe the affordability of going to retail facilities (shopping malls,

banks, grocery stores, etc) compared to where you lived before?

9. In your opinion how has staying close to ‘richer’ families affected your economic

conditions?

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Annexure B: Research themes and sub-themes

Theme Sub-theme 1 Sub-theme 2 Sub-theme 3 Sub-theme 4 Sub-theme 4

Access to work opportunities

Keeping existing work

Access to informal work in

the development

Access to informal

work outside the developme

nt

Access to formal work

in the development

Access to formal work outside the

development Questions 1, 6, 7, 9 2, 7, 9 2, 3, 7, 9 2, 7, 9 2, 3, 7, 9 Access to informal trading areas

Continuation of existing

informal trade

Starting new informal business

Questions 1, 9 3, 9 Affordability of public transport

Savings on public transport

cost

Accommodation of public

transport cost in budget

Questions 5, 9 5, 9 Affordable access to retail facilities (shopping malls, banks, grocery stores, etc)

Savings on travelling cost

to retail facilities

Accommodation of travelling cost to retail facilities in

budget

Questions 8, 9 8, 9 Affordability of municipal services (water, electricity, refuse removal, taxes)

Accommodation of municipal services in

budget Questions 5, 9 Other (not covered by research themes)

Access to income

Accommodation other living

costs in budget Questions 3, 4, 9 5, 9