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PUBLIC-PRIVATE COLLABORATION –
CASE STUDY : COSMO CITY
Yusuf Patel
Seminar – Urban Regeneration
5 November 2014, Maboneng
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Addressing Needs of
Informal Settlers
Cosmo City was borne out of an urgent need to create accommodation for the informal settlers of Zevenfontein, Riverbend and the farm workers of Cosmo City that illegally occupied privately owned land in the North Western area of Johannesburg.
City of Johannesburg and the Gauteng Government were instructed by the courts to find alternate accommodation to house the informal settlers and took the bold decision to acquire 1105ha of land and to relocate them into an integrated, mixed use development that would comply with the government’s policy in terms of a sustainable development.
The only way to achieve this ambitious vision was to embark upon a Partnership agreement between the City, the Provincial Government and the private sector to apply and put into practice the government’s “Breaking New Ground” Strategy.
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• Cosmo City was initiated by the Gauteng Department of
Housing and the City of Johannesburg in late 1998.
• Codevco (Basil Read) were appointed as preferred developer
in 2000.
• After many years of court cases defending objections to the
development, Codevco eventually broke ground in January
2005.
• By 2012 Cosmo City was the first successfully completed
mixed income, fully integrated sustainable human settlement in
South Africa.
Time Lines
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12 schools (7 complete)
40 sites for churches, clinics and crèches
43 parks and recreational sites
32 commercial and retail
40ha industrial park
300 ha environmental area
Land: 1 105ha
Top Structures:
• 5 000 BNG/FSH
• 3 000 Finance Linked units
• 3500 Bonded Houses
• 1000 Rental apartments
(281 complete)
Total 12 500 units
Population 60 000 +
Scope
PARKS
EDUCATION
COMMERCIAL
TRANSPORT
CHURCHES
HO
MES
PO
LIC
E
MEDICAL
Mixed Use
Integrated
Sustainable
Development
INDUSTRIAL
SOCIAL / RENTAL STOCK 6
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COSMO CITY SCHOOLS 8
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10
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12
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• Development value: R15.9 BN
CoJ should be collecting at least R100m p/a in rates & taxes
• Employment: 30 924 (During Construction)
• Unlocking household asset value - 1000 affordable houses
financed by FNB in 2006 increased in value by estimated
R100 million
(Mail & Guardian Business, November 15-21, 2013)
Socio-Economic Impact
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Gauteng Department of Housing
ˉ Housing subsidies
ˉ Schools
City of Johannesburg
ˉ Land owner
ˉ Bulk infrastructure
ˉ Approvals
ˉ Urban Management
Codevco (Basil Read)
ˉ Developer
The Parties
GAUTENG PROVINCIAL GOVERNMENT
CITY OF JOHANNESBURG
SUBSIDY AGREEMENT LAND AVAILABILITY AGREEMENT
AND
SERVICES AGREEMENT
CODEVCO DEVELOPMENT AGREEMENTS
LOW INCOME HOUSING
FINANCED CREDIT LINK HOUSING
BONDED HOUSING
BUILDING CONSTRUCTION
DESIGN & CONSTRUCT
APPOINTMENT
BULK & LINK
ENGINEERING
SERVICES
DESIGN & CONSTRUCT
APPOINTMENT
TOWNSHIP
ESTABLISHMENT
LAND SURVEY
COMMUNITY LIASON
LABOUR DESK
ENVIRONMENTAL
CONTROL
MARKETING AND
SALES
CONSULTANTS
CONTRACTORS
CONSULTANTS
CONTRACTORS CONSULTANTS SUB
DEVELOPERS
Design, acquire all necessary regulatory approvals and build the Cosmo City integrated development.
Appoint all the necessary professionals and contractors to install the required services for the project.
Ensure that all vacant and serviced land be developed in terms of the approved township application which may be amended from time to time to suit market conditions.
Sell all non-subsidised residential and non residential properties.
Liaise with all the necessary “Government” Departments to acquire schools, parks and clinics etc.
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Developer’s Brief
LESSONS
LEARNT
CODEVCO .
LESSONS LEARNT
Cosmo City was not only to be a 12 500 housing development it was to be a lifestyle that had never been tested before.
For such a development to work it was imperative that it would attract people that could afford to buy elsewhere but were prepared to invest in a town that catered for all income groups including people that would be living in a formal environment for the first time in their lives.
WHAT IS MIXED USE INTEGRATED HOUSING?
“Mixed use is to provide those facilities that makes a town sustainable .”
“Integration is to join together different income groups harmoniously into
a single community.”
Cosmo City is the first mixed use, fully integrated/inclusionary housing development in South Africa that encompassed the following components:
• Provide the same level of service for all income groups.
• Providing housing for the full economic spectrum group in the same human settlement.
Public-Private Investment Mix
LESSONS LEARNT
1. Location – Growth Area
2. Design – Protect assets and allow for natural integration
3. Identify beneficiaries upfront
4. Co-ordination
5. Household preferences: Commercial Centre's – Spaza Shops
6. Communicate, Communicate, Communicate
• Education Programmes – beneficiaries / bond holders
• Induction Courses – Contractors / Labour Desk
• Community Liason Officer
• Newspaper
• Established residents associations.
7. Funding & Cross subsidization
8. Alternative energy and environmental initiatives
9. Would we develop another Cosmo City?
1. Location – Growth Area
To achieve a successful integrated development it is essential that the development is located in a growth area, one needs to create a destination which will attract the bonded market. This market is required to provide the cross subsidisation that makes such developments work.
2. Design – Protect assets but allow for natural integration
Integration requires careful design that will encourage natural process:
• Quality design and schools being provided and positioned strategically to attract learners from the different income groups.
• Commercial facilities providing a good blend of services required by the different income groups.
• Traditional trading facilities must not be ignored for all income groups. Be it informal trading areas, taverns or malls and restaurants.
• Encouragement for the residents in the low income area to upgrade their houses and gardens.
• Churches, Clinics, Parks and open areas.
• Same level of services through out and proper transport facilities.
3. Identify beneficiaries upfront
The beneficiaries of the BNG houses should be identified upfront and inducted so that there is no confusion who will benefit form the development. This will help to avoid land invasions.
4. Co-ordination
It is critical to establish a management committee with the authorities as one has to work as a team.
Developer has to be Hands-on to achieve results
A project such as Cosmo City with a development cost of over R3 billion has a number of commercial issues at stake which have to be fully appreciated and therefore obstacles have to be overcome fast and implementation has to happen as seamlessly as possible.
5. Commercial Centre's – Spaza Shops
Provision was made for 32 number commercial retail sites at Cosmo but no provision was made for any informal trading.
Many beneficiaries earned their living, prior to being relocated to Cosmo City, by trading in the informal settlement they were living in. When they moved to Cosmo City they continued to trade from their houses.
This did not only apply to the low income but it has also been noticeable in the financed linked and bonded areas as well.
It is essential to provide formal trading facilities as early as possible even if one has to subsidise it, and to provide proper market places to allow informal trading.
6. Communicate, Communicate, Communicate
• Edducational programme about living in a new town and the responsibilities that comes with that is crucial.
• CLO’s to liaise with the residents and assist them.
• A successful community newspaper was started
• This also led to the establishment of residents associations as small groups of people started to establish task groups
• Induction Courses – Contractors / Labour Desk
Every contractor that works at Cosmo City must go through an induction course so that they understand what Cosmo City is about and they can buy into its success.
• We also established a labour desk where beneficiaries and local residents could register and contractors were obliged to draw their resources from. This way it created work for the local community it enabled them to build their own city.
7. Funding & Cross subsidization
Cosmo City`s total development cost is R 3.8 billion of which the funding is shared approximately
20 % City of Johannesburg - Land / Bulk and link infrastructure / community and municipal facility
19 % Gauteng Provincial Government – Subsidies, Clinics, Schools, and provincial facilities.
61 % Private
But what is critical in such a development from the private sector is the cross subsidisation that needs to take place especially to make the financed linked housing work. It is a requirement to provide a house on a serviced stand for a household income of under R 7500 /month - now up to R 15000 /month. This can only happen by cross subsidization between the bonded houses and the financed linked houses.
8. Alternative energy and environmental initiatives
We have started a new programme within Basil Read called BR-Green Projects to address these challenges especially for integrated developments.
We recognize that the type of developments we undertake are large from 100ha to 1400ha and that a lot of natural vegetation is lost. BR-GP has established a pilot nursery at Cosmo City to perfect the art of propagating trees, shrubs and vegetables.
The programme has propagated over 300 000 trees to be used as well in future developments.
Alternative building and energy still remains an unaffordable source to integrated housing - innovations are increasing.
9. Would we develop another Cosmo City?
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Mega-Scale Housing Delivery:
Economic Impact Integrated sustainable human settlements
Project No. Units Impact during
construction (R)
Employment
during
construction
Post
construction
(R)
Post
Construction
employment
Savanna
City
>18 000
R28,4 bn
54 900
R12,7 bn
12 700
No referencing and usage without permission from Basil Read (Pty) Ltd
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Notes: Direct, indirect and induced impact of a typical housing project in South Africa
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Subsidised/Social &
Affordable Housing
Public Public/Private Private
State Market Collaboration/
Contracting
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Why Public-Private Contracting?
Make great cities – integrated, spatially efficient, inclusive
Optimise location - Housing has to be delivered according to a strategic spatial development and investment framework
Cover investment costs adequately – sustainable human settlements
Share capabilities & synergise responsibilities
Contain Costs – ensure affordability with quality
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CONTAIN
COSTS
What can
people afford?
R350 000 house
R100 000 house
Need
R6 667 income p/m
Need
R11 667 income p/m
R200 000 house
Need
R3 334 income p/m
Reduce regulatory approval & preparation time
Apply Standards consistently
Plan better for bulk & lower contributions
Achieve economies of scale
Innovation (technology & policy)
Public-Private Investment Mix
Bulk Contributions
• Planning challenge: Lack of certainty regarding the availability of
bulk
• Policy challenge: Uncertain bulk service contribution framework
• Cost challenge: High and rising bulk service contribution costs
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Bulk Contributions Impact
Selling Price
VAT Top
Structure
Internal LPFM Available
for Bulk
R400 000 R56 000 R175 000 R60 000 R60 000 R49 000
R400 000 R56 000 R200 000 R60 000 R60 000 R24 000
R350 000 R49 000 R175 000 R60 000 R60 000 R6 000
R350 000 R49 000 R200 000 R60 000 R60 000 -R19 000
Illustration:
• 50m2 house
• Building rate: (1) R3500/m2; (2) R4000/m2
• LPFM: Land, Pre-development costs, Finance cost, Marketing
costs
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Bulk Contributions: Usage Standards
• Lower contributions should apply to affordable housing
developments compared with up-market housing
High Income Household
Affordable Housing
9 Kl/day
0,8 Kl/day
Water Usage Comparison
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Housing Market Households (%) by Household Income Category
2006
4.84%
7.40%
8.54%
11.32%
11.64%
8.96%
7.04%
7.17%
6.82%
6.74%
6.27%
5.66%
7.58%
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00%
0-200
201-500
501-1000
1001 - 1500
1501 - 2500
2501 - 3500
3501 - 4500
4501 - 6000
6001 - 8000
8001 - 11000
11001 - 16000
16001 - 30000
30 001+
Number of Households (as %)
Source: Adapted from Global Insight
Inco
me C
ate
gory
(M
onth
ly)
Subsidy market (52.7%)
Outstanding demand –
1,8 million units
Open market
(19.5%)
Gap market (27.8%)
Outstanding demand -
600 000 units
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Mega Project - Development Phases
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Outcomes Mixed income
Mixed Use
Green
Smart
Connected
Well managed
Viable
Sustainable
Investigation
Feasibility
Agreements
Planning & Approvals Construction
Marketing & Sales
Urban Management
1-2 years
3-5
years
7 – 15
years
Delivery Success Factors
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Well located
and priced
Land
Infrastructure
• Bulk
• Link
• Internal (water, sanitation,
power, roads, etc)
Accountable &
dedicated
Project team
(officials)
Planning,
Design,
Funding &
Financing
capacity
Development
Management &
Construction
Delivery
capacity
Integrated, sustainable human settlement
Subsidies, End-
User Finance
Product and
construction
technology
Long-term spatial planning & Land use management
Community
development &
local institutions
Urban
management
+ + + +
Marketing & Sales
Who are the Public & Private Sectors?
Public National government
Provincial government
Local government
State owned enterprises
Private Investors
Land owners
Funders
Developers
Contractors
Professionals
Home owners
Communities & Stakeholders
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What are the Responsibilities?
Public Sector Spatial planning
Land & Bulk Infrastructure (external engineering services)
Development approvals
Land Use management
Subsidies & Grants
Public & Municipal facilities (schools, clinics, parks, community centres, etc)
Urban management
Private sector Investment & Finance
Pre-development cost (studies, design, feasibility, applications)
Internal infrastructure (internal engineering services)
Top structures (FLISP, Bonded, office, retail)
Development Management
Construction
Marketing & Sales
67%
33%
Typical investment mix for Sustainable Human Settlement
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Procurement Strategy
State/Municipal Land Sell
Land Availability /Implementing Agent
Implementing Agent
Private Land Purchase
Land Availability
Incentivise/guide
Open
Fair
Competitive
Value for Money
Cost-Benefit Study
Rates base
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Public-Private Contracting: Key Issues
Packaging of proposal calls – must be realistic and credible
Realistic Land Development/Land Availability Agreements
MFMA – Limits municipalities to 3 year funding commitment
Installation of infrastructure – municipality or developer Engineering Service Agreements
Bulk contribution policies
Proper cost/risk and benefit understanding and sharing Life-cycle approach
Land value creation and Built environment investment
Rates base
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Thank You
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