Transforming South Africa’s Affordable Housing Strategy for Sustainable Growth: The need for direction on urban densification and Informed Investment

• Government should focus on affordable housing in urban areas to stimulate economic growth and tackle spatial exclusion.
• Research is needed to understand housing demand, location, and long-term economic impacts for better public investment decisions.
• TUHF advocates urban densification to create local economic opportunities and sustainable growth through infill housing projects.

In his 2025 State of the Nation address, President Cyril Ramaphosa set a bold vision to address South Africa’s housing crisis by prioritizing the development of affordable housing in urban centres, reclaiming hijacked buildings, and transforming cityscapes into thriving economic hubs.

This forward-thinking approach aligns with TUHF’s longstanding commitment to fostering sustainable urban densification and affordable housing that not only provides shelter but stimulates economic growth and local job creation. However, for this vision to become reality, there is a clear need for more strategic, research-backed investment that redefines how South Africa develops its cities.

The path to economic inclusion through well-located Affordable Housing

Affordable housing is not merely about providing shelter—it is the foundation for economic transformation. As Paul Jackson, CEO of TUHF, explains, "Well-located housing in urban areas stimulates local economic growth, resulting in opportunities for businesses and ultimately creating jobs.

Housing, as part of the real economy, is crucial to transforming our cities and stimulating the growth President Ramaphosa wants to achieve." This recognition of housing’s critical role in urban economic ecosystems underscores the urgency of aligning housing development with broader economic strategies.

For decades, South Africa’s housing policies have largely followed a straightforward principle: build as many houses as possible, as affordably as possible, on the outskirts of cities. While well-intentioned, this strategy has often led to sprawling, low-density developments that are disconnected from economic activity centres. This trend of "urban sprawl" has not only resulted in inefficient land use but has also exacerbated social and economic exclusion, trapping residents in areas with limited access to employment opportunities and public services.

As Jackson succinctly puts it, "Cities are built the way they’re financed. When housing investment focuses on achieving the lowest possible upfront cost in the annual budget without accounting for fiscal and economic impacts in the longer term, urban sprawl is inevitable."

This pattern of peripheral development is the most costly and unsustainable way to address the housing crisis. It leaves local governments burdened with the long-term costs of infrastructure development and service delivery, all while the economic potential of these communities remains untapped.

The Economic and Fiscal Impact of Spatial Exclusion

A crucial element often overlooked in affordable housing development is the fiscal impact. While the initial cost of building on the outskirts may seem more manageable, Jackson points out the hidden costs: "When a housing development is built on the periphery of a city, new infrastructure—physical, social, and administrative—must follow. These additional investments are not accounted for in the financial accounting model."

Moreover, the people living in these areas remain economically isolated. With limited access to jobs, public transport, and essential services, they contribute little to local government revenue, further draining the fiscus. Jackson highlights the importance of understanding this dynamic: "Government cannot collect income from spatially excluded households, simply because of indigence. These costs must be carried by other parts of the tax base."

This financial burden calls for a shift in focus. Investing in low-density, peripheral housing is not only unsustainable; it is the most expensive and ineffective approach to solving the housing crisis. Jackson advocates for a broader perspective that considers the long-term fiscal sustainability of local governments, the economic viability of developments, and their ability to contribute to social inclusion and business growth.

A New Approach: Urban Densification for Inclusive Growth

The solution, according to Jackson and TUHF, lies in urban densification. Rather than sprawling developments on the outskirts, TUHF supports the revitalization of existing urban areas through "infill" projects—redeveloping underutilized or abandoned land and buildings within city centers. "A certain level of densification is necessary to stimulate social and economic action. Distant, low-density residential areas simply cannot support the small businesses and social opportunities that generate growth," Jackson asserts. By focusing on denser, more strategically located housing, cities can foster environments where economic and social activities thrive in proximity.

TUHF’s approach emphasises micro-economic growth, where the impact of each affordable housing project is felt at the local level.

“Inclusive growth is a micro-economic concept that can only be achieved one building, one block, and one community at a time,” Jackson explains.

This approach not only addresses spatial exclusion but also unlocks economic opportunities for individuals, enabling them to start businesses, access jobs, and contribute to the local economy.

The Way Forward: Research and Strategic Investment

For urban densification to truly succeed, research must guide development decisions. Jackson advocates for comprehensive, government-led research into the demand for different types of housing, the most effective locations for such developments, and the long-term fiscal and social impacts of these projects. "If you don’t know where you’re going, any road will get you there," Jackson warns, stressing the need for data-driven decision-making in housing policy.

This research must include demand analysis - understanding what people want and need in terms of housing. TUHF’s experience has shown that many people prefer smaller, well-located homes over larger, peripheral ones, as long as they offer access to economic opportunities.

The growth of informal settlements, despite their lack of basic services, further highlights the gap between what people need and what is being provided.

Moreover, Jackson underscores the importance of aligning housing development with broader environmental, social, and governance (ESG) guidelines. By focusing on infill projects that reuse existing infrastructure and materials, cities can create sustainable, eco-friendly housing that aligns with the broader goal of urban regeneration.

Conclusion: A Call to Action for Government and Investors

TUHF’s vision aligns with President Ramaphosa’s commitment to transforming South Africa’s cities into economic powerhouses. However, achieving this goal requires more than just funding for housing projects—it demands a commitment to research, strategic investment, and urban densification. As Jackson concludes, "Affordable housing developments must support urban densification and spatial inclusion if they are to support inclusive economic growth."

The way forward is clear: a shift towards well-located, higher-density affordable housing that fosters local economic growth, strengthens fiscal sustainability, and promotes social inclusion. Only through informed, thoughtful investment can South Africa create the vibrant, sustainable cities that will drive the nation's future.

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