1. Dynamic models for understanding infrastructure and housing investments ACC Sustainable Human Settlements Citylab Urban Transformation: Challenges For Infrastructure & Housing Provision Nick Graham 30 th October 2012

2. Why use dynamic models? 1. To understand the multiple processes and variables that simultaneously affect housing supply and demand 2. To understand the interactions between housing, infrastructure, transport, space and money. 2 Example: eThekwini Housing Model Example: City Efficiency Costing Model

3. 3 eThekwini Housing Model

4. Supply and demand in the housing market at city scale 4 Demographic growth Economic growth Household fragmentation Policy Funding Survival strategies / Market forces

5. 5 Dynamic housing model DEMAND SUPPLY AFFORDABILITY Housing stock status quo Demographics Demographic and economic growth scenarios: MSFM projections User-defined Uniform Delivery programme Delivery scenarios: Unconstrained Match programme to funding Eliminate backlog Static delivery Capital funding Funding scenarios: Constrained Unconstrained Input dataScenario dataOutputs Housing dynamic Funding shortfall

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10. Dynamic model: eThekwini 10

11. Learning Interventions need to be understood in the context of market distortion and general supply shortage Targets, budgets and programmes do not tie up and are unrealistic. 11

12. City Efficiency Costing Model 12

13. 13 LAND SOCIAL SERVICESPREPARATORY WORK SERVICES TOP STRUCTURE Capital cost components

14. 14 Capital cost drivers PRIMARY DRIVERSECONDARY DRIVER LANDLOCATIONTYPOLOGY TOP STRUCTURETYPOLOGY BULK INFRA.LEVEL OF SERVICETYPOLOGY CONNECTOR INFRA.LOCATIONLEVEL OF SERVICE INTERNAL INFRA.LEVEL OF SERVICETYPOLOGY

15. 15 Capital cost drivers PRIMARY DRIVERSECONDARY DRIVER LANDLOCATIONTYPOLOGY TOP STRUCTURETYPOLOGY BULK INFRA.LEVEL OF SERVICETYPOLOGY CONNECTOR INFRA.LOCATIONLEVEL OF SERVICE INTERNAL INFRA.LEVEL OF SERVICETYPOLOGY

16. 16 Capital cost drivers PRIMARY DRIVERSECONDARY DRIVER LANDLOCATIONTYPOLOGY TOP STRUCTURETYPOLOGY BULK INFRA.LEVEL OF SERVICETYPOLOGY CONNECTOR INFRA.LOCATIONLEVEL OF SERVICE INTERNAL INFRA.LEVEL OF SERVICETYPOLOGY

17. 17 Poor locationGood location Location, land price and connector infrastructure

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19. 19 R145,000 R80/m2 Detached/3 storey R150,000 R125/m2 Detached/5 storey R165,000 R300/m2 3 storey/5 storey R180,000 R500/m2 Semi-detached/5 storey R126,000 R1000/m2

20. 20 Rust, K (2012) Perspectives on South Africa’s Affordable Housing Market: Current trends & issues Presentation available at: http://www.housingfinanceafrica.org/document/perspectives-on-south- africas-affordable-housing-market-current-trends-and-issues/ SUBSIDY MARKET FLISP MARKET NORMAL MARKET GAP MARKET

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22. 22 27% difference = R69 billion over 10 years

23. 23 Environmental impacts 22% difference

24. Learning There is no apparent capital financial incentive for the City or State to densify Capital costs are strongly driven by top structure costs and land costs, not by infrastructure costs Short-term capital decisions outweigh longer term operating cost savings The majority of the costs of urban sprawl and potential benefits of a compact city, are borne by households and the environment, and not by developers, the City or the State. 24

25. nick@pdg.co.za www.pdg.co.za Nick Graham 30 th October 2012