Inner City Transformation Programme

inner_city_johannesburg
Project box

Geographical area: Africa

Location: Johannesburg, South Africa

City size: XL (above 5,000,000 inhabitants)

Promoter: Municipality of Johannesburg, Metropolitan Government of Johannesburg and Provincial Government of Gauteng

Developer: Johannesburg Development Agency, Centrla Johannesburg Partnership and private developers

Start year:

End-year: In progress

Implementation phase: Implementation in progress

Project size: Neighborhood

Total area of intervention (in sqm): 18.000.000

Total investments (in USD): 1 billion

Project overview

The Johannesburg inner city regeneration project focused on revitalizing a central but declining urban area located in the southeastern section of the Johannesburg metropolitan area, spanning approximately 18,000,000 sqm. As the historic core of Johannesburg, the inner city was originally the site of mining camps in the late 19th century and later developed into the city’s commercial and residential hub. The area is strategically positioned as the economic heart of Johannesburg, contributing 21% to the overall metropolitan economy. The decline of Johannesburg’s inner city can be traced back to the early 1950s, when the city council and public institutions started to move out from the central district. The move of these authorities significantly reduced investments within the Inner City district, leading to an increasing development of decentralized areas compared to the central district. The decline of the inner city has been further exacerbated by apartheid-era policies, that led to spatial segregation and a higher economic disinvestment. The deterioration intensified during the 1980s and 1990s, marked by rising crime rates, out-migration of businesses, abandonment of buildings, and settlement of illegal tenants, which further contributed to the area's economic and social decline. To counteract these trends, the Johannesburg City Council initiated the first planning efforts in 1986, proposing the involvement of the private sector in the regeneration process. However, substantial progress began in the early 1990s when the Central Johannesburg Partnership, a non-profit organization representing business interests, was formed in 1992 to address urban blight and declining investment. In fact, during the apartheid period civil society institutions avoided to collaborate with the local government and city council, severely hindering the first regeneration efforts. The Central Johannesburg Partnership has been established as a non-profit organization mainly composed of private property owners, with the objective to facilitate the implementation of programs to revitalize the neighborhood and to represent the interests of Inner City businesses. In order to represent the community’ interests in the urban regeneration efforts planned, the Johannesburg Inner City Community forum was established in 1996. In the same year, the Johannesburg Inner City Development Forum was created to formulate a broad and inclusive vision for the Inner City regeneration, gathering inputs from businesses, residents, the Metropolitan Government of Johannesburg and the Provincial Government of Gauteng. The coalition developed the Johannesburg: The Golden Heartbeat of Africa vision, which emphasized and envisioned the redevelopment of infrastructures, significant environmental upgrades, reduction of crime and traffic congestion, provision of housing units and the improvement of public services. In parallel to the coalition, the Provincial Government of Gauteng moved its headquarters from Pretoria to the central district of Johannesburg and developed an intervention plan to revitalize the Inner City districts of several South African cities. The Metropolitan Government of Johannesburg established the Johannesburg Development Agency, formerly created as the Inner City Office, which is the entity responsible for the coordination and implementation of urban regeneration projects in the Inner City district. The renovation of the Inner City district started with the improvement and provision of new public spaces and the upgrades of public infrastructures by the Johannesburg Development Agency together with different private sector companies. Later, private developers and building owners started the renovation and construction of new buildings within the Inner City district, significantly improving housing conditions and providing new housing options for the residents. The Trust for Urban Housing Foundation provided financing to create new social housing units, while the Affordable Housing Company directly developed social and affordable housing buildings. To further boost the renovation of residential buildings, the Municipality of Johannesburg implemented the Better Buildings Program, where the Johannesburg Property Company expropriated and sold derelict, overcrowded and indebted buildings to private developer for renovation. Together with residential and infrastructure development, the established of the City Improvement District improved public services in the Inner City district, increasing safety through security cameras and security agencies, providing street maintenance and cleaning service, and improving facilities for informal traders. The vision for the Johannesburg inner city regeneration project was to transform the area into a vibrant, inclusive, and economically viable urban center. The initiative aimed to create a livable environment with a balanced mix of residential, commercial, and public spaces, addressing both the economic and social challenges that had plagued the Inner City for decades. The economic impact of the project was substantial, with significant private investment stimulated by public sector initiatives and tax incentives, leading to increased property values and rental incomes. In addition, the project focused on improving housing conditions and reducing crime, making the inner city more attractive to residents and businesses alike. Lastly, the project emphasized the development of public spaces and the integration of green infrastructure, contributing to a more sustainable urban landscape and a more livable environment for the Inner City residents.

The Inner City Transformation Programme involved the transformation of a vast area of the city involving different building types and classes. The project mainly focused on the creation of new residential buildings and affordable housing units. In addition, the initiative provided the neighborhood with new commercial spaces to attract businesses and commercial activities in the central district. Lastly, the regeneration programme ensured the implementation of open and public spaces, including parks, squares, pedestrian zones and open spaces.

Benefits

The regeneration efforts substantially boosted economic activities within the inner city, reducing property vacancy rates from 40% in 2003 to 17% in 2008. Public investment by the Johannesburg Development Agency successfully leveraged private sector investments at varying ratios across different areas, with an important leverage ratio of 1:19 between public and private investments in all the districts involved in the regeneration project. The introduction of Urban Development Zone tax incentives further stimulated private investment for buildings construction and refurbishment, leading to the creation of around 65,000 construction-related jobs. These efforts not only attracted investments but also significantly increased property values and rental incomes, which increased sharply during the duration of the initiative.

The project focused on improving the urban landscape through the development of public spaces, greenways, and the inclusion of public art, contributing to a more aesthetically pleasing and sustainable urban environment. The Inner City Regeneration Charter set a target for at least 5% of the Inner City to be developed as quality public spaces, encouraging social cohesion and enhancing the city's green infrastructure. These efforts were further complemented by City Improvement Districts, which improved urban management, including waste management and the maintenance of public spaces, contributing to a cleaner and more sustainable urban environment.

The regeneration project sought to address historical inequalities and improve the living conditions within the Inner City. Initiatives such as the Better Buildings Program and housing provisions by the Trust for Urban Housing Foundation and the Affordable Housing Company aimed to provide affordable housing and improve the quality of life for residents. The establishment of City Improvement Districts helped enhance safety and security, reducing crime rates by up to 80% in certain areas, thereby making the Inner City more livable and attracting a diverse population back into the area.

The regeneration initiative of the Johannesburg Inner City did not receive any certification.

Finance model

The Inner City Transformation programme received funding from both public and private sources. From the public side, the major funding source is the Johannesburg Development Agency, funded by the Municipality of Johannesburg, the National Treasury and the Department of Public Works. In addition, the regeneration project benefitted from private funding from the Trust for Urban Housing Foundation the Johannesburg Property Company to finance new social housing units. The Inner City regeneration project also employed private funding from private developers, building owners and homeowners to fund their redevelopment projects. Between private investments and public funding, the total cost of the project is around USD 1 billion.

The regeneration of Johannesburg’s Inner City was financed by a combination of various financing instruments. The Johannesburg Development Agency is mainly funded using grants and inter-governmental transfers from the Municipality of Johannesburg, the National Treasury and the Department of Public Works. In addition, the Johannesburg Development Agency requires a 5% fee on all the projects conducted by private developers and building owners in the Inner City district. From the private side, developers, building owners and homeowners mainly employed private resources to finance their redevelopment or new construction projects. In addition, private entities employed loans provided by the Trust for Urban Housing Foundation to conduct social housing development, together with the South African National Housing Finance. Through the City Improvement Districts, businesses, homeowners and property owners contributed with private resources to finance the management and implementation of public services for the local community. The City Improvement District is a private-led initiative where businesses, residents and property owners provide resources to fund public services such as street cleaning and maintenance, the installation of safety systems and garbage collection. To further attract private resources in conducting redevelopment projects in the Inner City district, the Ministry of Finance introduced the Urban Development Zone Tax Incentive. The program introduced a tax-based incentive for constructions and building renovations in specific urban development areas defined by the Municipality. The incentive works as an accelerated depreciation benefit, meaning that building owners and private developers are allowed to deduct a higher cost during the initial years of the construction or renovation investments, thus significantly reducing their taxable income and tax liability. This tax-based incentive can be applied over a 5-year period in case of total or partial refurbishment of an existing building, or over a 17-year period in case of newly developed buildings. The new construction or refurbished buildings need to be located within the established urban development zone. The tax incentive is conceded following strict requirements on the type of building and renovation involved, on the continuous use of the building for the purpose of trade and on the ownership status of the building.

References and Credits

Amirtahmasebi, R., Orloff, M., Wahba, S., & Altman, A. (2016). Regenerating Urban Land: A Practitioner’s Guide to Leveraging Private Investment, World Bank Group, Washington DC. Available here.

Johannesburg Development Agency. Inner City Transformation Programme. Accessed on 29/08/2024. Available here.

National Treasury. Urban Renewal Tax Incentive - Guide for Investors – MFMA. Accessed on 05/11/2024. Available here.

Municipality of Johannesburg. Urban Development Zone. Accessed on 05/11/2024. Available here.

Image from misio, retrieved here. Used under Content License.