Tel - SHRA

1STATE OF THE SOCIAL HOUSING SECTOR REPORT 2020

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CONTaCT iNfOrmaTiON

2 STATE OF THE SOCIAL HOUSING SECTOR REPORT 2020 3STATE OF THE SOCIAL HOUSING SECTOR REPORT 2020

Foreword by the minister 10

Foreword by the council chairperson 12

Foreword by the ceo 14

executive summary 16

1 introduction 23

2 social housing in south africa 23

2.1 Defining social housing in South Africa 232.2 Legislative and policy context 24

3 social housing Programme 26

3.1 Key features 263.2 Funding for Social Housing 273.2.1 Consolidated capital grant 283.2.2 Institutional investment grants 303.2.3 Private sector investment in social housing 313.3 The role of the SHRA 31

4 demand for social housing 32

4.1 Extent of social housing in South Africa’s housing market 324.2 Demand for social housing 33

5 overview of the social housing sector 35

5.1 Stakeholders in the sector and institutional arrangements 355.2 Size of the sector 375.3 Delivery typologies and unit types 38

6 Performance of the social housing sector 39

6.1 Units developed 396.1.1 Number of units developed 396.1.2 Type of units developed 466.1.3 Delivery agents 466.1.4 Location of units developed 476.1.5 Units under regulation 506.1.6 Quality of housing stock 516.2 Funds invested 526.3 Accreditation of social housing institutions/other development agencies 566.4 SHI/ODA performance 606.4.1 Portfolio growth 606.4.2 Vacancy rates and rent collection rates 62

6.4.3 Analysis of audited financial statements 2018/2019 666.4.4 Tenants 666.5 Restructuring zones 686.5.1 Number and application 686.5.2 Impact on urban regeneration 696.6 Capacity building 716.7 Sector transformation 716.8 Stakeholders views on operating in the sector 74

7 Focusing on the Future – social housing in the Next decade 77

7.1 Meeting the 30 000-unit target 777.2 Challenges facing the sector 787.2.1 Legislative and regulatory environment 787.2.2 Capacity in the sector 787.2.3 Funding and financial viability 797.2.4 Affordability of tenants 797.2.5 Development costs 797.2.6 Impact on integration and the restructuring of cities 797.2.7 Rent boycotts and political interference 807.2.8 Administrative delays 807.2.9 Potential loss of capacity in the construction sector 807.2.10 The SHRA pipeline 807.3 Opportunities for the sector 827.3.1 Sustainability of the social housing sector 827.3.2 National Infrastructure Investment Programme 827.3.3 High demand 827.3.4 Impact of social housing longitudinal studies 827.3.5 Transformation 827.3.6 Potential in the construction sector 827.4 Conclusions 82

8 references and data sources 84

8.1 Documents reviewed 848.2 Data sources 868.3 Interviews 87

9 appendices 88

9.1 Appendix A: Methodology 889.2 Appendix B: Overview of Relevant Legislation and Policy 899.2.1 Comprehensive Plan for the Development of Sustainable Human Settlements 899.2.2 Social Housing Act (Act No 16 of 2008) 899.2.3 Housing Code, 2009 919.2.4 National Development Plan, 2030 919.2.5 Medium-term Strategic Framework (2019 – 2024) 929.2.6 Integrated Urban Development Framework (2016) 92

CONTENTS


Figure 1: Legislative/policy timeline 24

Figure 2: Target market segmentation 28

Figure 3: Metropolitan areass: Percentage growth by sector 2011 to 2016 31

Figure 4: Overview of the key stakeholders in the social housing sector 33

Figure 5: Social housing projects and units developed (2005 to 2020) 35

Figure 6: Social and rental housing over time, 2005 to 2019 36

Figure 7: MTSFP 2014 to19 unit delivery by province 39

Figure 8: Overall share of rental subsidy units compared to the private market

by number of units, 2010 to 2019 39

Figure 9: Number of units approved and completed over the MTSF period 40

Figure 10: Delivery agent by type, 2005 to 2019 44

Figure 11: Cumulative growth in units under regulation over the 2014 to 2019 MTSF 48

Figure 12: Expenditure of the consolidated capital grant (R) - 2014/15 to 2019/20 50

Figure 13: Social Housing Investment Programme (SHIP) active projects (quick facts) 53

Figure 14: Accreditation status at end-March 2020 (Source: Annual report) 56

Figure 15: Location of residential subsidy programme units in relation to population growth 68

Figure 16: Expenditure of institutional investment grants (R), 2014 to 2019 69

Figure 17: Project pipeline 79

Table 1: Funding for social housing 26

Table 2: Typical cost structure of a social housing project 27

Table 3: Institutional investment grants 29

Table 4: Housing circumstances of households in South Africa (2016) 30

Table 5: Summary of roles and responsibilities of sector stakeholders 34

Table 6: Units completed per funding allocation over the MTSF 2014 to 2019 7

Table 7: Project pipeline at end-March 2020 41

Table 8: Unit typologies per project 44

Table 9: Project delivery 2005 to 2019 per location and type of delivery agent 46

Table 10: Units under regulation by delivery agent type 48

Table 11: Loan and equity investors in 28 projects in SHIP 5A – SHIP 10C 53

Table 12: Portfolio growth from Q4 2015 to Q4 2019 58

Table 13: Change in categories of entity size between 2015 and 2019 59

Table 14: Vacancies and rent collection rates Q4 2019 (at March 2020) 60

Table 15: Average monthly loss of income across the quarter as a result of vacancies 61

Table 16: Comparison of debtors >120 days Q4 2015 and Q4 2019 62

Table 17: Household type and gender of main leaseholder 64

Table 18: Age and gender of main leaseholders 65

Table 19: Race of main leaseholders 65

Table 20: Distribution of household income (at entry) 66

Table 21: IIG funds committed up to date at August 2020 69

Table 22: Achievement of transformation objectives 71

Table 23: Programme 3 resource considerations 71

Table 24: IIG recipients that are majority black owned or -controlled 71

TablE Of figurES liST Of TablES


aCrONymS

BBBee BROAD-BASED BLACK ECONOMIC EMPOWERMENT

cahF CENTRE FOR AFFORDABLE HOUSING FINANCE IN AFRICA

cBd CENTRAL BUSINESS DISTRICT

ccG CONSOLIDATED CAPITAL GRANT

ceo CHIEF EXECUTIVE OFFICER

cidB CONSTRUCTION INDUSTRy DEVELOPMENT BOARD

crU COMMUNITy RESIDENTIAL UNIT

dBsa DEVELOPMENT BANK OF SOUTHERN AFRICA

dFi DEVELOPMENT FINANCE INSTITUTION

ecdc EARLy CHILDHOOD DEVELOPMENT CENTRE

eKhc EKURHULENI HOUSING COMPANy

Fmhc FIRST METRO HOUSING COMPANy

GPF GAUTENG PARTNERSHIP FUND

hael HOUSING ASSOCIATION EAST LONDON

hda HOUSING DEVELOPMENT AGENCy

hsdG HUMAN SETTLEMENT DEVELOPMENT GRANT

iiG INSTITUTIONAL INVESTMENT GRANT

Joshco JOHANNESBURG SOCIAL HOUSING COMPANy

mha MADULAMMOHO HOUSING ASSOCIATION

moe MUNICIPAL-OWNED ENTITy

mTeF MEDIUM-TERM EXPENDITURE FRAMEWORK

mTsF MEDIUM-TERM STRATEGIC FRAMEWORK

Nasho NATIONAL ASSOCIATION OF SOCIAL HOUSING ORGANISATIONS

NeF NATIONAL EMPOWERMENT FUND

NhFc NATIONAL HOUSING FINANCE CORPORATION

oda OTHER DELIVERy AGENT

Prasa PASSENGER RAIL AGENCy OF SOUTH AFRICA

rcG RESTRUCTURING CAPITAL GRANT

rsP RESIDENTIAL SUBSIDy PROGRAMME

sahl SA HOMELOANS

sasihc SOUTH AFRICA SWEDISH INTERNATIONAL HOUSING COMPANy

sd&T SECTOR DEVELOPMENT AND TRANSFORMATION (PROGRAMME)

shi SOCIAL HOUSING INSTITUTION

shF SOCIAL HOUSING FOUNDATION

shiP SOCIAL HOUSING INVESTMENT PROGRAMME

shra SOCIAL HOUSING REGULATORy AUTHORITy

Thh THE HOUSING HUB

TUhF TRUST FOR URBAN HOUSING FINANCE

UsdG URBAN SETTLEMENT DEVELOPMENT GRANT


The State of the Social Housing Sector Report 2019/20 documents important strides in improving delivery of the Social Housing Programme, highlights challenges that remain, and identifies opportunities for progress and future growth of the sector.

During the year, social housing project progress was encouraging, with 13 projects completed, delivering 13 968 units. Although the target for the year was not met, it is a solid achievement. The importance of the Social Housing Programme in transforming South African society is acknowledged, with the President including it in the national Infrastructure Investment Programme list of supported infrastructure projects. This brings an opportunity to link financing to projects far quicker and potentially at a more attractive financing cost.

Demand for social housing remains high, with a call for 320 000 units nationally, comprising 235 000 units in metropolitan municipalities and 83 000 units in district municipalities. It is universally recognised that social housing is vital to improving peoples’ lives and uplifting communities.

The Social Housing Programme is also an instrument for transformation in the construction and property sectors as it targets procurement and informs broad-based black economic empowerment (BBBEE) sector codes. Proper policy and regulation needs to be institutionalised and monitoring tools developed to ensure that the process is tracked and amended if needed.

There is clear evidence that that the social housing sector has huge potential to grow and is an important delivery mechanism, as it not only provides affordable rentals to low-income households, but facilitates urban regeneration and sustainability of local municipalities.

Accordingly, the SHRA’s growth plan formulated during the year under review provides strong and clear direction for the way forward and for increasing substantially the number of units provided by the social housing sector. The plan calls for revisions to policy and the funding framework and for processes to administer social housing.

As Chairperson of the Social Housing Regulatory Authority (SHRA, I welcome publication of the State of the Social Housing Sector Report. I would like to thank the SHRA team and sector stakeholders who willingly contributed to the development of this report.

__________________________________________________

Bathabile dlamini SHRA Council Chairperson

The State of the Social Housing Sector Report 2019/20 documents a period of positive change and renewal in the social housing sector. The report demonstrates a clear increase in the number of projects underway.

In line with the Medium-term Strategic Framework (MTSF) 2019 to 2024 five-year target to deliver 30 000 social housing units, the SHRA has developed an ambitious social housing programme growth plan that will double the production rate for social housing in the 2020/21 to 2024/25 term compared with the 2015/16 to 2019/20 period and triple it in the 2025/26 to 2029/30 period, thus adding a further 87 500 affordable-rental housing units and growing the social housing portfolio in the country to 125 000 units.

The growth plan proposes progressive budget reform and that the established construction sector be pulled in through proactive invitations to participate in authentic empowerment deals. This is very important because the established construction sector has much valuable expertise and experience to support transformation, deliver at pace, and create and maintain jobs.

Key policy reform measures are proposed to enhance sector efficiency and to realise the envisaged increased delivery. The intention is to adopt a bold expenditure-driven policy that establishes social housing as a strong and reliable contributor to infrastructure spending and job creation. This is crucial given the economic and social consequences of the Covid-19 pandemic.

The growth plan framework proposes an approach where the National Housing Finance Corporation (NHFC), the SHRA, the Housing Development Agency (HDA) and others are components of a system and where targets and timeframes among public entities are mutually reinforcing and equally urgent.

The growth plan framework proposes an approach where the National Housing Finance Corporation (NHFC), the SHRA, the Housing Development Agency (HDA) and others are components of a system and where targets and timeframes among public entities are mutually reinforcing and equally urgent.

The SHRA will direct its capacity and resources primarily at solving problems, achieving results and innovating through a sharper interventionist approach that leads and is supported by the existing huge administrative capacity. The intention is to actively eradicate waste, leakage, inefficiency, bribery, corruption, extortion and inefficiency.

The SHRA is excited to move forward with all social housing stakeholders. It is our belief that together we can and will implement the growth plan and achieve, even exceed, the targets set.

__________________________________________________

mpolai NkopaneActing Chief Executive Officer

fOrEwOrd by ThE CEOfOrEwOrd by ThE ChairPErSON


introduction

In accordance with key requirements of the Social Housing Act, this annual State of the Social Housing Sector Report provides an overview of the current state of the sector, including the demand to date for social housing, the profile and performance of the sector, the current state of transformation in the sector, and the successes, challenges, opportunities and developments facing the sector. It also presents the plans and initiatives of the SHRA and the sector to support the development of the Social Housing Programme, policy and the sector in partnership with all key role-players. This report is for the 2020 calendar year.

social housing in south africa

The Social Housing Act, 2008 (Act No 16 of 2008) defines social housing as: ‘A rental or co-operative housing option for low to medium income households at a level of scale and built form which requires institutionalised management, and which is provided by social housing institutions or other delivery agents in approved projects in designated restructuring zones, with the benefit of public funding.’ (Social Housing Act, 2008, p8 (b))

Primary legislative and policy documents and initiatives that define social housing in South Africa include the Constitution of South Africa, 1996 (Act No 108 of 1996), the Housing Act, 1997 (Act No 107 of 1997, as amended in 2001), the Social Housing Policy, 2005 and the Social Housing Act (Act No 16 of 2008).

social housing Programme

The Social Housing Act governs the implementation, funding and regulation of social housing in South Africa. As a policy instrument, the primary purposes of social housing are urban restructuring and regeneration, and increasing the supply of rental housing in good locations for low- to moderate-income earners.

Social housing projects are developed and managed predominantly by SHIs. SHIs are intended to be sustainable cooperatively-, privately- or municipal-owned entities (MOEs) operating for profit or not-for-profit over a long period. The policy also enables private sector for-profit entities termed other development agencies (ODAs) to develop and manage social housing projects.

In addition to residential accommodation, social housing estates can incorporate other facilities and services. These provide community development incentives and empowerment benefits and promote a lifestyle conducive to community cohesion.

Social housing is delivered under the jurisdiction of the SHRA and must be developed within restructuring zones. The SHRA is a juristic person whose core functions are to regulate SHIs and projects, and to invest in capital projects and institutional development.

A government grant enables access to the housing stock provided by low-income households. The focus is on funding projects rather than units, which allows for a holistic approach to lifecycle costing and long-term perspective required for social housing projects. Public sector funding for social housing comprises three components:

1. Funding for social housing projects through the Consolidated Capital Grant (CCG).2. Funding for SHIs through the Institutional Investment Grant (IIG).3. Funding for the operations of the SHRA, which is mandated to oversee the social housing sector.

A total of R4,3 billion has been allocated for social housing over the five-year MTEF period. This is expected to deliver 30 000 social housing units.

The CCG of R723 706 million is only 2.2% of the human settlements capital budget for the 2019/20 year (the budget is R32 752 billion). Of this, 57% (R18,779 billion) was allocated to the human settlement development grant (HSDG) and 37% (R12 045 billion) to the urban settlement development grant (USDG). The SHRA is currently motivating for an increase in its allocation, as it believes the current allocation is insufficient for 30 000 units. The current Social Housing Act and Regulations do not allow the SHRA to borrow or leverage its current capital allocation.

demand for social housing

Based on data from the 2016 Community Survey (StatsSA), social housing is 0.5% of the housing sector, about 76 617 units. Most social housing units are in metropolitan areas, where social housing is 1% of the sector.

The size of the formal rental segment in which social housing falls decreased -5% from 2011 to 2016. The highest growth was in backyard formal rental (16%) and backyard informal rental (5%). Formal owned grew by 8%.

Despite this, SHRA independent research in 2016/17 the SHRA established that the demand for social housing was about 320 000 units nationally, comprising 235 000 units in metropolitan municipalities and 83 000 units in district municipalities.

overview of the social housing sector

Since 2005, 135 projects were delivered through the Social Housing Programme, providing 33 241 units. A further 38 projects are in progress, which will bring the number of projects to 173, providing 52 683 units.

Of the 173 projects developed or in progress, 90 (52%) and 27 000 units (51%) are in Gauteng. Twenty-one projects (12%) and 6 000 units (11%) are in Eastern Cape. Cape Town has 17 projects (10%) and 6 000 units (11%) and KwaZulu-Natal, 21 projects (12%) and 7 500 units (14%). These four provinces account for 86% of projects.

Social housing units must be self-contained, which means that each unit must contain sleeping quarters, living/dining/kitchen areas and ablutions. No rooms with communal ablutions or other facilities are funded.

Units must be a minimum of 30m2, but the SHRA is looking to become more demand responsive. To this end, draft norms and standards were developed during 2020.

ExECuTivE Summary


Performance of the social housing sector

y Number of units: Between 2014/15 and 2018/19, 13 968 units were delivered. A further 3 010 were completed in 2019/20. The target for 2014 to 2019 was 27 003 units completed and for 2019/20 a further 4 871. SHRA achieved about 51% (13 968 units completed) of its target between 2014/15 and 2018/19 and 10% of the five-year (2019 to 2024) MTSF target of 30 000 units in 2019/20.

y Units developed: In 2019/20, 3 010 units were completed from 13 projects – 2 140 from nine projects in Gauteng, 452 from two projects in Eastern Cape, 114 from one project in Mpumalanga and 304 from one project in Western Cape.

Since 2014/15, the number of units approved has far exceeded the number completed - in 2019/20, for example, 4 816 units were approved and 3 010 developed. This can be attributable partly to difficulties in securing development funding institution or private funding and in obtaining planning approval.

From 2019, the SHRA started to cancel non-performing contracts and recover funds from grant recipients who failed to perform. It has also started a review of its compliance, accreditation and regulation framework, which seeks to strengthen its regulatory role and internal processes.

y Project pipeline: While the number of projects delivered in the 2019/20 was low, the SHRA pipeline at March 2020 consisted of 44 projects with a potential yield of 20 315 units. Of these project applications, 27 were from SHIs (11 117 units) and 22 from ODAs(9 198 units).

y Type of units developed: According to the tenancy audits consolidated baseline report for 2019/20, the most common type of units developed during the period were two-bedroom units (2 340 units or 63%) followed by one-bedroom units (703 units or 19%).

y Delivery agents: Fifty-six percent of units from 2005 to 2019 were by SHIs, 22% by ODAs and 21% by SHI MOEs.

y Location of units developed: Nearly 41 000 (78%) of the 52 683 units delivered are in the major metropolitan municipalities, with 15 000 (29%) in the City of Johannesburg alone. City of Cape Town recorded 5 923 units (11.2%), eThekwini 5 065 units (9.6%) and City of Tshwane 4 958 units (9.4%).

y Units under regulation: The number of units under regulation grew steadily from 20 447 at the beginning of the 2014 to 2019 MTSF period, to 36 305 at the end of the term, an increase of 15 858 at an average 3 172 a year. The number of units under regulation increased by a further 3 102 units to 39 407 as at end March 2020.At the end of the 2018/19 reporting period, 28 institutions were reporting. The majority were from SHIs and MOEs, accounting for 95% of the number of units under regulation at that time.

y Quality of housing stock: Rising construction costs force SHIs and ODAs to explore cheaper project typologies (e.g. communal/shared rooms) and lower quality standards. Average unit costs increased by an average of 11% a year between 2007/08 and 2013/14. Construction costs increased by about 39% between 2013 and 2017. In the meantime, inflation increased annually by 6.4% between April 2008 and March 2017. In the absence of inflation-based subsidy increases, some SHIs argue for more flexible standards (e.g. unit size) for the sector.Increasing operational efficiency and generating a surplus can undermine the social objectives of the SHI/ODA. Some SHIs are less financially efficient because they provide more social support services to tenants or do not outsource operational activities to third party agents. There is a tension between offering holistic support to tenants and having a narrow client-service provider relationship. SHIs and ODAs may deal differently with this tension, which could have significant impact on the reputation and impact of the sector. While non-profit SHIs may be more inclined to build strong relationships with their tenants and provide value-added services, ODAs tend to put commercial considerations first.Funds invested: Funds expended through the CCG rose from R36 million in 2014/15 to R1 203 million in 2019/20. The envisaged role of the private sector in capital financing of the sector this has not materialised to the extent expected as the current financial viability and structure of social housing projects does not attract private sector investment. Very few commercial banks or other private funders are willing to provide loans. Most debt finance was provided by DFIs, predominantly the National Housing Finance Corporation (NHFC) and the Gauteng Partnership Fund (GPF). The latter is no longer providing finance and the NHFC limits the number of SHIs it funds, which does not accommodate the SHRA’s 30 000-unit target. The current Social Housing Act and Regulations do not allow the SHRA to borrow or leverage its current capital allocation.

While private sector involvement has been minimal, it has slowly increased over the past five years. Several factors have curbed private investment:

y Investment decision makers do not have a thorough understanding of social housing and how to achieve the returns they require.

y Some investors are concerned that they cannot protect their investment by default by holding a bond over the property, which they consider a necessary last resort.

y The concern that as social housing is linked to government, it is more susceptible to political pressure that could negatively affect financial sustainability of projects. This is exacerbated by increasing numbers of organised rental boycotts in the sector.

y Private investors, including ODAs, need greater clarity on the terms and conditions for equity withdrawal to properly calculate their likely returns.

y Investors consider many of the newer, less-experienced SHIs high risk as they have no proven track record of delivery and lack business development support while they gain the necessary experience and expertise.

y Investment requires participation in what is considered a very bureaucratic approach to project approval and contracting.


y Accreditation of SHI/ODAs: For 2019/20, 107 SHIs/ODAs and MOEs were conditionally or fully accredited. Only 42% (38) of the conditionally accredited SHIs had projects in the pipeline or under construction. The other institutions are yet to record projects with the SHRA. The SHRA needs to review its accreditation policies so that credible SHIs can deliver units timeously.

y Portfolio growth over time: Only five SHIs, one MOE and one ODA showed reasonable growth in numbers (150+ a year). Eight delivery agents established more than 20 years ago did not increase their numbers under management between year of establishment and Q4 2015, and seven of those showed no increase between 2015 and 2019 either. In 2015, four entities were managing more than 2 000 units, and by 2019, that number had not changed. An additional four, however, had shown an increase. Two of the SHIs showed a decrease in numbers. There was only a small increase in the numbers of entities that have moved up in size category over the period, which reflects very slow portfolio growth.

y Vacancy rates and rent collection rates: The SHRA benchmark for vacancies is less than 2% and for rent collection greater than 95%. Only seven (24%) of the entities with units under regulation achieved the vacancies benchmark and only four (14%) achieved the benchmark rental collection. At these levels, most delivery agents, especially MOEs, cannot remain sustainable unless conditions improve substantially. With a few notable exceptions where well-performing entities have seen a decrease in losses from 2015 to 2019, most have experienced increased losses through vacancies. For some, the increases have been extremely high.

y Financial performance: The SHRA analysed the audited financial statements of 20 SHIs and MOEs and determined that the profitability of the sector deteriorated between 2018 and 2019. Only three of the SHIs maintain ring-fenced maintenance reserves. Although all three increased their reserves from 2018 to 2019, older refurbished buildings form a significant part of their portfolios, and the reserves are not sufficient to cover anticipated capital refurbishments in the medium term.

y Restructuring zones: In 2019, there were 46 restructuring zone municipalities and 236 gazetted restructuring zones. Thirty-one (67%) of these municipalities had no social housing delivery, none planned and no delivery pipeline. Furthermore, fewer than 20% of the gazetted restructuring zones had delivered social housing. The restructuring zone assessment of 2017 recommended that, in the short term, the SHRA should strengthen the criteria and oversight for zone approval, with zones being phased out in the medium- to long term and social housing projects evaluated against strong performance criteria.

y Sector transformation: The SHRA strongly believes in sector transformation and having a diverse and expanded pool of transformed delivery agents that mature and progress from conditionally accredited to fully accredited institutions. Sixty percent of these are to be BBBEE owned and -controlled companies as defined in the BBBEE Act. The SHRA’s sector development and transformation (SD&T) programme had an allocation for this financial year of R22 428 000. Key initiatives undertaken include:

y Annual training. In 2019/20, training focused on an introduction to social housing, project packaging, corporate governance, client services and risk management.

y Awareness sessions that target designated groups such as women. y An incubation project initiated during the first quarter of 2020/21. Seven newly accredited

institutions will be incubated over several years, their first target to have a social housing project on the registered SHRA pipeline. ore participants will be enrolled in the next financial year.

y Involvement with the Property Sector Charter Council so that social housing is included in the amended property sector codes, entrenching in the scorecard female involvement in the property sector.

y The transformation charter developed by the National Association of Social Housing Organisations (NASHO) and the SHRA is a statement of intent by NASHO members on how they will help achieve employment equity and BBBEE transformation objectives. The charter provides a scorecard for NASHO members1. Transformation has been embedded in the 2019/20 SHRA Annual Performance Plan - 11 of the 30 indicators pertain to transformation and two of relate to operational and capital budget awarded to women, youth, people with disabilities and military veterans. The SHRA has achieved both these targets for the past financial year.

1 NASHO, 2019


Focusing on the future - meeting the 30 000-unit target

The MTSF 2019 to 2024 specifies delivery of 30 000 social housing units. The SHRA’s ambitious Social Housing Programme Growth Plan will double the production rate for social housing in 2020/21 to 2024/25 compared with 2015/16 to 2019/20 and triple it from 2025/26 to 2029/30. This will add a further 87 500 affordable rental housing units and grow the size of the social housing portfolio in the country to 125 000.

In this growth plan, the SHRA argues that during 2019/20, the human settlements budget for capital expenditure was reduced to R32.752 billion. Of this, only R723.706 million, or 2,2% was allocated to social housing units. The HSDG budget soaked up the lion’s share of the capital budget (R18.779 billion or 57%); and the USDG budget was awarded R12.045 billion or 36.7%. Given a housing backlog of 2.3 million units and social housing unit demand of 320 000 units, the social housing share of the capital budget should be about 14% (R4.5 billion in 2019/20 budgeting terms).

At current cost and excluding escalations linked to building inflation, 87 500 state-subsidised social housing units would require a grant injection of R23.7 billion. This equates to 7.2% of the human settlements capital budget over the same period if the current year’s allocation of R32.7 billion is straight-lined.

The growth plan proposes the following:

1. Reform the budget by progressively growing the proportion of invested in social housing to a greater share (at least 7.5%) of the overall human settlements vote. A multiyear budgeting process against public sector budgeting should be considered, with the use of surpluses and other funding sources.

2. Pull in the established construction sector through proactive invitations to participate in authentic empowerment deals. This sector has much valuable expertise and experience to support the transformation drive, deliver at pace, and create and maintain jobs.

3. Approve a shortlist of essential policy reforms, including policy reforms that stipulate what is built and that lighten the regulatory burden and bureaucratic risks that accompany where to build. Essentially, the minimum norms and standards must accommodate more smaller but higher-density units and the rules governing how restructuring zones are gazetted should be revised to speed up the process.

4. Adopt a bolder expenditure-driven policy so that human settlements and social housing are seen as a strong and reliable contributor to infrastructure spending and job creation.

5. Sequence, align and make coherent the planning targets and key driving accountabilities and mandates of public entities. The growth plan framework proposes a system approach, where NHFC, the SHRA, and the Housing Development Agency (HDA) and others are only components of an overall system, and that targets and timeframes among public entities are mutually reinforcing and equally urgent.

6. Position the best capacity in the best places and concentrate to deliver the most important results. The SHRA needs to use its capacity and resources to solve problems, and achieve results and innovation. Administrative capacity must be relied on to support this leadership approach. Sound administrative processes alone are not enough, as they are a maintenance function. What is needed is sharper interventionist thinking and leadership thinking that is not drowned out by administrative-compliance thinking.

7. Actively manage waste, leakage, inefficiency, bribery, corruption, extortion and inefficiency so that perverse incentives are identified and managed and so that there is less leakage and less public money not being used effectively.

8. A medium- to high-density sectional title ownership programme needs to be considered, not inside the affordable rental housing programme, where ‘rent to buy’ will confuse and make the rental programme unsustainable by introducing unintended risks, but alongside affordable rental houses.


1 iNTrOduCTiON

The SHRA was established in August 2010 by the Minister of Human Settlements in terms of the Social Housing Act 16 of 2008. Section 11(1) of the Act requires that the SHRA:

y Promote the development and awareness of social housing. y Provide advice and support to the (National) Department in its development of policy for the

social housing sector and facilitate national social housing programmes. y Advise the Minister on developments in the social housing sector. y Promote an enabling environment for the growth and development of the social housing sector. y Provide best practice information and research on the status of the social housing sector.

In accordance with the above requirements of the Social Housing Act, the annual State of the Social Housing Sector Report provides an overview of:

y The current state of the sector, including the demand to date for social housing. y The profile and performance of the sector. y The current state of transformation in the sector. y The successes, challenges, opportunities and developments facing the sector. y The plans and initiatives of the SHRA and the sector to support the future development of the

social housing programme, policy, and the sector in partnership with all key role players.

The current sector report is for the 2020 calendar year and sets out in Section 2 an overview of social housing in South Africa, including a definition of social housing and the legislative and policy context. Section 3 provides an overview of the Social Housing Programme and Section 4 details the demand for social housing. Section 5 focuses on the social housing sector and Section 6 details sector performance during the year under review. Section 7 looks at the future.

The methodology applied in formulating this report is set out in Annexure 9.1.


2 SOCial hOuSiNg iN SOuTh afriCa

2.1 defining social housing in south africa

The Social Housing Act, 2008 (Act No 16 of 2008) defines social housing as:

‘A rental or co-operative housing option for low to medium income households at a level of scale and built form which requires institutionalised management, and which is provided by social housing institutions or other delivery agents in approved projects in designated restructuring zones, with the benefit of public funding.” (Social Housing Act, 2008, p8 [b])

Social housing is, therefore, rental or cooperative accommodation held by SHIs over a long period. It excludes individual ownership by residents, including deferred ownership arrangements such as ‘rent to buy’.

Under the current policy directives, the term ‘low to medium income household’ refers to a monthly household income of between R1 500 and R15 000. Within this broad affordability band, SHIs can target a diverse resident population, including households from different income categories. Institutions can also focus on meeting special needs of a particular population, such as the elderly, the disabled or single-parent families.

Social housing projects include high-rise, medium-rise (walk-up) and low-rise (single-storey) housing located on contiguous sites or scattered across urban areas. Generally, social housing estates consist of medium- to higher-density projects (60 to 200 units per hectare) usually in two- to four-storey walk-ups (no lifts) or increasingly, as land becomes scarcer and more expensive, in medium- to high-rise tower blocks with lifts (eight to 13 storeys or more) in inner-city areas. Social housing schemes can also include mixed-use developments with residential, retail, commercial, recreational and even light industrial components.

2.2 legislative and policy context

Social housing in South Africa is defined by key legislative and policy documents/initiatives such as the Constitution of South Africa, 1996 (Act No 108 of 1996), the Housing Act, 1997 (Act No 107 of 1997, as amended in 2001), the Social Housing Policy, 2005 and the Social Housing Act (Act No 16 of 2008) (see Appendix 9.2 for an overview of legislation and policy).

Section 26 of the Constitution (1966) states that all South Africans have the right to ‘access to adequate housing’ and that it is the government’s duty to take reasonable legislative and other measures, within available resources, to achieve this.

The Housing Act (1997) sets out general principles for housing development to which national, provincial and local government must adhere. These include prioritisation of the needs of the poor, a wide choice of housing and tenure options (the Act does not prioritise one tenure option over another) that are economically and financially affordable and sustainable, and administered transparently and equitably and in an integrated manner that creates socially and economically viable communities.

Regulation of rental housing was initially provincial government, but became national. In 1997, the Gauteng Provincial Government introduced the Residential Landlord and Tenant Act (Act No 3 of 1997) to manage landlord and tenant relations in Gauteng. In 1999, the parameters of the Act were incorporated into national legislation, the Rental Housing Act (Act No 50 of 1999). This Act defines the responsibility of government for rental housing and creates mechanisms to ensure the rental housing market functions properly. It sets out the duties and responsibilities of both landlords and tenants, and provides for rental housing tribunals in provinces to provide speedy, cost-effective resolution of disputes between landlords and tenants.

In 2000, the Support Programme for Social Housing was established with a grant of R200 million from the European Community to the South Africa government. Its objective was ‘to support the establishment of a viable, sustainable social housing sector in South Africa, and to provide the basis for its future expansion’. It would contribute to the establishment of at least 60 sustainable housing organisations and ensure that 50% had achieved financial viability by December 2004. During the same period, the Social Housing Foundation (SHF) was established to develop institutional capacity in the sector.

The first National Housing Code (2001) introduced the government’s first rental subsidy (the institutional subsidy programme), which was the start of government’s rental housing programme. The subsidy was provided to legally established institutions that had identified a housing project to offer affordable rental or instalment sale housing units to beneficiaries.

The Comprehensive Plan for the Development of Sustainable Human Settlements (2004), popularly known as ‘Breaking New Ground’, was the first policy document that formally recognised and introduced social housing as a concept into South African policy. The document shifted government’s emphasis from provision of housing to creation of sustainable human settlements and promotion of more efficient cities, towns and regions. Through Breaking New Ground, the strong focus on ownership that had characterised housing policy began to change, with an increasing recognition of rental housing, particularly social housing. In support of spatial restructuring, the plan highlights the need to ‘integrate previously excluded groups into the city and the benefits it offers’. The plan flags the need for densification, including ‘housing products which provide adequate shelter to households whilst simultaneously enhancing flexibility and mobility’. The then-recently renamed National Department of Human Settlements developed seven business plans to address its new focus on housing delivery and, for the first time. these plans included the social and rental housing sectors.

Between 2000 and 2003, consensus was obtained about a policy and legislative framework to regulate and support the social housing sector. By end-2003, stakeholders better understood the challenges in establishing SHIs and developing and managing social housing stock.

In 2004, a Social Housing Programme-coordinating structure – the National Social Housing Task Team - was established, which led to the publication in 2005 of a social housing policy for South Africa.

In 2016, the National Department of Human Settlements established the Interim Social Housing Programme (ISHP) with the SHF as interim fund manager. This pilot programme would eventually migrate to the SHRA when it was established.

The ISHP was piloted new subsidies for the social housing sector that would be project- rather than institution-focused and that would more rigorously assess social housing delivery projects upfront and manage disbursed funds on implementation. It was envisaged that ISHP lessons learnt would be used to gradually scale up delivery and provide robust tools to undertake project viability assessments before allocation of funds and project implementation.


In 2007, the Social Housing Bill was drafted, which was promulgated as the Social Housing Act (No 16 of 2008). The Act provides the regulatory framework for the social housing sector and governs how the sector is currently implemented, funded and regulated. The Act provides the environment for social housing to be a viable and substantial component of the housing sector in which the public sector is empowered to act and the private sector is confident to invest. Specifically, the Act provided the legislative framework for the following:

y To establish and promote a sustainable social housing environment. y To define the functions of national, provincial and local governments in social housing. y To provide for the establishment of the SHRA to promote, regulate and guide the investment of

public money in the social housing sector. y To provide the basis and govern the use of public money for social housing by delivery agents in

social housing projects. y To give statutory recognition to, and regulate, SHIs. y To provide for the creation of restructuring zones.

In 2010, in accordance with the Social Housing Act, the SHRA was established and took over implementation of the ISHP.

Since the promulgation of the Act, government has reinforced its commitment to social housing through national legislation and policy documents. The National Development Plan 2030 (2012) acknowledges the positive direction that human settlement policy has taken since the introduction of Breaking New Ground and endorses an emphasis on increased social housing delivery and inducements for affordable rental accommodation. The plan indicates that the shift should move from building single houses to supporting the development of various housing types with different tenure arrangements (including affordable rental and social housing). Mixed use development should be encouraged.

The MTSF 2019 to 2024 focuses on seven priorities of government. Its five-year target is to deliver 30 000 social housing units and 12 000 community residential units in priority development areas (PDAs).

The 2016 Integrated Urban Development Framework (IUDF), coordinated by the Department of Cooperative Governance and Traditional Affairs, seeks to foster a shared understanding across government and society about how best to manage urbanisation and achieve economic development, job creation and improved living conditions. The IUDF recognises the lack of sufficient social and rental housing for the lower end of the market, especially on well-located land with good access to socio-economic opportunities. It calls for increased investment in social housing.

Figure 1: Legislative/policy timeline

1996 The Constitution(108 of 1996) 1997Housing Act

(107 of 1997)

1998 Rental Housing Act(50) 1999Rental Housing Act

(50)

2000 Support Prog for Social Housing (2000) 2001Housing Code

(2001)

2003 Social Housing Policy(2003) 2004BNG Policy

(2004)

2006 Interim SocialHousing Prog(2006) 2008Social Housing Act

(16 of 2008)

2009 Revised Housing Code Published (2009) 2010SHRA (2010)

2012 National DevelopmentPlan, 2030 (2012) 2016Integrated Urban Development

Framework(2016)

2019 Medium Term Strategic Framework (2019 - 2024)


3 SOCial hOuSiNg PrOgrammE

3.1 Key features

As indicated above the Social Housing Act2 sets out the basis for social housing, whose primary purposes are urban restructuring, regeneration and sustainability, and the increased supply of rental housing in good locations for low- to moderate-income earners. South Africa’s Social Housing Policy aims to lead social, economic and spatial restructuring, integrating class and race, and creating access to economic opportunity for low- and medium-income households excluded from well-located and well-serviced living areas.

Social housing projects are developed and managed predominantly by SHIs - legal entities established to develop and/or managing social housing stock, which is owned by the institution. SHIs aim to be sustainable institutions that can be cooperatively-, privately- or MOEs, operating for-profit or not-for-profit over a long period.

An SHI must be a company registered under the Companies Act No 71 of 2008, or a cooperative registered under the Co-operatives Act No 14 of 2005, or any other form of institution acceptable to the SHRA. To qualify for public funding support, SHIs (whether public or private, for-profit or not-for-profit) must be accredited by the SHRA. The policy also enables private sector entities ODAs that are for-profit companies to develop and manage social housing projects.

In addition to residential accommodation, social housing estates can incorporate other facilities and services. These provide community development incentives and empowerment benefits and promote a lifestyle conducive to community cohesion. The SHI/ODA may provide social services (health, education and recreation), economic services (financial counselling and links to income-generation opportunities), and/or training and empowerment programmes, capacity building and job-creation. Special attention is dedicated to creating good public spaces around a social housing project.

2 This section adapted from Department of Human Settlements, Department of Planning, Monitoring and Evaluation. (2016). Impact and Implementation Evaluation of the Social Housing Programme. Pretoria, South Africa: Author Rebel Group Advisory South Africa

A government grant is provided to enable access to the housing stock provided by low-income households. The mechanism is focused on funding projects rather than units and allows for a holistic approach to lifecycle costing and the long-term perspective required for social housing projects. Project residents participate to a greater or lesser degree in the management of their living arrangements, usually through formally established structures such as a tenant committee.

Social housing must be delivered under the jurisdiction of the SHRA and developed within restructuring zones. The Social Housing Act defines a ‘restructuring zone’ as a geographic area identified for social housing by the municipality, in agreement with the provincial government. Restructuring zones are instruments in the restructuring of South African cities and are intended to improve integration (economic, racial and social). Restructuring should not entrench, enforce or in any way maintain the spatial status quo, but should overcome the social and economic disparities that typify South Africa’s urban spaces.

It is, thus, intimately linked to interventions in the land market, to either protect lower income (often black) people from displacement or bring lower income (often black) people into areas of economic and other opportunity from which they would otherwise be excluded. The logic of restructuring is different from the logic of urban regeneration and urban renewal but there are overlaps. Restructuring zones align with urban development zones, which are linked to planning processes such as the national spatial development framework, provincial growth and development strategies, provincial spatial development plans, and local authorities’ integrated development plans.


3.2 Funding for social housing

Public sector funding for social housing comprises three components:

1. Funding for projects through the CCG. 2. Funding for SHIs through the IIG.3. Funding for operations of the SHRA, which oversees the social housing sector.

The amounts allocated for each of these components in the MTEF are shown in the table below.3 As indicated, R4.3 billion has been allocated over the five-year MTEF period to deliver 30 000 social housing units.

The CCG of R723.706 million is only 2.2% of the human settlements capital budget of R32.752 billion for 2019/20. Of this, 57% (R18.779 billion) was allocated to the HSDG and 37% (R12.045 billion) to the USDG.4 The SHRA is currently motivating for an increase in its allocation as it feels that the current allocation is insufficient to deliver the 30,000 targets.5

Table 1: Funding for social housing

Source: SHRA Annual Performance Plan, 2020/21

3 SHRA Annual Performance Plan, 2020/214 SHRA, 17 and 20 February 2020. Social Housing Programme Growth Plan Framework5 SHRA, 17 and 20 February 2020. Social Housing Programme Growth Plan Framework

3.2.1 ccG

The SHRA administers the CCG.6 It includes the former restructuring capital grant and the institutional subsidy. The funds are provided to accredited projects, SHIs and private sector landlords (ODAs) in specified restructuring zones. Grant procedures are determined by the incomes of tenants accommodated in the buildings funded, and rentals charged.

To be accredited for funding, a project must be financially viable, fully and properly structured, with matching funding (debt and/or equity) secured. Approvals are based on project readiness for implementation. Financial viability is checked against key performance indicators specified by the SHRA. The project sponsor (either an SHI or ODA) should provide equity investment (from own savings or profits from ongoing enterprise) for the project, although, generally, SHIs are not required to fulfil this requirement.7

The CCG generally provides funding for about 60% to 70% of the cost for a low-rise social housing unit, and 49% for a high-rise unit. The remaining amount is equity from the SHI/ODA and a commercial bank or DFI loan. Given income band determinations, this places significant pressure on the feasibility of developments.8

The total grant quantum is determined on a project-by-project basis and depends on the affordability mix of the units. The standard grant quantum averages R271 867 a unit. Inflation-linked escalations are not applied annually to the grant quantum but are generally ad hoc.

The following apply:

y The standard grant quantum allocates a minimum of 30% of the units to the primary target market (households earning between R1 500 and R 5500 a month) to a maximum of 70%. The secondary target market (households earning between R5 501 and R 15 000 a month) occupies the remaining units. The standard grant quantum is applied across the development to achieve project feasibility.

y The variance to the standard grant quantum is based on the degree of allocation of units to the primary target market. The standard grant quantum increases by R1 549 per 1% allocation to primary beneficiaries over and above a minimum of 30% (up to a maximum of 70% of project units).

y Projects may include a higher proportion of the primary target market than the 70% maximum, but there is no increase in the total grant quantum.

y For social housing, the cost of acquiring land is included in the funding package of grant, equity and debt. Land donated by municipalities free of charge to SHIs, or sold at substantially lower than market prices, are considered municipal subsidies.

6 SHRA website and Crede Capital Partners, February 20207 Crede Capital Partners, February 20208 Gardner David, Lockwood Keith and Pienaar Jacus, December 2019

r million

Total

shra funding 2019/20 2020/21 2021/22 2022/23 2023/24

operational Grant 55 .201 58 .237 60 .939 63 .123 66 .910 304 .410

ccG 723 .706 725 .747 764 .646 791 .144 836 .613 3 .841 .856

iiG 21 .259 22 .428 23 .662 24 .764 26 .250 118 .363

regulation 10 .560 11 .141 12 .255 13 .481 14 .289 61 .726

Total funds 810 .726 817 .553 861 .502 892 .512 946 .062 4 .326 .355

PrimarymarKeT

y Income band R1 501 - R3 500 y Income band R3 501 - R5 500 y CCG parameters

deeP dowNmarKeT

y Income band R800 - R3 500 y CRU

secoNdarymarKeT

y Income band R5 501 - R7 700 y Income band R7 701 - R11 300 y Income band R11 301 - R15 000 y CCG parameters


SHIs generally do not provide equity, but ODAs must provide equity of 20%.

Table 2: Typical cost structure of a social housing project

capital cost R400 000

ccG R271 876

debt R128 124

monthly operational cost R1 350

Primary market 30% of tenants’ average rental R1 018

secondary market 70% structured average rental R3 640

end-user deposit 1 to 3 months

Formal lease Range of lease durations offered

Tenant training and social programmes Included in operational cost

land Subsidised or unsubsidised

Sources: SHRA website and Crede Capital Partners, February 2020. Review of current mechanisms for the social housing financing model report

Social housing projects are expected to deliver a post-grant internal rate of return of prime plus 4.5% over 20 years, and a minimum debt service cover ratio of 1.3. Generally, low-rise social housing developments are made viable through substantial contributions from municipalities, mainly in free or reduced-cost land, waivers/discounts on bulk services development contributions, town planning applications costs and building plan fees, and by applying the variations (geotech, topography etc) possible under the institutional subsidy component of the CCG. High-rise social housing projects receive the same benefits, but appear to work only when they form part of larger mixed use, mixed income development, with capital cross-subsidisation from the sale of for-profit market products such as sectional title apartments, shops and offices. Some such initiatives are underway in Cape Town and eThekwini, but it is too early to prove that the concept works.9

9 Gardner David, Lockwood Keith and Pienaar Jacus, December 2019

In June 2017, Ministers and Members of Executive Councils (MinMEC) resolved that the community residential units (CRU) programme should fund only redevelopment of hostels and bad buildings taken over by local or provincial government, and that all new-build CRU development, except where directly related to hostel redevelopment, should be placed under SHRA regulation. An SHRA study into this determined that the SHRA cannot regulate municipalities and provinces since they are spheres of government with their own constitutionally defined and autonomous functions. While the matter is being investigated further, there is a moratorium on the development of all new CRU stock.10

A summary of the target market segmentation through the CCG and CRU is shown below.

Figure 2: Target market segmentation

10 SHRA Strategic Plan, 2020/21- 2024/25


3.2.2 iiG

The IIG11 fall under the SD&T programme. They support and develop SHIs, ODAs, cooperatives and municipalities to create an enabling environment for growth, development and transformation of the social housing sector.

The following grants are provided:

y Project acquisition and feasibility grant: Financial support for preparing and obtaining approval for project proposals.

y Pre-accreditation grant: Financial support for preparing a proposal and submitting it for accreditation.

y General capacity-building grants: Demand-driven and programme-related grants to support the sector through the project pipeline.

y Staff gear-up grant: Financial support for tenanting and initial management of new projects. y Remedial action: Intervention proposed by compliance monitoring function.

The grants favour black economic enterprises, women and youth.

The table below outlines the purpose and amount of each grant.

Table 3: Institutional investment grants

Grant Purpose average grant quantum

Project acquisition and feasibility grant

Assist projects that have been accredited with outstanding conditions to access the CCG

Up to R500 000

Pre-accreditation grant Assist institutions to meet requirements to obtain full accreditation status and to assist institutions with their first projects

Training and skills development to the value of R100 000 in one financial year

General capacity-building grants

Assist institutions through professional knowledge and innovation development to ensure sustained sector development

R1 million

Staff gear-up grant Assist institutions managing projects with funds to cover operating costs as a project is completed and still undergoing tenanting

Up to R500 000

Remedial action Provide assistance and funding to non-compliant institutions to enable them to become compliant

Undefined

Source: SHRA, 2017. SD&T programme

11 SHRA website and SHRA, 2017. SD&T programme

3.2.3 Private sector investment in social housing

The private sector is not attracted to invest in social housing projects as the current financial viability and structure of projects casts doubt on the ability to generate cash flows to meet debt requirements. Consequently, very few commercial banks or other private sector funders are willing to provide loans. Most of the debt finance is provided by DFIs.12

These DFIs were the NHFC and the GPF, but the latter no longer provides such finance. The NHFC has been consolidated with the National Urban Reconstruction and Housing Agency and the Rural Housing Loan Fund into the Human Settlements Development Bank, which is now subject to the approval of the Human Settlements Development Bank Bill being processed by Cabinet. The NHFC limits the number of SHIs it funds, which does not accommodate the 30 000-unit target of the SHRA.13

The current Social Housing Act and Regulations do not allow the SHRA to borrow or leverage its current capital allocation.14

3.3 The role of the shra

The Social Housing Act established the SHRA as a juristic person to regulate SHIs and projects and to invest in capital projects and institutional development. The key functions of the SHRA are:

y Promote the development and awareness of social housing and an enabling environment for the growth and development of the sector.

y Provide advice and support to the Department of Human Settlements, Water and Sanitation in its development of policy for the sector and facilitate national programmes.

y Provide best practice information and research on the status of the sector. y Support provincial governments with the approval of project applications by SHIs and

assist, where requested, in designating restructuring zones. y Enter into agreements with provincial governments and the NHFC to ensure that

their implementation is coordinated. y Provide grants to SHIs to develop institutional capacity, gain accreditation as SHIs

and submit viable project applications. y Accredit institutions that meet the SHI accreditation criteria and maintain an SHI

register. y Monitor compliance through regular inspections and enforce compliance where

necessary; intervene in SHI maladministration. y Approve, administer and disburse the IIG and capital grants and obtain grant

applications through engagement with provincial governments and municipalities. y Make rules and regulations for the accreditation of SHIs and the disbursement of

government funds to them.

12 Crede Capital Partners, February 2020

13 ibid14 ibid


4 dEmaNd fOr SOCial hOuSiNg

4.1 extent of social housing in south africa’s housing market

The table below provides an overview of the housing sector in South Africa based on data from the 2016 Community Survey. Owned units comprises 50% of the sector, the majority of which are formal owned detached units and 2% sectional title units. Rental comprises 23% of the market, 15% of which is rented from private individuals either as a detached single stand or apartments, 2% public-sector-provided housing units on a single stand and 6% backyard rental (both formal and informal). Social housing is a very small component of the sector at 76 617 units (i.e. 0.5% of the market). Most social housing units are in metropolitan areas where they comprise 1% of the housing sector.

Table 4: Housing circumstances of households in South Africa (2016)

metropolitan areas

secondary cities

other urban areas

Non-urban areas

Total

Number % Number % Number % Number % Number %

Formal owned detached single stand

3 505 389 46 1 283 269 50 634 344 46 2 651 805 49 8 074 807 48

Formal owned apartment, townhouse, cluster, semi-detached

285 328 4 37 983 1 16 099 1 73 250 1 412 660 2

Formal rented detached on single stand – rented from private individual

909 431 12 355 007 14 202 606 15 631 311 12 2 098 355 12

Formal rented detached on single stand – rented from other (government)

172 283 2 46 109 2 29 774 2 57 913 1 306 079 2

Formal rented apartment, townhouse, cluster or semi-detached – private individual

340 293 5 60 313 2 33 303 2 48 551 1 482 460 3

Formal rented apartment, townhouse, cluster or semi-detached – rented from other (government, SHI)

58 500 1 7 940 - 6 175 - 4 002 - 76 617 0,5

Backyard rental formal 331 997 4 109 507 4 46 948 3 99 444 2 587 896 3

Backyard rental informal 311 073 4 97 343 4 34 420 3 52 287 1 495 123 3

Informal settlement 740 465 10 239 783 9 100 151 7 194 680 4 1 275 079 8

Traditional dwelling 70 784 1 44 746 2 113 164 8 952 051 18 1 180 745 7

Other 820 752 11 299 357 12 155 621 11 657 758 12 1 933 488 11

Total 7 546 295 100 2 581 356 100 1 372 606 100 5 423 052 100 16 923 309 100

Source: National Department of Human Settlements, Water and Sanitation, 2020

Form owned Formal rented, not in a backyard

Informal settlement

Backyard rental formal

Backyard rental informal

Traditional dwelling

Other

8% -5% 0% 16% 5% 0% 13%

metropolitan areas: Percentage growth by sector


The figure below sets out the growth of different sub-markets of the housing sector of metropolitan areas between the 2011 Census and the 2016 General Household Survey (StatsSA). Formal rental (not in a backyard) in social housing areas decreased in size by 5% over the period. Highest growth was in backyard formal rental (16%) and backyard informal rental (5%). Formal owned grew by 8%.

Figure 3: Metropolitan areas: Percentage growth by sector 2011 to 2016

Source: 2011 Census and 2016 Community Survey

4.2 demand for social housing

SHRA independent research in 2016/17 established that the national demand for social housing was about 320000 units, comprising 235 000 units in metropolitan municipalities and 83 000 units in district municipalities.15 Several factors influence demand:

1. Population growth: In the next 31 years, the South African population will grow by at least 30% or 17 million people, from around 58 million people in 2018, to around 75 million by 2050. The population will be primarily urban-based and at least 30 million (40%) are likely to be living below the minimum living level.16

2. Urbanisation: By 2030, almost three-quarters (71.3%) of South Africa’s population will live in urban areas, reaching nearly 80% by 2050. The IUDF indicates that this will have the greatest impact on metropolitan areas. The 40 million people living in urban areas will be mostly in Gauteng, eThekwini and Cape Town.17

3. Unemployment and poverty: South Africa’s unemployment rate by the end of Q2 2020 was estimated at 23.3% (about 4.3 million)18. High unemployment has been consistent over the last decade, which causes high levels of poverty and inequality. South Africa is known as one of the most unequal countries in the world, having reported a per-capita expenditure Gini coefficient of 0.6519 in 2015.

4. Affordability for ownership: Only 30% of South Africans can afford to buy a home costing more than R500 000, the average house price in low-income areas in 2017.20 Slow economic growth and, recently, the impact of Covid-19 recently have deepened the problem.

While the above factors contribute positively to demand for social housing, Covid-19 is a key negative factor, which, with the associated lockdown, has devastated the economy and recovery is expected to be slow. The country’s GDP fell by 16.4%21 from Q1 to Q2 2020. This is likely to impact on SHIs through increased vacancies and defaults on rentals.

15 SHRA State of the Social Housing Sector Report 2016 and Quarterly Report 2019/2016 Draft National Spatial Development Framework, 2018 17 Department of Cooperative Governance, Integrated Urban Development Framework, 201618 Stats SA, Mid-year population estimates (Statistical release P0302)19 Hundenborn et al (2018)20 FNB, 201721 Valodia

support organisations

Financiers delivery agents

Social HousingRegulatory Authority

Municipalities

Ministry of Finance

National Treasury

Parliament

Cabinet

Ministry of HumanSettlements

Department of HumanSettlements

ProvincialDepartments of Human

Settlements

Consolidated Capital Grant (CCG)Institutional Investment Grants (IIG)1

Key changes over last 5 years:

1. Institutional Subsidy (IS) flow shifted from provincial DoHS to SHRA and combined with former Restructuring Capital Grant (RCG).

2. Gauteng Partnership Fund (GPF) has exited this market

3. SHiFT has ceased to operate.

Social HousingInstitutions

National HousingFinance Corporation

Commercial Banks

Development Bankof South Africa

Private PropertyDevelopers

National Association of Social Housing Organisations3

2


5 OvErviEw Of ThE SOCial hOuSiNg SECTOr

5.1 stakeholders in the sector and institutional arrangements

Figure 4: Overview of the key stakeholders in the social housing sector22

22 This section adapted from Department of Human Settlements, Department of Planning, Monitoring and Evaluation, (2016). Impact and implementation evaluation of the Social Housing Programme. Pretoria, South Africa: Author Rebel Group Advisory South Africa


The key stakeholders making up the social housing sector include policymakers, sector regulators, delivery agents, f inanciers and support organisations (NASHO).The role of the key stakeholders is shown here.

Table 5: Summary of roles and responsibilities of sector stakeholders

stakeholder roles and responsibilities

National governmentOversight, legislation and regulation, ensuring compliance and funding frameworks

y Create and uphold an enabling environment for social housing by providing the legislative, regulatory, financial and policy framework for the delivery of social housing.

y Address issues that affect the growth, development or sustainability of the sector. y Institute and fund the Social Housing Programme. y Allocate funds from the department budgets for the operational costs and commitments of the SHRA.

y Determine norms and standards for provinces and municipalities. y Monitor the SHRA.

Provincial government (provincial steering committees)Planning for, resourcing and monitoring social housing investments

y Ensure fairness, equity and compliance with national and provincial social housing norms and standards.

y Ensure protection of consumers by creating awareness of consumers’ rights and obligations.

y Facilitate sustainability and growth of the social housing sector. y Identify and submit restructuring zones to the Minister. y Mediate in conflict between SHIs and municipalities, if required. y Monitor social housing projects for compliance with prescribed norms and standards.

y Endorse social housing projects

municipalitiesPlanning for, resourcing and initiating projects

y Encourage the development of new social housing stock and the upgrading of existing stock or the conversion of existing non-residential stock.

y Provide access to municipal rental stock, land and buildings for social housing development in designated restructuring zones and to municipal infrastructure and services for approved projects.

y Initiate and motivate the identification of restructuring zones. y For municipalities with assigned powers, approve, allocate and administer capital grants for approved projects.

The shraSector regulation and promotion, and investment coordination

y Register and accredit SHIs and projects. y Assist with the recommendation of restructuring zones. y Set rules and regulation for compliance and accreditation, and act on non-compliance.

y Regulate the investment of public funds in affordable rental housing projects. y Report on compliance of delivery agents and the sector.

stakeholder roles and responsibilities

NashoRepresent, campaign and lobby for members

y Representation and coordination for members (SHIs and ODAs). y Campaign and lobby for members. y Promote the social housing sector. y Support individual SHIs and ODAs y Promote capacity building in the sector from demand-side partnerships with other sector players.

y Promote joint procurement by SHIs where efficient. y Promote exchange of good practice among members.

National rental housing Task TeamCoordination and alignment

y Facilitate, coordinate, guide and manage the interface among all rental housing programmes to achieve greater alignment and coherence in policy, programmes, projects and research with government’s human settlement policies, development and performance objectives.

Financiers (NHFC, Development Bank of Southern Africa (DBSA), commercial lenders)

y Finance the development of social housing projects. y Provide debt funding.

shis y Comply with the criteria for accreditation. y Acquire, develop, manage, or develop and manage, approved social housing projects for low-income residents with the support of local authorities.

y Promote the creation of high-quality living environments for low-income residents. y Inform residents of their social housing rights and obligations. y Observe and operate within government policy on social housing. y Seek SHRA permission to sell any properties they own. y Seek SHRA permission for any merger or separation of SHIs/

odas/private sector Develop and manage social housing stock

y Provision of viable projects. y Land and services. y Property development services. y Property management services.

Tenants Rent social housing units from SHIs and ODAs, with rentals and terms and conditions based on income.

Source: Developed from Social Housing Policy and the Social Housing Act 16 of 2008


5.2 size of the sector

Since 2005, the Social Housing Programme has delivered 135 projects, providing 33 241 units. A further 38 projects are in progress, which will bring project numbers to 173m providing 52 683 units (see f igure below).

Figure 5: Social housing projects and units developed (2005 to 2020)

Source: Residential subsidy programme (RSP) stats updated project database 2020

Of the 173 projects developed or in progress, 90 (52%) are in Gauteng and 27 000 units (51%) have been developed in this province. Twenty-one projects (12%) and 6 000 units (11%) are in Eastern Cape, 17 projects (10%) and 6 000 units (11%) in Cape Town and 21 projects (12%) and 7 500 units (14%) in KwaZulu-Natal. These four provinces account for 86% of all projects.23

23 RSP stats updated project database 2020

The figure below shows the location of the projects developed since 2005. The highest delivery was in 2010 to 2014 (60 projects) and, also during this period, implementation became better distributed across South Africa.

Figure 6: Social and rental housing 2005 to 2019


5.3 delivery typologies and unit types

Various delivery typologies apply when developing social housing units, including :

y The SHI or ODA structures, develops and manages the units themselves, for example yeast City Housing (see box).

y The SHI or ODA partners with a developer and the SHI or ODA then buys the units and undertakes ongoing management, for example Imizi and Madulammoho (see box).

y The SHI or ODA structures the project and then outsources all aspects, including design, development and management, for example the Housing Hub (see box).

Social housing units must be self-contained, incorporating sleeping quarters, living/dining/kitchen areas and ablutions. No rooms sharing ablutions and other facilities are funded. Units must be a minimum of 30m2.

Unit sizes vary, influenced by factors such as the existing configuration, structural module and floor plate dimensions. The types of units are generally:

y Bachelor/studio unit comprising one room (living, dining, bedroom and kitchen together) with bathroom separate (about 30m2 to 35m2).

y One-bedroom unit comprising one room (living, dining and kitchen together) with bedroom and bathroom separate (about 33m2 to 38m2).

y Two-bedroom unit comprising living, dining and kitchen either together or separate, with two bedrooms and bathroom separate ( about 38m2 to 48m2).

y Three-bedroom unit (about 48m2 to 55m2).

While currently, a funded unit is restricted to 30m2, the SHRA is looking to become more demand responsive. Draft norms and standards addressing this were developed during 2020.


6 PErfOrmaNCE Of ThE SOCial hOuSiNg SECTOr

6.1 Units developed

6.1.1 Number of units developed

As indicated in the table below, 13 968 units were delivered between 2014/15 and 2018/19. A further 2 351 were delivered in 2019/20. The target for 2014 to 2019 was 27 003 units completed and tenanted and 4 871 more in 2019/20. The SHRA achieved 51% of its target (13 968 tenanted units) between 2014/15 and 2018/19 and 48% in 2019/20.

Delivery from projects funded in the early years of the Social Housing Programme (SHIP 2 and 3) accounted for half of the number of developed units (7 146), with delivery markedly slower in SHIP 4 to 9, apart from a small spike in SHIP 5.

Table 6: Units completed per funding allocation over the MTSF 2014 to 2019

shiP*

mTsF Period Total

2014/15 2015/16 2016/17 2017/18 2018/19 No. of Units % of Total

SHIP 2 1 557 1 181 67 - - 2 805 20%

SHIP 3 496 1 343 1 458 1 044 - 4 341 31%

SHIP 4 - 522 342 328 74 1 266 9%

SHIP 5 - 8 866 856 510 2 240 16%

SHIP 6 - - 303 205 133 641 5%

SHIP 7 - - 22 884 342 1 248 9%

SHIP 8 - - - 2-2 187 389 3%

SHIP 9 - - - - 1 038 1 038 7%

Total 2 053 3 054 3 058 3 519 2 284 13 968 100%

% of Totals 15% 22% 22% 25% 16% 100%

*SHIP = Social Housing Investment Programme

Source: State of the Social Housing Sector Report 2018/19 (unpublished)

case study: yeast city housing

yeast City Housing (yeast) was founded in 1997 as a non-profit company by the Tshwane Leadership Foundation and its eight partner churches. It was the first social housing company in the City of Tshwane and one of the first in South Africa. Its mandate is to ensure decent, affordable housing and to contribute to urban regeneration and social inclusion through well-managed social housing.

yeast started with a number of small social development projects, including Hofmeyr House (1998), comprising 56 communal housing units, Litakoemie (2000), with 31 communal housing units, and Burgers Park (2000), a mixed-use, mixed-income facility including offices, social services, a chapel, 16 separate housing units for families and 24 beds for special-needs housing (women at risk).

yeast’s largest project was Thembelihle Village, an upgrade of an existing building undertaken between 2014 and 2018. This mixed-use development includes a gym and training centre, 733 housing units (bachelor/one-bed/two-bed/three-bed units) and 11 commercial units. The units include three- to four-storey walk-up units and tower blocks. The project was a partnership of the SHRA, City of Tshwane, Department of Human Settlements, Gauteng Partnership Fund and the NHFC. It was the first residential development of its kind at such scale in the Pretoria central business district (CBD) and more than doubled yeast’s portfolio.

Another large project was Kopanong, undertaken in 2004, offering 62 apartments.

yeast’s housing portfolio currently stands at 1 261 units, but this will be increased through extensions to existing properties and acquisition of new properties. yeast’s aim is to have 5 000 units under management in the next four years.

yeast has a board of seven non-executives and a staff complement of 49.

yeast’s ability to reach scale is a result of:

y Strong local focus and community base through its church partners.

y An integrated approach to projects that includes social services, housing and commercial and has enabled cross-subsidisation, improved the viability of projects and enabled yeast to build its own equity.

y Growing organically, starting with small projects and then adding larger projects as experience grew.

y Obtaining grants and funding in the form of both land and access to buildings.

y A positive relationship with City of Tshwane y A strong and experienced management team.


The figure below shows provincial unit delivery between 2014/15 and 2018/19. As indicated, 64% of delivery was in Gauteng and KwaZulu-Natal. Units were developed in all provinces except for Limpopo and Northern Cape.

Figure 7: MTSF 2014 to 2019 unit delivery by province

Projects are not mutually exclusive, i.e. the same project can deliver units over many years.

Source: State of the Social Housing Sector Report 2018/19 (unpublished)

In 2019/20, 3 010 units were completed from 13 projects, with the following provincial breakdown:

y Gauteng: 2 140 (nine projects). y Easter Cape: 4 542 (two projects). y Mpumalanga: 114 (one project). y Western Cape: 304 (one project).

The f igure below shows the relative contribution of rental subsidy housing compared to non-subsidised units. The relative contribution of social housing compared to the larger market appears to be minimal.

Figure 8: Overall share of rental subsidy units compared to the private market by number of units, 2010 to 2019

Source: StatsSA P5041.3 Buildings Completed 2010 to 2019 and SHRA State of Social Housing Sector Report 2020

The figure above highlights the contribution of social housing to the overall housing plans approved and built, specifically flats and townhouse units, whose numbers equal those for social housing units. In 2010, the RSP contributed 40% of units produced. By 2019, the RSP contributed 8% of units produced. The RSP delivers on average 3 000 units a year. With the current MTSF target of 30 000 units by 2021, a major shift in approach is needed. This may be to the SHRA’s accreditation process or providing incentives to new SHIs with the capacity to deliver the 30 000 units with the assistance of equity financing, among other things.


Supply is insufficient, especially in the affordable segment. In 2019, 45 366 new housing units were delivered across the top 20 municipalities. In the same period, 56 610 new residential properties came onto the deeds registry, 55% of which were valued at less than R600 000 (US$34 865).24

While most South African households (81% in 2018) live in formal dwellings, many live in informal dwellings (13%) and 5% live in traditional dwellings. Urbanisation, including internal migration to Gauteng and Cape Town, has put increased pressure on housing supply in urban areas. In 2018, 17.9% of households in metropolitan areas lived in informal dwellings.25

The government’s housing programme has had a tremendous impact on housing supply: According to the General Household Survey (2018), 13.6% of households lived in state-subsidised housing.26 Since 1994, the government has delivered more than 4.7 million housing opportunities. In 2018/19, 2 284 social housing rental units were completed.27 Measures put in place by government to provide relief during the pandemic include the delivery of 8 000 housing units, built with alternative technologies.28

Figure 9: Number of units approved and completed over the MTSF period

Source: State of the Social Housing Sector Report 2018/19

24 Centre for Affordable Housing Finance in Africa (2020). 2020 yearbook: Housing Finance in Africa. Johannesburg, South Africa. Accessed at: http://housingfinanceafrica.org/app/uploads/2020_CAHF_yEARBOOK_COMP-2.pdf

25 Statistics South Africa. Statistical Release P0318 General Household Survey 201826 Ibid27 Department of Human Settlements (2019). Annual Report 2018-201928 Centre for Affordable Housing Finance in Africa (2020). 2020 yearbook: Housing Finance in Africa. Johannesburg, South Africa.

Accessed at: http://housingfinanceafrica.org/app/uploads/2020_CAHF_yEARBOOK_COMP-2.pdf

The figure above sets out the number of units approved and completed from 2014/15 to 2019/20. The number of units approved far exceeds those completed. The reasons for this include:

y Difficulties in securing DFI/ private funding. Central to the social housing model is a funding model that combines SHRA funding with that from other sources. There is the need to secure finance from DFIs or private sources These funding processes are not aligned or integrated and the resulting procedural complexity and differing credit criteria delay funding finalisation, which delays the project start once the SHRA has approved funding.

y Difficulties in obtaining planning approval. Municipalities are a key component of the social housing delivery value chain, but planning approval and related process (such as securing services) remain a significant challenge to all housing development. Again, this often results in significant lags between SHRA funding approval and construction completion.

From 2019, the SHRA started taking steps to cancel non-performing contracts and recover funds where grant recipients failed to perform. It also reviewed its compliance, accreditation and regulation framework which seeks to strengthen its regulatory role and internal processes.

While the number of projects delivered in 2019/20 was low, the SHRA project pipeline at end-March 2020 consisted of 44 projects with a potential yield of 20 315 units. Projects were located in Gauteng (11 797 units), followed by Eastern Cape (2 358 units), KwaZulu-Natal (2 358 units), Western Cape (1 838 units), North West (700 units), Limpopo (700 units) and Mpumalanga (537 units).

Table 7: Project pipeline at end-March 2020

Province Number of projects Number of units % of units

Gauteng 27 11 797 58.1%

Eastern Cape 5 2 385 11.7%

KwaZulu-Natal 4 2 358 11.6%

Western Cape 1 1 838 9.0%

North West 1 700 3.4%

Limpopo 1 700 3.4%

Mpumalanga 5 537 2.6%

Totals 44 20 315 100.0%

Source: SHRA 2019/20 Q4 report


6.1.2 Type of units developed

According to the tenancy audits consolidated baseline report for 2019/20, the most common type of units developed during 2019/20 were two-bedroom units (2 340 units or 63%) followed by one-bedroom units (703 units or 19%). Other units include 4 ‘live-and-work units’ at Brickfields and two transitional housing units (accommodating up to 10 people) at New El Kero.

Table 8: Unit typologies per project

No Project shi Provinceroom

communalstudio/

bachelorone-

bedroomTwo-

bedroomThree-

bedroomother*

Totalnumber of

units

1 Acacia Park*

Capital City

KwaZulu-Natal

- - 26 276 9 - 311

2 Airport Park

EKHC Gauteng - - 29 183 88 - 300

3 Delville EKHC Gauteng - -- 38 168 42 - 248

4 Pharoe Park

EKHC Gauteng - 13 145 236 46 - 440

5 Brandwag FRESHCO Free State

- 168 150 390 99 -- 807

6 Tasneeva Gardens

KZN SH KwaZulu-Natal

- - - 114 - - 114

7 Brickfields JHC Gauteng 5 1 88 240 7 4 345

8 Jeppe Oval

JHC Gauteng - - 72 168 - - 240

9 New El Kero

MHA Gauteng 141 27 - - - 2 170

10 Belgravia HAEL Eastern Cape

- - 139 266 33 - 438

11 Troyeville Co-Op Gauteng - - 16 104 - - 120

12 Pennyville JOSHCO Gauteng - - - 195 - - 195

Total 146 209 703 2340 324 6 3 728

% of Total 4% 6% 19% 63% 9% - 100%

*Unit make-up varies per survey (28 one-bedroom, 265 two-bedroom and 18 three-bedroom units)

Source: SHRA tenant audits 2019/20

6.1.3 delivery agents

The figure below sets out the type of delivery agents that developed projects from 2005 to 2019.Fifty-six percent of units delivered were by SHIs, 22% by ODAs and 21% by SHI MOEs.

Figure 10: Delivery agent by type, 2005 to 2019

Source: RSP stats updated project database 2020


6.1.4 location of units developed

The table below shows the geographic distribution of projects delivered between 2005 and 2019. Nearly 41 000 (78%) of the 52 683 units delivered are in the major metropolitan municipalities, with 15 000 (29%) in City of Johannesburg alone. The other metros or large cities with significant numbers are:

y City of Cape Town: 5 923 units (11.2%). y eThekwini: 5 065 units (9.6%). y City of Tshwane: 4 958 units (9.4%). y Ekurhuleni: 3 409 units (6.5%). y Nelson Mandela Bay: 2 652 units (5%). y Buffalo City: 2 548 units (4.8%).

Table 9: Project delivery 2005 to 2019 per location and type of delivery agent

ishP/shiP: 2005 to 2019

local municipality seat Projects Total units %

City of Johannesburg Johannesburg 65 15 032 28.5%

City of Cape Town Cape Town 17 5 923 11.2%

eThekwini Durban 18 5 065 9.6%

City of Tshwane Pretoria 14 4 958 9.4%

Ekurhuleni Germiston 11 3 409 6.5%

Nelson Mandela Bay Port Elizabeth 10 2 652 5.0%

Buffalo City East London 11 2 548 4.8%

Matlosana Klerksdorp 2 1 744 3.3%

Rand West City Randfontein 2 1 662 3.2%

Mogale City Krugersdorp 1 1 590 3.0%

Mangaung Bloemfontein 3 1 395 2.6%

Msunduzi Pietermaritzburg 2 1 346 2.6%

Newcastle Newcastle 1 1 056 2.0%

Polokwane Polokwane 3 923 1.8%

Moses Kotane Mogwase 1 801 1.5%

Govan Mbeki Secunda 3 791 1.5%

Steve Tshwete Middelburg 4 660 1.3%

Sol Plaatjie Kimberley 1 372 0.7%

Msukaligwa Ermelo 1 360 0.7%

Merafong Carletonville 1 258 0.5%

eMalahleni Witbank 1 104 0.2%

Lekwa Standerton 1 34 0.1%

Totals 173 52 68329 100.0%


case study: imizi

Imizi began as part of a cooperation agreement between the Nelson Mandela Bay Municipality (NMBM) and the Swedish International Development Agency in 2011. The latter provided a R2 million grant to launch the venture. Imizi obtained full accreditation for Imizi with the SHRA within three years.

Its first project was Walmer Link, in Walmer, Nelson Mandela Bay in partnership with the Eastern Cape provincial government and NMBM, which had land available and was undertaking a mixed-use development. The project included 347 social housing units and 400 affordable bonded houses. Unfurnished bachelor, one- and two-bedroom rental flats were provided. The intention was that a tenant would start off in a social housing unit, then progress to buying a bonded house.

Not wanting to develop the units itself, Imizi entered an agreement with The Home Market, a Section 21 company specialising in affordable housing for sale and appointed to develop the bonded houses. The Home Market purchased the erf for R1 from the NMBM and developed the units, which Imizi bought with SHRA grant funding and NHFC loan funding.

By 2016, Imizi had four projects with 1 259 units under management. This success could be attributed to its ability to access land at significantly reduced costs. In addition, the Imizi operated with a lean management structure – split over three departments - property management, client services and community development.

Staff members perform a several roles. Initially, Imizi paid staff sub-market salaries, but as it grew, it introduced market-related rates. Initially, Imizi’s seven independent directors were volunteers. Professional organisations contracted agreed to reduced fees, given the nature of the work. Where initially, social welfare services were provided through a partnership with NMBM, Imizi now has a social work department, with a social worker on site at each project.

Imizi’s ultimate aim is to have 3000 units under management.

29 This number includes units in planning or development


6.1.5 Units under regulation

Over the MTSF 2014 to 2019 period, the number of units under regulation grew from 20 447 to 36 305, an increase of 15 858 at an average 3 172 per annum.

Figure 11: Cumulative growth in units under regulation over the MTSF 2014 to 2019

Source: SHRA Annual Performance Plan, 2020/21 and SHRA Annual Report, 2019/20

If the graph is expanded to include 2019/20, the first year of the new MTSF, the number of units under regulation increased by 3 102 units to 39 407 at end-March 2020.

Table 10: Units under regulation by delivery agent type

delivery agent Number of agents % Number of units %

Non-profit company/SHI 20 71% 23 462 65%

MOE 4 14% 10 860 30%

ODA 3 11% 1 863 5%

Cooperative 1 4% 120 -

Totals 28 100% 36 305 100%

Source: Analysis Q4 2018/19 Compliance Report

At the end of 2018/19, there were 28 institutions, reporting 36 305 units under management. Most units under regulation were from SHIs and MOEs (95%).

6.1.6 Quality of housing stock

In the early years of social housing, when grant funding was limited to the institutional housing subsidy, SHIs/ODAs often had to trade-off certain aspects that resulted in some compromise of design and build quality and accelerated deterioration of stock. Examples included:

y Vinyl flooring and/or cheap carpeting. y Cheap kitchen cupboards, sanitary

fittings, door locks. y Non-durable wall f inishes. y Omission of proper eaves and verge

treatment for roofs, such as facias, gutters and rainwater downpipes.

y Minimal attention to external areas such as gardens, driveways and parking areas.

y Limited access control and perimeter security measures.

After a countrywide building condition audit by the SHF in 2007 with Rooftops Canada showed alarming deterioration in stock developed between 1995 and 2006, more attention was paid to quality and maintenance by both the regulator and the delivery agents. It has become common practice in the sector to specify the use of, for instance:

y Hard-wearing ceramic tiling on all floors. y Better-quality kitchen units, sanitary

fittings, door locks, including granite worktops for kitchen cupboards.

y Better-quality wall f inishes, including durable paints and facebrick.

y Rainproofing. y More attention to external areas. y More effective access control, area

lighting and perimeter security.

New social housing stock is of reasonable quality, despite the static funding model’s inability to f inance upfront high-quality and affordable units.

In delivering a quality housing unit, SHIs and ODAs have to balance financial viability and quality of projects. The former depends on funding and financing arrangements, development costs, operational efficiency, tenant mix and management and other income-generating activities. SHIs/ODAs improve their viability by increasing incomes and reducing costs. This causes tensions between financial and social objectives that manifest in the type of accommodation created, the type of

tenants selected and the types of services provide.

The design and quality of social housing have considerable cost implications. The higher the specifications of the unit, the more expensive it is. Costs varied between R7 000 and R12 000 per m² in 2013. The average annual costs per unit for primary and secondary markets were R360 000 and R400 000 respectively in 2017. Through the RCG and institutional subsidies (now CCG), the government reduces the development costs of the social housing unit by between 60 to 70%, resulting in lower debt repayment costs for the SHI/ODA. However, rising construction costs force SHIs and ODAs to explore cheaper project typologies (e.g. communal/shared rooms) and lower quality standards. Average unit costs increased at an average of 11% a year between 2007/08 and 2013/14. Construction costs increased by about39% between 2013 and 2017. In the meantime, inflation increased annually by 6.4% between April 2008 and March 2017. In the absence of inflation-based subsidy increases, some SHIs argue for more flexible standards (e.g. unit size) for the sector.

Increasing operational efficiency and generating a surplus can undermine the social objectives of the SHI/ODA. Some SHIs are less financially efficient because they provide more social support services to tenants or do not outsource operational activities to third party agents. There is a tension between offering holistic support to tenants and having a narrow client-service provider relationship. SHIs and ODAs deal differently with this tension, which could have significant impact on the reputation and impact of the sector. While non-profit SHIs may be more inclined to build strong relationships with their tenants and provide value-added services, ODAs tend to put commercial considerations first.


6.2 Funds invested

Figure 12: Expenditure of the CCG (R) 2014/15 to 2019/20


The envisaged capital financing role of the private sector has not materialised to the extent expected. The current financial viability and structure of social housing projects dissuade the private sector from investing in projects as it doubtful whether the projects can generate cash flows to meet debt requirements. Consequently, very few commercial banks or other private sector funders provide loans. The majority of debt finance is provided by DFIs.

predominantly the NHFC and the GPF. The latter no longer provides finance. The NHFC has been consolidated with the National Urban Reconstruction and Housing Agency and the Rural Housing Loan Fund into the Human Settlements Development Bank, which is now subject to the approval of the Human Settlements Development Bank Bill being processed by Cabinet. the NHFC limits the number of SHIs it funds, which does not accommodate the SHRA’s 30 000-unit target. The current Social Housing Act and Regulations do not allow the SHRA to borrow or leverage its current capital allocation.

The NHFC limits the number of SHIs it funds, which does not accommodate the 30 000-unit target of the SHRA. The current Social Housing Act and Regulations does not make allow the SHRA to borrow or leverage its current capital allocation.

case study: The housing hub

The Housing Hub (THH) is a for-profit social enterprise company that has been operating for 30 years in the affordable housing market and student accommodation. Its first project after accreditation by the SHRA was Akasia Place in Pretoria. Construction of the first 400 units was completed in January 2018 and these were fully tenanted by May 2018. SHRA approval is pending for the second phase, which will provide 150 more units. THH’s second social housing project, Greenfields Estate in Randfontein, comprises 1 080 units and was approved by the SHRA in April 2018. Construction is underway.

The Xara Trust (owned by the Fourie family) invested R10 million as seed capital for THH, following this with R20 million more. The capital funded an extensive research and development phase and project identification. Consultants completed a comprehensive due diligence phase, after which land was bought and a project pipeline determined.

THH has in-house capacity to identify and structure projects, and a team of external consultants. Construction is outsourced and completed projects are managed by an external property management company. Funding is secured from financial institutions and THH is currently in discussion with the NHFC and the DBSA.

THH prides itself on providing a high-quality product and finishes, Wi-Fi/Dstv in each unit, child aftercare, sports facilities, good access control and well-maintained public areas. There is a waiting list for units. THH has three additional social housing projects that will provide a further 2 692 units, bringing its portfolio to 4 200 units. Its aim is to grow the portfolio to more than 10 000 units within the next five years.

Its vision is to form a rental estate investment trust (REIT), which is an investment structure whereby rental income is distributed monthly or quarterly to investors. REITs oversee the rental administration and maintenance of the buildings and are listed on the Johannesburg Stock Exchange. THH’s REIT will control a large portfolio of residential stock including social housing. THH’s SHRA projects should benefit from cross-subsidisation and funding from its non-subsidised projects and private sector funding initiatives.

THH is pioneering a new social housing development model through a for-profit entity, its key success factors being:

y Persistently challenging processes. y A good work ethic and extensive

experience in the affordable market sector in South Africa.

y A defined goal. y A diverse team that is committed and

energetic.


While the involvement of the private sector has been minimal, it has slowly increased over the past five years. An analysis undertaken by NASHO of loan and equity in 27 projects undertaken in the SHIP 5A to SHIP 10C allocations determined that the total CCG allocation was about R5 billion and the total debt/equity just over R1 billion. This funded 22 629 units (see table and figure below).

Table 11: Loan and equity investors in 27 projects in SHIP 5A to SHIP 10C

NhFc other government sources Banks other private lenders

9 5 6 7

NEF - 3ECDC - 1

City of Polokwane - 1

Nedbank - 4ABSA - 1RMB - 1

JJP Properties - 1TUHF - 1

Mergence Capital - 1SAHL - 2

SASFIN - 1Investico - 1

Senziwe Mine - 1

Source: NASHO investment patterns

Figure 13: SHIP active projects (quick facts)

Source: CEO presentation – SHRA Investment Seminar 2020

Three of the established banks provided loans for the social housing sector and while the amount is low, it demonstrates that with the right conditions they are prepared to invest. The primary nature of this investment is loan financing for 10 to 15 years at an interest rate from prime to prime +2%. Such loan finance is targeted at well-established SHIs and ODAs with established rental housing portfolios and in areas with proven affordable rental demand.

The Trust for Urban Housing Finance (TUHF) provided 4% of the loan finance, particularly in the inner city of Johannesburg. However, its lending at prime +4-5% has made it too expensive without blending with lower costing loan finance. The high cost of loan finance in areas such as inner-city Johannesburg – with its high cost of buildings - has further hampered project viability. Initially, its lending was suitably blended with the lower interest rate from the GPF, but during the review year, GPF withdrew from any new lending in the sector, which has made TUHF lending more difficult and expensive.

As previously mentioned, several factors have influenced lower-than-expected private investment in the sector, including:

y Investment decision makers do not have a thorough understanding of social housing and how to achieve the returns they require.

y Some investors are concerned that they cannot protect their investment by default by holding a bond over the property, which they consider a necessary last resort.

y The concern that as social housing is linked to government, it is more susceptible to political pressure that could negatively affect financial sustainability of projects. This is exacerbated by increasing numbers of organised rental boycotts in the sector.

y Private investors, including ODAs, need greater clarity on the terms and conditions for equity withdrawal to properly calculate their likely returns.

y Investors consider many of the newer, less-experienced SHIs high risk as they have no proven track record of delivery and lack business development support while they gain the necessary experience and expertise.

y Investment requires participation in what is considered a very bureaucratic approach to project approval and contracting.


6.3 accreditation of shi/odas

Social housing units are delivered by accredited SHIs in approved projects, and by ODAs that have undergone due diligence in approved projects. Units funded under the Social Housing Programme fall under SHRA regulation after completion and tenanting.

Accreditation, which ensures that institutions are fit to carry out the business of social housing, includes the screening, evaluation, conditional and final accreditation of an SHI by the SHRA. Accreditation allows an SHI to access Social Housing Programme grants. Accreditation is granted for three to five years and all applications are processed within 90 days.

There are two types of SHRA accreditation:

y Conditional accreditation is approval to operate as an SHI for up to two years, under the conditions out of the conditional compliance notice, while all outstanding accreditation requirements, criteria and standards are fulfilled.29

y Full accreditation is approval to operate as an SHI for up to five years after an institution complies with all SHRA accreditation requirements, criteria and standards.30.

A coop is an autonomous, voluntary association of persons to meet common economic and social needs and aspirations through jointly owned and democratically controlled enterprise based on cooperative principles. Housing cooperative is a primary cooperative that provides housing to its members or a secondary cooperative that provides technical sectoral services to a primary housing cooperative.31 There are currently two cooperatives with conditional accreditation and one in Troyeville (120 units) that is receiving SHRA support.

ODAs are not required to be institutionally accredited but their projects must be. Their performance is subject to quarterly compliance monitoring.

As at the end of 2019/20, 106 SHIs were accredited, 12 fully. Three institutions were withdrawn during the year. Sixty-seven conditionally accredited institutions did not have any stock under management and nine of these had projects registered on the SHRA project pipeline as at the end of 2019/20.

The following diagram shows provincial distribution of accredited institutions.

Figure 14: Accreditation status at end-March 2020 (Source: Annual Report)

29 Social Housing Act 16 of 2008, General Notice 624 in Government Gazette 40312 dated 30 September 2016. Commencement date: 30 September 2016

30 Social Housing Act 16 of 2008, General Notice 624 in Government Gazette 40312 dated 30 September 2016. Commencement date: 30 September 2016

31 ibid

case study: madulammoho

Madulammoho began through a partnership between the Metro Evangelical Services (MES), a non-profit, faith-based organisation that provides social services to Johannesburg’s inner-city community and the Johannesburg Trust for the Homeless (JTH). They formed Madulammoho Housing Association in 2004 as a Section 21 company.

Initially a job creation programme for unemployed youth in Hillbrow, it evolved into housing. The first project, in 2005, was the conversion of the Europa Hotel as part of the Better Buildings Programme of City of Johannesburg.

By end-2010, Madulammoho noted that not all clients wanted to live in the inner city and that property prices were escalating, making it difficult to structure viable projects. Opportunities were sought elsewhere with a view to accessing the RCG that had just become available.

Madulammoho partnered with Calgro M3, a listed development mixed-income residential construction company that was involved in the Fleurhof Project with City of Johannesburg. It was the start of an ongoing relationship between Madulammoho and Calgro M3, with the latter developing the social housing units to a Madulammoho-agreed design and Madulammoho buying completed units using the RCG and loan funding. Madulammoho then manages the units.

Madulammoho currently has 10 projects with 2 599 units under management - eight projects in Johannesburg (1 470 units) and two projects in Cape Town (1 129 units). The company intends to expand its portfolio, renovating inner-city buildings and participating in well-located mixed used developments.

Madulammoho owes its success to:

y A hands-on management approach - it is part of the development team from the start and is involved in design and development.

y Careful selection of projects. y Excellent committed staff who work hard. y Avoiding political pressure.


Table 12: Portfolio growth from Q4 2015 to Q4 2019326.4 shi/oda performance

As recipients of tax-payer funding, SHIs and ODAs are subject to regular performance reporting and monitoring by the SHRA, which has the power to take remedial action if necessary.

Performance reporting monitored by the SHRA occurs:

y During project development until the tenanted stage (the CCG project agreement contains stringent and comprehensive reporting requirements).

y In the operational/property management phase - SHIs and ODAs with units under regulation must submit quarterly compliance reports to the SHRA.

6.4.1 Portfolio growth

The portfolio growth of delivery agents with units under management between 2015 and 2019 is shown in the table below.

Numbers under management increased from 2014 to 2019 by 12 140 a year (419 per entity) at an average 3 035 (105 per entity). Strategies are required to increase the rate of delivery substantially if future targets are to be met. Only five SHIs, one MOE and one ODA showed reasonable growth in numbers (150+ a year).

Eight delivery agents established more than 20 years ago did not increase their numbers under management between year of establishment and Q4 2015, and seven of those showed no increase between 2015 and 2019.

In 2015, four entities were managing more than 2 000 units, which by 2019 had remained unchanged. An additional four, however, had shown an increase. Two SHIs showed a decrease in numbers - one sold off units under the institutional subsidy rent-to-buy scheme and one had to sell units to recapitalise its business after an extended and costly rent boycott in one of its properties.

32

32 Dashes in Table 12 onwards indicate zero returns posted in reports or nothing reported. It is not possible to distinguish which is which. The figures below are all pre-Covid-19.

shi/ moe year established

Total units managed increase 2015 to 2019

average annual increase 2015 to 2019Q4 2015 Q4 2019

A 1999 737 1 692 955 239

B 1929 339 339 - -

C 1998 2 157 1 930 -227 -

D 2002 1 237 1 349 112 28

E 1998 1 897 2 569 672 168

F 2009 808 897 89 22

G 1995 330 393 63 16

H 1998 438 438 - -

I 2003 715 1 259 544 136

J 1995 4 294 4 457 163 41

K 2008 - 1 452 1 452 -

L 2016 - 246 246 -

M 2005 1 821 2 599 778 195

N (MOE) 2001 26 26 - -

O 2001 1 049 1 798 749 187

P 2000 88 88 -

Q 2002 2 225 1 843 -382 -96

R 2001 591 660 69 17

S 2011 - 112 112 -

T 1998 533 1 270 737 184

U (MOE) 2000 988 1 244 256 64

V (MOE) 2001 95 685 590 148

X (MOE) 2003 5 516 8 770 3 254 814

y (MOE) 2002 697 697 - -

Z (ODA) 2015 - 1956 1 956 489

AA (ODA) 2012 - 400 400 -

AB (ODA) 2011 - 295 295 -

AC (ODA) 2006 - 550 550 -

AD 2000 - 120 120 -

AE 136 - - -

AG 123 - - -

AH 1 242 - - -

Totals 27 994 40 134 12 140 3 035

Sources: SHRA Compliance Monitoring Report Q4 2019: January to March 2020 quarterly reporting tools analysis, and SHRA Compliance Monitoring Report Q4 2015: January to March 2016 quarterly reporting tools analysis


The change in size of entities from 2015 to 2019 is shown in the table below. Only a few entities moved up in size category over the period, which reinforces the slow portfolio growth.

Table 13: Change in size categories between 2015 and 2019

size (number of units) Number of entities

Q4 2015 Q4 2019 change +/-

<500 units 8 10 2

501 to 1 000 units 7 5 -2

1 001 to 1 500 units 3 5 2

1 501 to– 2 000 units 3 5 2

2 000+ units 4 4 -

Totals 25 29 4


6.4.2 Vacancy rates and rent collection rates

The table below sets out vacancy and rent collection rates for Q4 2019 (at end-March 2020) for SHIs, ODAs and MOEs. The SHRA benchmark for vacancies is less than 2%, and for rent collection greater than 95%. Only seven (24%) entities with units under regulation achieved the benchmark performance on vacancies, and only four (14%) achieved the benchmark for rental collection. Clearly most delivery agents, especially MOEs, cannot remain sustainable unless conditions improve substantially.

Table 14: Vacancies and rent collection rates Q4 2019 (at end-March 2020)

Vacancies and rent collection rates Q4 2019 (at end-march 2020)

shi/moe year established Units Vacancy rate rent collection rate

A 1999 1 692 5.6% 65%

B 1929 339 3.9% 93%

C 1998 1 930 - -

D 2002 1 349 13.6% 33%

E 1998 2 569 3.8% 59%

F 2009 897 - -

G 1995 393 0.5% 42%

H 1998 438 12.9% 96%

I 2003 1 259 - 93%

J 1995 4 457 9.0% 68%

K 2008 1 452 0.3% 97%

L 2016 246 11.9% 99%

M 2005 2 599 6.2% 100%

N (MOE) 2001 26 - 100%

O 2001 1 798 13.9% 94%

P 2000 88 - 1%

Q 2002 1 843 2.0% 76%

R 2001 660 5.0% 64%

S 2011 112 - 9%

T 1998 1 270 4.1% 75%

U (MOE) 2000 1 244 1.3% -14%

V (MOE) 2001 685 2.2% 80%

X (MOE) 2003 8 770 1.1% 39%

y (MOE) 2002 697 5.9% 25%

Z (ODA) 2015 1956 19.7% 90%

AA (ODA) 2012 400 0.2% 87%

AB (ODA) 2011 295 3.3% 17%

AC (ODA) 2006 550 1.9% 90%

AD 2000 120 - -

Total units: 40 134 average rent collection rate: 65%2

Source: SHRA Compliance Monitoring Report Q4 2019: January to March 2020 quarterly reporting tools analysis


The average monthly loss of income due to vacancies per delivery agent for Q4 2015 and Q4 2019 respectively is shown in the table below. With a few notable exceptions where well-performing entities have seen a decrease in losses from 2015 to 2019, most entities have experienced increased losses through vacancies. For some, the increases have been extremely high.

Table 15: Average monthly loss of income across the quarter through vacancies

average monthly loss of income across the quarter through vacancies increase/-decrease/unit

Q4 2015 (at march 2016) Q4 2019 (at march 2020)increase/ unit 2015 to 2019

% increase/unit 2015 to 2019

shi/moe year established

Units average for quarter

Perunit


Perunit

A 1999 737 R169 752 R230 1 692 R235 337 R139 -R91 -39.61%

B 1929 339 R4 598 R14 339 R34 382 R101 R88 647.76%

C 1998 2 157 - - 1 930 - - - -

D 2002 1 237R249 004

R201 1 349R524 020

R388 R187 92.97%

E 1998 1 897 R181 149 R95 2 569 R251 204 R98 R2 2.40%

F 2009 808 - - 897 - - - -

G 1995 330 R66 618 R202 393 R9 600 R24 -R177 -87.90%

H 1998 438 R64 663 R148 438 R174 467 R398 R251 169.81%

I 2003 715 R466 R1 1 259 - R0 -R1 -100.00%

J 1995 4 294 R565 142 R132 4 457R1 362 905

R306 R174 132.34%

K 2008 - - - 1 452 R9 615 R7 - -

L 2016 - - - 246 R78 420 R319 - -

M 2005 1 821 R4 046 R2 2 599 R318 060 R122 R120 5407.91%

N (MOE) 2001 26 R1 625 R63 26 - - -R63 -100.00%

O 2001 1 049 R23 197 R22 1 798R580 390

R323 R301 1359.73%

2000 - - - 88 - - - -

average monthly loss of income across the quarter through vacancies increase/-decrease/unit

Q4 2015 (at march 2016) Q4 2019 (at march 2020)increase/ unit 2015 to 2019

% increase/unit 2015 to 2019

shi/moe year established


Perunit


Perunit

Q 2002 2 225 R90 944 R41 1 843 R128 360 R70 R29 70.40%

R 2001 591R1 100 000

R1 861 660 R161 553 R245 -R1 616 -86.85%

S 2011 - - - 112 - - - -

T 1998 533 R2 044 R4 1 270 R76 295 R60 R56 1466.53%

U (MOE) 2000 988 R131 358 R133 1 244 R49 226 R40 -R93 -70.24%

V (MOE) 2001 95 R787 R8 685 R30 735 R45 R37 441.62%

X (MOE) 2003 5 516 R120 249 R22 8 770R1 277 655

R146 R124 568.28%

y (MOE) 2002 697 R15 583 R22 697 R73 461 R105 R83 371.42%

Z (ODA) 2015 - - - 1956R830 988

R425 R425 -

AA (ODA) 2012 - - - 400 R3 600 R9 R9 -

AB (ODA) 2011 - - - 295 R25 517 R86 R86 -

AC (ODA) 2006 - - - 550 R39 267 R71 R71 -

AD 2000 - - - 120 - - - -

AE - 136 R5 020 R37 - - - - -

AG - 123 R852 R7 - - - - -

AH - 1 242 - - - - - - -

Totals 27 994 40 134



The table below shows rental arrears and bad debt. Many delivery agents accumulated substantial rental arrears and bad debt between 2015 and 2019. The table provides a comparison between Q4 2015 and Q4 2019 of debtors greater than 120 days, often considered to be non-recoverable. Total debtors greater than 120 days increased by R220 million, but must be seen against an increase in the number of units under management. A better measure is the increase per unit, R4 730, from R2 568 to R7 298.

The actual position may be worse than it seems as some entities regularly write off bad debt, reducing the amount of arrears and debtors over 120 days.

Table 16: Comparison of debtors >120 days Q4 2015 and Q4 2019

comparison of debtors >120 days Q4 2015 and Q4 2019 increase/-decrease/unit

Q4 2015 (at march 2016) Q4 2019 (at march 2020) increase/ unit 2015 to 2019

% increase/unit 2015 to 2019shi/

oe established Units debtors >120 days

Perunit Units debtors >120

daysPerunit

A 1999 737 R2 400 000 R3 256 1 692 R3 637 556 R2 150 -R1 107 -33.98%

B 1929 339 - - 339 R939 757 R2 772 - -

C 1998 2 157 R3 400 000 R1 576 1 930 R10 675 149 R5 531 - -

D 2002 1 237 - - 1 349 R16 787 934 R12 445 - -

E 1998 1 897 R8 300 000 R4 375 2 569 R31 395 137 R12 221 R7 845 179.31%

F 2009 808 R14 - 897 - - - -

G 1995 330 - - 393 R6 775 900 R17 241 R17 241 -

H 1998 438 R175 - 438 - - - -100%

I 2003 715 - - 1 259 - - - -

J 1995 4 294 - - 4 457 R285 402 R64 R64 -

K 2008 - - - 1 452 R1 053 976 R726 - -

L 2016 - - - 246 - - - -

M 2005 1 821 - - 2 599 R1 616 668 R622 - -

N (MOE)

2001 26 - - 26 - - - -

O 2001 1 049 - - 1 798 R29 174 R16 R16 -

2000 - - - 88 R6 312 125 R71 729 - -

Q 2002 2 225 - - 1 843 R4 748 340 R2 576 R2 576 -

R 2001 591 R1 900 000 R3 215 660 R4 052 500 R6 140 R2 925 90.99%

S 2011 - - - 112 R391 619 R3 497 - -

comparison of debtors >120 days Q4 2015 and Q4 2019 increase/-decrease/unit

Q4 2015 (at march 2016) Q4 2019 (at march 2020) increase/ unit 2015 to 2019

% increase/unit 2015 to 2019shi/

oe established Units debtors >120 days

Perunit Units debtors >120

daysPerunit

T 1998 533 - - 1 270 R1 613 822 R1 271 - -

U (MOE)

2000 988 R9 300 000 R9 413 1 244 R30 745 397 R24 715 R15 302 162.56%

V (MOE)

2001 95 - - 685 R1 534 641 R2 240 - -

X (MOE)

2003 5 516 R26 900 000 R4 877 8 770 R120 455 549 R13 735 R8 858 181.64%

y (MOE)

2002 697 R17 300 000 R24 821 697 R47 714 529 R68 457

R43 636 175.81%

Z (ODA)

2015 - - - 1 956 - - - -

AA (ODA)

2012 - - - 400 R94 762 R237 - -

AB (ODA)

2011 - - - 295 R1 964 281 R6 659 - -

AC (ODA)

2006 - - - 550 R64 341 R117 - -

AD 2000 - - - 120 - - - -

AE - 136 - - - - - - -

AG - 123 R2 400 000 R19 512 - - - - -

AH - 1 242 - - - - - - -

Totals 27 994 r71 900 189 r2 568 40 134 r292 888 559 r7 298 - -



6.4.3 analysis of audited financial statements 2018/19

The SHRA analysed the audited financial statements of 20 SHIs and MOEs. ODAs were not analysed as social housing usually forms only a portion of their overall portfolios. The analysis revealed:

y Comprehensive income, minus grants, subsidies, fair value adjustments and gains vested, , improved for 10 of the entities from 2018 to 2019, and deteriorated for the other 10. For some, especially MOEs, the deterioration is substantial, a decrease of at least R10 million.

y In 2018, nine of the SHIs increased their profit by at least R5 million.

y In 2018, f ive SHIs and three MOEs operated at a loss.

y In 2019, six SHIs operated at a profit of more than R5 million.

y In 2019, six SHIs and four MOEs operated at a loss. y Between 2018 and 2019, the profit of five entities

was reversed and turned into a loss.

Based on the above, the profitability of the sector deteriorated between 2018 and 2019. Only three of the SHIs maintain ring-fenced maintenance reserves and, although all three increased their reserves from 2018 to 2019, older refurbished buildings form a significant part of their portfolios, leading to the conclusion that reserves are not sufficient to cover anticipated capital refurbishments in the medium term.

6.4.4 Tenants

At project completion and tenanting stage, the SHRA ensures compliance with income bands by making the release of the final 10% of CCG funding conditional on a tenant audit showing compliance.

Over time, annual escalations, however, push rentals beyond the initial limits. The only way to ensure conformation with the prescribed bands is to ensure that new tenants are within the prescribed bands.

Below is an overview of tenants occupying social housing projects based on a tenancy audit undertaken by the SHRA in 2019/20. The audit focused on 12 projects in four provinces

household type

Of 3 338 households, 1 121 units were classified as single-headed households without children (34%), 596 of which were headed by female leaseholders and 525 by male leaseholders. A further 5.1% were rented by couples without children or dependants, while 38.7% were households with no financial dependants. Couple-headed households with children accounted for 688 units.

Table 17: Household type and gender of main leaseholder

household type Female frequency

male frequency

Joint lease* frequency

Totalfrequency

% of total

1. Couple-headed households with children/dependant(s) 206 303 179 688 20.6%

2. Couple-headed households without children/dependant(s) 46 75 50 171 5.1%

3. Single-headed households with children/dependant(s) 941 406

-

1 347 40.4%

4. Single-headed households without children/dependant(s) 596 525 1 121 33.6%

Other 3 1 7 11 0.3%

Total 1 792 1 310 236 3 338 100%

Source: SHRA tenancy audits 2019/20


age and gender

Female leaseholders number 2 123 (57%) and male leaseholders 1 599 (43%). Social housing tenants are relatively young and of working age, with very few people at or post retirement age. Only 64 leaseholders (1.8%) were older than 65 years.

Table 18: Age and gender of main leaseholders

age bracket Femalefrequency Female % male

frequencymale% Total %

20 to 24 26 0.7% 17 0.5% 43 1.2%

25 to 29 277 7.4% 186 5.0% 463 12.4%

30 to 34 544 14.6% 335 9.0% 879 23.6%

35 to 39 471 12.7% 347 9.3% 818 22.0%

40 to 44 352 9.5% 306 8.2% 658 17.7%

45 to 49 226 6.1% 187 5.0% 413 11.1%

50 to 54 100 2.7% 110 3.0% 210 5.6%

55 to 59 56 1.5% 49 1.3% 105 2.8%

60 to 64 37 1.0% 32 0.9% 69 1.9%

65 to 69 19 0.5% 18 0.5% 37 1.0%

70 to 74 7 0.2% 8 0.2% 15 0.4%

75 to 79 3 0.1% 3 0.1% 6 0.2%

80 years and older

5 0.1% 1 - 6 0.2%

Total 2 123 57.0% 1 599 43.0% 3 722 100.0%

Average age 38.3 39.5 38.8

Median age 36.0 38.2 37.0

Source: SHRA tenant audit baseline report, 2020

race

Below is the racial profile by province and project by main leaseholder. Ninety percent of main leaseholders are black African, 3.2% coloured, 5.8% Indian and 1% white.

Table 19: Race of main leaseholders

ProvinceTotal % of total

race Gauteng Free state KwaZulu-Natal eastern cape

Black African 1 893 696 306 384 3 279 90.0%

Coloured 15 56 22 25 118 3.2%

Indian 3 3 203 3 212 5.8%

White 3 21 11 1 36 1.0%

Total 1 914 776 542 413 3 645 100.0%


household income analysis

Overall, 84% or 2 843 units were allocated to social housing income bands between R1 500 to R15 000 monthly household income. Of these:

1 089 units (32%) are in the primary target market (R1 500 to R3 500). 1 754 units (52%) are in the secondary target market (R5 501 to R15 000). 1% or 31 units were allocated to those earning less than R1 500. 532 units (16%) were allocated to households earning above R15 000.

Table 20: Distribution of household income (at entry)

household income (rand per month)

households Target market monthly income (rand)

Frequency % Frequency % average minimum maximum

1. Less than 1 500 31 1% 31 0.9% 1 083 315 1 400

2. 1 500 to 3 500 622 18%1 089 32%

2 700 1 500 3 500

3. 3 501 to 5 500 467 14% 4 593 3 501 5 500

4. 5 501 to 7 700 740 22%

1 754 51.5%

6 648 5 503 7 700

5. 7701 to 11 300 555 16% 9 369 7 710 11 300

6. 11 301 to 15 000 459 13% 13 159 11 310 15 000

7. 15 001 to 17 500 176 5%

532 15.6%

16 209 15 007 17 500

8. 17 501 to 20 000 137 4% 18 845 17 502 20 000

9. 20 001 to 22 500 66 2% 21 100 20 002 22 500

10. 22 501 – 25 000 59 2% 23 825 22 572 25 000

11. >25 000 94 3% 34 882 25 046 83 219

Total/average 3 406 100% 3 406 100% 9 257



6.5 restructuring zones

6.5.1 Number and application

In 2019, there were 47 restructuring zone municipalities and 236 gazetted restructuring zones.33 About 31 (67%) of these municipalities had no social housing delivery, none planned and no delivery pipeline. Social housing delivery has taken place in fewer than 20% of gazetted restructuring zones. By end-December 2020, five municipalities were added, bringing the total of gazetted restructuring zone municipalities to 52.34

The 2017 restructuring zone assessment recommended that in the short-term, the SHRA should strengthen the criteria and oversight of restructuring zone approval. In the medium- to long-term, it was suggested that the zones be phased out and that social housing projects be evaluated against strong performance criteria. Criteria alignment with other programmes that include National Treasury Cities Support Programme initiatives should be considered. (P63)

During 2020, 136 priority human settlements and housing development areas were declared.

The Sheba et al, 2020 study shows an increasing spatial drift to less-central parts of urban areas. While this does not necessarily mean that such projects do not meet the programme spatial restructuring intent, the looseness of the restructuring zone approval process increases the risk that these projects become more about delivery numbers than about urban restructuring.

Both the Sheba et al, 2020 study and the 2017 restructuring zone assessment suggest a shift from the restructuring zone approach to one that considers location assessment against set criteria at project approval stage and that links more closely to spatially targeted programmes of the National Department of Human Settlements, Water and Sanitation, National Treasury and other government bodies.

The more restructuring zone municipalities approved, the thinner the social housing resources, which is likely to dilute the impact of the programme on urban restructuring and economic integration.

33 SHRA annual performance plan 2019/2034 Government Gazette No 43726 September 2020

6.5.2 impact on urban regeneration

Restructuring zones use government investment to stimulate urban regeneration in better-located urban areas with developed infrastructure but deteriorating property investment. While this was important in the early days of the programme, particularly in Johannesburg CBD, it now has less influence on the targeting of the CCG investment. In Johannesburg CBD, most social housing investments are undertaken by the municipal entity rather than the independent SHIs. This is because City of Johannesburg no longer releases land and buildings in these areas to private, non-profit SHIs.

A 2013 study by NASHO and the HDA was the first to indicate that the programme may be compromising on its original intentions to promote urban regeneration. Social housing, it was suggested, was moving away from the ‘urban core’ towards ‘outer suburbs’ and ‘grey zones’ because of the availability of land at the right price. The trend was also seen to be the result of inconsistent application of restructuring zones, which were becoming increasingly loose in application by ‘detracting from the original urban restructuring intent of the Social Housing Policy and national strategic programmes’.35

The figure below shows the location of rental subsidy programmes (projects) in the four key metropolitan areas against population growth between 2011 and 2016. A key observation is the centralisation of projects in highly populated areas. However, in areas where the population increased (30 000 to 67 000) there were not many social housing projects. This indicates that social housing is not keeping up with population growth in certain areas. An objective of the Social Housing Policy is to cater to densely populated areas as these point to households needing affordable accommodation. In Cape Town, for example, RSPs are in areas with a population growth of 10 000 to 30 000. There are very few in areas with high population growth. The situation is similar in eThekwini. Gauteng appears to be the only metropolitan area that has somewhat kept up with a growing population.

Delivery of RSPs in certain areas is located in areas declining population. Between 2005 and 2019, almost 13% of RSP units were delivered in areas with a population decline of greater than 1 000. During the same period, almost 20% of delivery catered to areas with high population growth (30 000 to 67 000).

Social housing development is increasingly moving towards peripheral areas, with an emphasis on development of large greenfield sites and mega projects. Reliance on the private market to supply land within the financing constraints of the programme has added to the attractiveness of larger less-well-located sites.

35 NASHO and HDA, 2013: 5


During the past five years, the only significant investment linked to urban regeneration was the 720-unit development in the Pretoria CBD. With its potential to stimulate urban regeneration in the surrounding area, it was developed as a standalone project on land released at below-market value by the municipality without a clear precinct development plan for the surrounding area.

Figure 15: Location of RSP units in relation to population growth


Initiatives are underway in eThekwini and City of Cape Town to systematically use municipal-owned land for social housing to stimulate urban regeneration. Both areas were part of the Equal Spaces-NASHO Social Housing and Urban Regeneration Programme. eThekwini has identified seven sites for social housing in the CBD and immediate surrounding areas that would yield about 2 800 units from 2020 to 2025. Cape Town has identified seven sites in the rapidly gentrifying area of Salt River-Woodstock precinct for partial or full use for social housing. The cities are using a social housing precinct-based urban regeneration model developed by Equal Spaces-NASHO.

The model is also being used in Parow, which has identified five sites that could produce 1 800 units over five years.

Without greater proactive municipal involvement in facilitating social housing, it is difficult to view social housing investment as a stimulant to urban regeneration. The SHRA Municipal Housing Support Programme planned for 2020/21 should generate and facilitate greater municipal engagement in using social housing as a catalyst for urban regeneration.


6.6 capacity building

The SHRA SD&T programme was allocated R22 428 000 during 2019/20. The table below shows commitments made for 2020/21.

Table 21: IIG funds committed by August 202036

No. description Budget breakdown (r) committed (r)

1 IIG

1.1 Pre-accreditation grants 2 000 000 700 000.00

1.2 General capacitation grants 6 650 000 9 132 900

1.3 Project feasibility grants 5 000 000 3 000 000

1.4 Staff gear-up grants 2 000 000 400 0000

1.5 Remedial action grants 3 000 000 1 000 000

2 Goods and services 778 000 500 000

3 Research 3 000 000 2 690 305

Budget vs commitments 22 428 000 17 423 205

Source: SD&T updated expenditure budget and cash flow 2020/21

As shown in the figure below, the SHRA’s IIG performance has not been as good, with a significant drop in expenditure in 2018/19 and 2019/20.

Figure 16: Expenditure of the IIG (R), 2014 to 2019


36 SD&T programme updated expenditure, budget, commitments and cash flow for 2020/21.

6.7 sector transformation

The SHRA strongly believes in sector transformation and in having a diverse and expanded pool of transformed delivery agents that mature and progress from conditionally accredited to fully accredited institutions. Of these, 60% are to be BBBEE-owned and -controlled companies as defined in the BBBEE Act.


Key transformation initiatives include:

1. Annual training. In 2019/20, training focused on an introduction to social housing, project packaging, corporate governance, client services and risk management. More than 600 delegates, at least 50% women, attended raining sessions in Gauteng, Mpumalanga, Free State, Limpopo, Western Cape and North West. The private sector, national, provincial and municipal government and delivery agents were represented. Best practice workshops were held on gender-based violence in social housing, rent boycotts and social housing invasions, and community development and 67% of delegates were women.

2. Awareness sessions that target designated groups such as women. During the year, the SHRA partnered with the African Women’s Movement and Black Management Forum for an information session on participation in the Social Housing Programme, aimed specifically at women. An information session was also held with the South African Institute of Black Property Professionals.

3. An incubation project initiated during the first quarter of 2020/21. Seven newly accredited institutions identified will be incubated over several years, their first target to have a social housing project on the registered SHRA pipeline. More participants will be enrolled in the next financial year.

4. Involvement with the Property Sector Charter Council so that social housing is included in the amended property sector codes, entrenching in the scorecard female involvement in the property sector. The amended codes were presented to the SHRA Executive Committee on 9 March 2020 and approved as the Social Housing Sector Transformation Charter. This is also a key outcome in the SHRA’s strategic plan.

5. The transformation charter developed by NASHO and the SHRA is a statement of intent by NASHO members on how they will help achieve employment equity and BBBEE transformation objectives. The charter provides a scorecard for NASHO members.37

37 NASHO, 2019

Transformation has been embedded in the 2019/20 SHRA Annual Performance Plan - 11 of the 30 indicators pertain to transformation and two relate to operational and capital budget awarded to women, youth, people with disabilities and military veterans. The SHRA has achieved both these targets for the past financial year (see table below).

Table 22: Achievement of transformation objectives

Number Transformation indicators for women empowerment Target 2019/20achievement

1.% of operational budget spent on women, youth, people with disabilities and military veterans

30% 44.45%

2.% of CCG awarded to women, youth, people with disabilities and military veterans

30% 40.26%

Source: NASHO, 2019

Of the 14 grant applications accredited in the past financial year translating to 4 860 units, four projects valued at R480.94 million were majority owned and -controlled by women and/or youth. These projects represented 1 768 units and claimed 40% of the grant awarded.

Table 23: Programme 3 resource considerations

Programme 3: sector development and Transformation

audited Unaudited revised budget mTeF estimates

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

economic classification:

Compensation of employees 2 050 2 718 3 271 3 326 3 592 3 808 4 036

Goods and services 945 3 548 2 246 2 027 2 230 2 453 2 698

IIG 18 746 10 783 13 705 20 401 21 432 22 311 23 552

Total expenses 21 741 17 049 19 222 25 754 27 254 28 572 30 286

Source: SD&T programme


The annual performance plan requires that more than 70% of IIG recipients are majority black owned or -controlled (they must have a valid and confirmed level 1 or 2 BBBEE status). The list at the end of Q3 provided for 33 eligible grant recipients as indicated in the table below. Valid BBBEE certification was obtained for 30 of these (91%).

Table 24: IIG recipients that are majority black owned or -controlled

Number Name of institution confirmed and valid BBBee status

institutional investment grant particulars

1 FRESHCO Level 1 Turnaround strategy

2 Govan Mbeki Housing Company Level 1 Business process redesign

3 TopRoot Property Management Level 1 Staff gear-up

4 Hlalanathi SH Association Level 1 Staff gear-up

5 Povicom Level 1 Staff gear-up

6 Urban Status Rentals Level 1 Staff gear-up

7 DCI Community Housing Services Level 1 Project feasibility

8 Emalahleni Housing Company Level 2 Project feasibility

9 Emalahleni Housing Company Level 2 Project feasibility

10 Ermelo Social Housing (Pty) Ltd Level 1 Project feasibility

11 Mbombela Housing Association Level 1 Project feasibility

12 Hlalanathi SH Association Level 1 Development manager

13 DCI Community Housing Services Level 1 Development manager

14 DCI Community Housing Services Level 1 Development manager

15 Qhama Level 1 Staff gear-up grant

16 Brianwell Properties (Pty) Ltd Level 1 Project feasibility

17 SASIHC Level 1 Project feasibility Hull Street Phase 2

18 Golden West SHI Level 1 Staff gear-up

19 NASHO Level 1 General capacitation: Incubation

20 NASHO Level 1 General capacitation: Municipal support

21 NASHO Level 1 General capacitation: Technical support

22 NASHO Level 1 General capacitation: Institutional support

23 Zuberi Housing Company Level 1 Project feasibility

24 FMHC SA Level 1 Pre-accreditation

25 SOHCO Level 1 General capacity

26 Troyeville Housing Co-Operative Level 1 Remedial action

27 Property Sector Charter Council Level 1 General capacity

28 Mazzaroth Projects Level 1 Pre-accreditation

29 Hope Social Housing Project Level 1 Pre-accreditation

30 SCM Social Housing Level 1 Project feasibility

31 Isibani Anami Level 2 General capacity

32 Afrikhaya Level 1 Project feasibility

33 SASIHC Level 1 Project feasibility bulk services

Source: SD&T quarterly report, 2020/21

Key government stakeholders indicated in interviews that the sector had transformed since the inception of the programme, particularly the BBBEE status of SHIs. However, sector experts and SHIs interviewed believed there was no ‘visible’ transformation, particularly in the inclusion of women and youth.

Sector experts and SHIs recommended that greater flexibility and accessibility in the industry and the protocols would encourage transformation. Government participants proposed greater outreach to encourage further community upliftment.

Both government and sector experts felt that the social housing sector had achieved limited inclusive growth. Some suggested that the recommended enhancements may be well intended, but may not be reasonable given current external influences.

The current model of transformation ensures that transformation does not stop with the recipient and should extend throughout the value chain. Thus, the SHRA will enhance its role to ensure a consistent approach to measuring transformation in line with the amended BBBEE code and that transformation extends across the value chain.


6.8 stakeholder views on operating in the sector

This section is based on 31 interviews undertaken, and 54 responses from SHIs/ODAs to an internet survey.

1. Relevance and state of the sector: All respondents felt that social housing is extremely relevant, but most saw it as ‘struggling’, particularly government and SHI interviewees. Most interviewees are positive though. Of the 54 online respondents, 93% plan to develop additional social housing units over the next 12 months and 68% believe that the sector will grow in the next 24 months.

2. The extent to which the policy framework is enabling: Of the 54 internet participants, 72% felt that the Social Housing Act and policy framework have enabled sector growth, but recommend the following amendments:

y Greater support to SHIs in land and funds. y Reviewing income bands of qualifying beneficiaries and allowing more

flexibility. y Allowing SHIs to diversify their portfolio, for example, into student

accommodation. y Increasing the quantum and linking it to inflation.

Most interviewees want the legal framework amended, although government participants maintained that the current framework is enabling. Public sector interviewees felt the current funding framework was appropriate but needed amending. Other stakeholders felt that the framework hinders sector growth. Three key factors were identified as growth enablers - amendments to current protocols, time management (efficient communication among role-players) and expansion of social housing reach (not catering merely to the low- to middle-income earners but to middle- to higher-income earners).

3. SHRA performance: All interviewees felt that the SHRA is relevant and plays an important role. Most felt that it is more successful in a regulatory role than a managerial role. Some saw a conflict in the SHRA being both regulator and funder. Public sector participants generally felt that the SHRA had achieved what it had set out to do, but others disagreed. Interviewees’ mixed views on SHRA performance are mirrored in the internet survey, with 57% of respondents stating that the impact of the SHRA was both positive and negative and a further 41% calling it mostly positive, 72% feeling that it had enabled social housing growth. The SHRA, respondents said, inhibits growth through:

y The onerous approval process (47%). y Burdensome reporting requirements (59%). y Long accreditation turnaround time(53%).

The internet survey revealed the following SHRA enabling qualities:

y It provides direction and leadership on the Social Housing Policy and Social Housing Act (53%).

y It enables sector growth through regulation and promotion of sustainable integrated communities (37%).

y It provides a level playing field to access funding to manage and develop projects (16%).

It is noted that 65% of the internet survey respondents indicated that it is difficult or very difficult to apply for funding from the SHRA and a further 55% found the accreditation process to be difficult or very difficult.

4. Key challenges for SHIs/ODAs: Individuals from SHIs/ODAs cited administrative delays as their main challenge. Public sector representatives felt that they were insufficiently informed or had limited training to produce optimal outcomes. The following challenges were identified by the 54 SHIs/ODAs:

y Access to funding (42%). y Growing unemployment (32%). y Declining household income (30%). y Rising operating costs (28%). y Regulatory burdens (26%).

5. Roles of DFIs such as NHFC: Most SHIs, ODAs, SHRA management and sector experts indicated that the role that DFIs such as NHFC and DBSA play is critical to the continued development and growth of the sector. However, they noted that the disconnect between processes of the SHRA and DFIs hamper social housing delivery and may be causing the mismatch between demand and supply.Financial institutions interviewed said that DFIs’ role was limited by their involvement in accreditation and approval. Given their limited involvement from project initiation discussions to project realisation, DFIs are prevented from ‘doing more’ for the sector. Due diligence is completed by the SHRA), then approved projects must seek debt financing. However, when DFIs are approached, due diligence starts again, delaying project delivery and keeping supply low, said respondents.

6. Extent of private sector participation in the sector and challenges in increasing this participation: Stakeholders indicated the private sector’s role is limited even though it would enhance sector sustainability. Overwhelmingly, stakeholders agreed that the biggest hurdle is the sector’s not- for- profit status. Thus, the sector needs to incentivise private sector involvement, perhaps through focus on mixed-development property/projects.


7 fOCuSiNg ON ThE fuTurE – SOCial hOuSiNg iN ThE NExT dECadE

7.1 meeting the 30 000-unit target

The MTSF 2019 to 2024 has a target of 30000 social housing units. The SHRA’s ambitious Social Housing Programme Growth Plan will double the production rate for social housing in 2020/21 to 2024/25 compared with 2015/16 to 2019/20 and triple it from 2025/26 to 2029/30. This will add a further 87 500 affordable rental housing units and grow the size of the social housing portfolio in the country to 125 000.

In this growth plan, the SHRA argues that during 2019/20, the human settlements budget for capital expenditure was reduced to R32.752 billion. Of this, only R723.706 million, or 2,2% was allocated to social housing units. The HSDG budget soaked up the lion’s share of the capital budget (R18.779 billion or 57%); and the USDG budget was awarded R12.045 billion or 36.7%. Given a housing backlog of 2.3 million units and social housing unit demand of 320 000 units, the social housing share of the capital budget should be about 14% (R4.5 billion in 2019/20 budgeting terms).

At current cost and excluding escalations linked to building inflation, 87 500 state-subsidised social housing units would require a grant injection of R23.7 billion. This equates to 7.2% of the human settlements capital budget over the same period if the current year’s allocation of R32.7 billion is straight-lined.

The growth plan proposes the following:

1. Reform the budget by progressively growing the proportion of invested in social housing to a greater share (at least 7.5%) of the overall human settlements vote. A multiyear budgeting process against public sector budgeting should be considered, with the use of surpluses and other funding sources.

2. Pull in the established construction sector through proactive invitations to participate with conditions of authentic empowerment deals. This sector has much valuable expertise and experience to support the transformation drive, deliver at pace, and create and maintain jobs.

3. Approve a shortlist of essential policy reforms, including policy reforms that stipulate what is built and that lighten the regulatory burden and bureaucratic risks that accompany where to build. Essentially, the minimum norms and standards must accommodate more smaller but higher-density units and the rules governing how restructuring zones are gazetted should be revised to speed up the process.

4. Adopt a bolder expenditure-driven policy so that human settlements and social housing are seen as a strong and reliable contributor to infrastructure spending and job creation.

5. Sequence, align and make coherent the planning targets and key driving accountabilities and mandates of public entities. The growth plan framework proposes a system approach, where NHFC, the SHRA, and the Housing Development Agency (HDA) and others are only components of an overall system, and that targets and timeframes among public entities are mutually reinforcing and equally urgent.

6. Position the best capacity in the best places and concentrate to deliver the most important results. The SHRA needs to use its capacity and resources to solve problems, and achieve results and innovation. Administrative capacity must be relied on to support this leadership approach. Sound administrative processes alone are not enough, as they are a maintenance function. What is needed is sharper interventionist thinking and leadership thinking that is not drowned out by administrative-compliance thinking.

7. Actively manage waste, leakage, inefficiency, bribery, corruption, extortion and inefficiency so that perverse incentives are identified and managed and so that there is less leakage and less public money not being used effectively.

8. A medium- to high-density sectional title ownership programme needs to be considered, not inside the affordable rental housing programme, where ‘rent to buy’ will confuse and make the rental programme unsustainable by introducing unintended risks, but alongside and next to affordable rental houses.


7.2 challenges facing the sector

If public sector investment continues, the targets of the growth plan are achievable. There are challenges, but they are not insurmountable and stakeholder coordination is sufficient to overcome them.Among the key challenges are:

7.2.1 legislative and regulatory environment

The Social Housing Policy is 15 years old and the Social Housing Act 12 years old. Adjustments and enhancements would speed up production through broader participation and more diverse unit types. It is essential that the minimum 30m² unit size requirement be removed. The SHRA, with the policy branch of the National Department of Human Settlements, Water and Sanitation, is reviewing policy and will make recommendations to the Minister of Human Settlements, Water and Sanitation during 2020/21.

7.2.2 sector capacity

Management skills and governance in SHIs have been improved. Of concern is whether SHIs can expand sufficiently to deliver the number of units for which there is funding. New delivery methods and institutions are being explored - for example, having large construction companies partner with SHIs to develop projects, taking advantage of economies of scale. Bringing in private companies to provide social housing units will need to be more actively pursued.

The pool of sustainable SHIs needs to expand. Non-accredited and accredited SHIs that are not delivering need to be put under regulation and become sustainable. If not possible, they must close and their stock be transferred elsewhere.

7.2.3 Funding and financial viability

The subsidy allocation per unit has not been indexed. There is growing evidence that for the sector to grow, the subsidy allocation should rise with inflation each year.

The reluctance of private sector financial institutions to fund projects hinders SHIs’ ability to access the matching loan funding required. During 2018 and 2019, the SHRA liaised with Sanlam, the DBSA, the Public Investment Corporation, SA Homeloans, International Housing Solutions, Futuregrowth, Standard Bank, ABSA and Nedbank to expand their participation in the programme. Their appetite varies. Monthly engagements are also held with the NHFC.

7.2.4 affordability of tenants

Both the economy and escalating costs undermine tenants’ ability to pay rent. This is exacerbated by the Covid-19 pandemic. In addition, the expectation of a ‘free house’ through the housing subsidy programme leads to reluctance to pay by some members of the primary target group. Poor policing and an inability to enforce evictions of non-paying tenants are also problematic. Improved tenant screening and rental collection mechanisms address this to an extent, but given the economic vulnerability of the target market, this is a key concern, exacerbated by the fixed income profile that SHIs must structure for projects.

7.2.5 development costs

Access to affordable, well-located land is key. In addition, high bulk infrastructure contributions undermine the viability of projects. Escalating construction costs and fixed development standards are also problematic, as are rising municipal and utility charges, which increase the cost of the development and diminish tenants’ ability to pay rent.

Land assembly must be achieved in the most desirable locations for the construction of medium- to high-density affordable rental housing that is not disjointed from commercial and other land uses, and that is connected into the public transportation system.

The SHRA is addressing this challenge and has already had moderate success through coordination with the HDA, the Passenger Rail Agency of South Africa (PRASA), Intersite, Transnet and the Department of Public Works and Infrastructure in unlocking land, such as the PRASA land surrounding the Goodwood and Heiderveldt rail stations in Cape Town. Priority housing development areas implemented during 2020 may be a very important vehicle for land assembly.

7.2.6 impact on integration and city restructuring

The effectiveness of restructuring zones in achieving integration and restructuring is questionable. There are too many restructuring zones and often they are too large for social housing projects to have sufficient impact.

Furthermore, the requirement that restructuring zones be gazetted before the SHRA can accredit projects there is an impediment in some provinces because of the inability of some towns and provinces to administer restructuring zone approvals.

It is proposed that the gazetting of restructuring zones be removed from legislation and replaced with a less administratively cumbersome approach to selecting appropriate locations, driven predominantly by demand.

7.2.7 rent boycotts and political interference

Tenant unwillingness to pay rent and SHIs’ inability to act against non-payers are concerning. The promise of a free subsidy house and political interference, especially around national election time, undermine SHIs and their rental collections.

7.2.8 administrative delays

SHRA accreditation is onerous. Once completed, SHIs must apply for debt financing from financial institutions such as the NHFC. The accreditation process is then repeated, delaying the start of projects. A mechanism is needed to prevent delays. The SHRA and financiers must communicate on projects being accredited and those that have been accredited and need funding. Speeding up the process would also prevent SHIs from incurring additional costs.


7.2.9 Potential loss of capacity in the construction sector

Skills and capacity may be lost to other industries, even other economies, if the order book of construction companies remains too lean for them to sustain their overheads over a prolonged period. To maintain production levels at the desired pace and scale, access is needed to sufficient developers and contractors with plant and capacity (both financial and personnel) to maintain a Construction Industry Development Board (cidb) rating of nine. Certain larger construction firms have already ceased trading (notably Murray & Roberts) and others have declared declining returns and even marginal losses (Calgro M3 and Steffanuti Stocks).

Because of the capital intensiveness of the construction and infrastructure sector, it is essential that the economy sustain large-scale players that can carry multimillion rand overheads that come with large staff complements, insurance premiums, guarantees, and plant and equipment. This category of developer and main contractor is the base for sustained sub-contracting and beneficiation of small and medium-sized businesses given the opportunity to grow from one contract to the next and ultimately evolve into large developers and contractors. Access to contracts from public spending ensures that support is provided to new or emerging businesses (including women-owned businesses) that will achieve cidb ratings of nine through capacity built over various contracts.

7.2.10 The shra pipeline

The pipeline at December 2020 reported at end-Q3 2020/21 consisted of 520 projects with a potential yield of 21 167units The pipeline of projects registered with the SHRA will not achieve the desired growth. Thus, the SHRA published an expression of interest that closed in May 2020 to increase the number of its projects. Responses are being assessed.

Figure 17: Project pipeline


7.3 opportunities for the sector

7.3.1 sector sustainability

The affordable rental housing programme (social housing) has been evaluated by the Department of Planning, Monitoring and Evaluation and National Treasury as being the human settlements programme that sustains itself after construction has been completed, and where local authorities can recover their investment in municipal infrastructure and strengthen the revenue base of local government through the recovery of rates and municipal service charges.

7.3.2 National infrastructure investment Programme

The President announced that the government would build 37 000 rental apartments as part of the project pipeline supported through the Infrastructure Investment Programme over the next 10 years. This inclusion of the Social Housing Programme in the National Infrastructure Investment Programme supported infrastructure projects is an opportunity to link financing to projects far more quickly, potentially at a more attractive financing cost.

7.3.3 high demand

In 2016/17, SHRA independent research established that the demand for social housing was about 320 000 units nationally, comprising 235 000 units in metropolitan municipalities and 83 000 units in district municipalities. This is much higher than supply.

7.3.4 impact of social housing

Social housing can improve peoples’ lives and uplift communities. To date there have been no studies of the impact of social housing longitudinally to establish a clear trajectory and body of evidence.

7.3.5 Transformation

The Social Housing Programme can be a transformation instrument in the construction and property sectors through targeted procurement and informing sector codes on BBBEE. Policy and regulation need to be institutionalised and monitoring tools developed to ensure that the process is tracked and amended as needed.

7.3.6 construction industry potential

Present economic conditions in South Africa make for a very ‘hungry’ construction industry with insufficient work for available capacity. When economic growth is poor and business confidence is low, construction is the most negatively and heavily affected industry.

7.4 conclusions

In line with the Social Housing Act, this annual State of the Social Housing Sector Report provides an overview of the current state of the sector, including demand for social housing, sector profile and performance, the current state of transformation, and the successes, challenges, opportunities and developments facing the sector. It also presents the plans and initiatives of the SHRA and the sector to further the Social Housing Programme, policy and the sector in partnership with key role-players. This report is for the 2020 calendar year.

Social housing faces significant challenges, including insufficient funding from both public and private sectors, difficulties in accessing land for projects, slow and complex administrative systems and an outdated policy that hinders rather than enables delivery.

The results are insufficient delivery of social housing projects and units. Despite an increase in the number of SHIs under regulation, many SHIs are not able to deliver projects and funding allocated for projects does not result in development.

However, demand far exceeds supply and this offers huge potential to grow the sector. Furthermore, social housing is recognised an important delivery mechanism as it provides affordable rental to low-income households, and contributes to urban regeneration and the sustainably of local municipalities.

Accordingly, the SHRA’s growth plan formulated during the review year provides strong and clear direction to increase substantially the amount of stock provided by the sector. The plan calls for revisions to policy, the funding framework and processes for administering social housing.


8 rEfErENCES aNd daTa SOurCES8.1 documents reviewed

Centre for Affordable Housing Finance in Africa (2020). 2020 yearbook: Housing Finance in Africa. Johannesburg, South Africa. Accessed at: http://housingfinanceafrica.org/app/uploads/2020_CAHF_yEARBOOK_COMP-2.pdf




Centre for Affordable Housing in Africa (2016): Potential impact of social housing on the South African housing market. AfD/NHFC Social Housing Workshop (Presented June 2016).

CEO presentation – SHRA Investment Seminar 2020

Compliance Accreditation and Regulations Unit, Social Housing Regulatory Authority (SHRA), (2020). Transformation data

Crede Capital Partners, (2020). Review of current mechanisms for the social housing financing model

Department of Cooperative Governance, (2016). Integrated Urban Development Framework: A new deal for South African cities and towns, Pretoria

Department of Human Settlements (2019). Annual Report 2018-2019

Department of Human Settlements (2017). National Human Settlements Development Summit, Concept Note for Commission 1: Scenarios for human settlements policy and programmes

Department of Human Settlements, Water and Sanitation (2020). Land Assembly Policy for the human settlement sector

Department of Human Settlements, Department of Planning, Monitoring and Evaluation. (2016). Impact and implementation evaluation of the Social Housing Programme. Pretoria, South Africa: Author Rebel Group Advisory South Africa

Estimates of national expenditure. (2020). National Treasury Republic of South Africa. Accessed at: https://vulekamali.gov.za/2020-21/national/departments/human-settlements/

Gardner D, Lockwood K and Pienaar J. (2019). Analysing the economic impact of South Africa’s subsidy housing instruments: Cost benchmarking and impact on the economy. Accessed at: http://housingfinanceafrica.org/documents/analysing-the-economic-impact-of-south-africas-subsidy-housing-instruments-cost-benchmarking-and-impact-on-the-economy/

Hundenborn et al (2018). Inequality trends in South Africa: A multidimensional diagnostic of inequality. (2019). StatsSA. Accessed at: http://www.statssa.gov.za/publications/Report-03-10-19/Report-03-10-192017.pdf

Lockwood K. (2020). Unpacking the potential impact of the Covid-19 pandemic on the South African economy and the housing sector. 24 April 2020. Centre for Affordable Housing Finance in Africa. http://housingfinanceafrica.org/documents/unpacking-the-potential-impact-of-the-covid-19-pandemic-on-thesouth-african-economy-and-the-housing-sector/

Mosselson A. (2018). Caught between the market transformation: Urban regeneration and the provision of low-income housing in inner-city Johannesburg. Johannesburg: University of Johannesburg and University of the Witwatersrand

NASHO project database final version 5, (2017)

Pomeroy S and Sager M. (2014). Long-term financing of social housing: Examination of current practice and alternatives for a more sustainable future: Phase 2 Report. Pretoria, South Africa: NASHO

Sheba A, Turok I and Visagie I. (2020). The role of social housing in reducing inequality in South African cities. HSRC.

Social Housing Regulatory Authority (SHRA), (2020). Annual Performance Plan 2020/21, Parktown. Accessed at: https://shra.org.za/sites/default/files/SHRA%20-%20APP%202020_21%20%28Final%20-%2011%20March%202020%29.pdf

Social Housing Regulatory Authority (SHRA), (2020). Phase 2 Tenancy Audits 2019/20, Consolidated Baseline Report. Parktown.

Social Housing Regulatory Authority (SHRA), (2020). Social Housing Programme Growth Plan Framework

Social Housing Regulatory Authority (SHRA), 2018. State of the sector report. Available at http://www.shra.org.za/images/2018/reports/SHRA_State%20Sector%20Report_Final_OL.pdf

Social Housing Regulatory Authority (SHRA), 2018/19 Q4 Quarterly Report and Project Pipeline (2018).

Social Housing Regulatory Authority (SHRA), Annual Performance Plan, 2020/21, (2020)

Social Housing Regulatory Authority (SHRA), Annual Report, 2019/20, (2019).

Social Housing Regulatory Authority (SHRA), Compliance Monitoring Report Q4 2019, (2019).

Social Housing Regulatory Authority (SHRA), Compliance Monitoring Report Q4 2015: January – March 2016 quarterly reporting tools analysis (2016).

Social Housing Regulatory Authority (SHRA), https://www.shra.org.za/

Social Housing Regulatory Authority (SHRA), January – March 2020 quarterly reporting tools analysis (2020).

Social Housing Regulatory Authority (SHRA), Sector Development and Transformation Programme SD&T, Updated Expenditure, Budget, Commitments and cash flow for 2020/2021. Parktown.

Social Housing Regulatory Authority (SHRA), State of the Sector 2016

Social Housing Regulatory Authority (SHRA), Strategic plan 2020/21- 2024/25

Social Housing Regulatory Authority (SHRA), Strategic plan 2020-2025

South Africa, (2016). Social Housing Act 16 of 2008, General Notice 624 in Government Gazette 40312 Accessed at https://www.greengazette.co.za/notices/social-housing-act-16-2008-rules-on-long-term-accreditation-of-social-housing-institutions_20160930-GGN-40312-00624

State of the sector report 2018/29 (unpublished).

Statistics South Africa (2019). Consumer Price Index July 2020, Statistical Release P0141. Pretoria. Statistics South Africa.

Statistics South Africa, (2011). Statistical Release P0301.4, Census 2011. Pretoria: Stats SA Library Cataloguing-in-Publication (CIP) data

Statistics South Africa, (2016). Statistical Release P0301, Community Survey 2016. Pretoria: Stats SA Library Cataloguing-in-Publication (CIP) data

Statistics South Africa, (2018). Statistical Release P0318, General Household Survey. Pretoria: Stats SA Library Cataloguing-in-Publication (CIP) data

Statistics South Africa, (2019). Inequality trends in South Africa: A multidimensional diagnostic of inequality. Accessed at: http://www.statssa.gov.za/publications/Report-03-10-19/Report-03-10-192017.pdf

Understanding South Africa’s Housing Finance Market. (2020). CAHF. Accessed at: http://housingfinanceafrica.org/app/uploads/Focus-on-South-Africa.pdf

Wilson A. (2013). Housing co-operatives in South Africa: Presentation to the ICA Housing Seminar and Roundtable.

http://housingfinanceafrica.org/app/uploads/2020_CAHF_YEARBOOK_COMP-2.pdf

http://housingfinanceafrica.org/app/uploads/2020_CAHF_YEARBOOK_COMP-2.pdf

http://housingfinanceafrica.org/documents/analysing-the-economic-impact-of-south-africas-subsidy-housing-instruments-cost-benchmarking-and-impact-on-the-economy/



http://www.statssa.gov.za/publications/Report-03-10-19/Report-03-10-192017.pdf

http://housingfinanceafrica.org/documents/unpacking-the-potential-impact-of-the-covid-19-pandemic-on-thesouth-african-economy-and-the-housing-sector/



https://shra.org.za/sites/default/files/SHRA%20-%20APP%202020_21%20%28Final%20-%2011%20March%202020%29.pdf

https://shra.org.za/sites/default/files/SHRA%20-%20APP%202020_21%20%28Final%20-%2011%20March%202020%29.pdf

http://www.shra.org.za/images/2018/reports/SHRA_State%20Sector%20Report_Final_OL.pdf

http://www.shra.org.za/images/2018/reports/SHRA_State%20Sector%20Report_Final_OL.pdf

https://www.greengazette.co.za/notices/social-housing-act-16-2008-rules-on-long-term-accreditation-of-social-housing-institutions_20160930-GGN-40312-00624



http://www.statssa.gov.za/publications/Report-03-10-19/Report-03-10-192017.pdf

http://housingfinanceafrica.org/app/uploads/Focus-on-South-Africa.pdf

http://housingfinanceafrica.org/app/uploads/Focus-on-South-Africa.pdf


8.2 data sources

Estimates of National Expenditure. (2020). National Treasury Republic of South Africa. Accessed at: https://vulekamali.gov.za/2020-21/national/departments/human-settlements/

Gardner D, Lockwood K and Pienaar J. (2019). Analysing the economic impact of South Africa’s subsidy housing instruments: Cost benchmarking and impact on the economy. Accessed at: http://housingfinanceafrica.org/documents/analysing-the-economic-impact-of-south-africas-subsidy-housing-instruments-cost-benchmarking-and-impact-on-the-economy/

NASHO project database final version 5, (2017)

Residential Subsidy Programme (RSP) statistics: Updated project database, (2020).

Social Housing Regulatory Authority (SHRA), (2020). Phase 2 Tenancy Audits 2019/20, Consolidated Baseline Report. Parktown.

Social Housing Regulatory Authority (SHRA), Analysis Q4 2018/19 Compliance Report, (2019).

Social Housing Regulatory Authority (SHRA), Annual Performance Plan, 2020/21, (2020)

Social Housing Regulatory Authority (SHRA), Annual Report, 2019/20, (2019).

Social Housing Regulatory Authority (SHRA), Compliance Monitoring Report Q4 2019, (2019).

Social Housing Regulatory Authority (SHRA), Compliance Monitoring Report Q4 2015: January – March 2016 quarterly reporting tools analysis (2016).

Social Housing Regulatory Authority (SHRA), Register of Accredited SHIs and ODAs with Stock, (2020)

Social Housing Regulatory Authority (SHRA), SHI Register, at October 2020

Statistics South Africa, (2011). Statistical Release P0301.4, Census 2011. Pretoria: Stats SA Library Cataloguing-in-Publication (CIP) data

Statistics South Africa, (2016). Statistical Release P0301, Community Survey 2016. Pretoria: Stats SA Library Cataloguing-in-Publication (CIP) data

Statistics South Africa, (2018). Statistical Release P0318, General Household Survey. Pretoria: Stats SA Library Cataloguing-in-Publication (CIP) data

Statistics South Africa, (2019). Buildings Completed, P5041.3. Pretoria: Stats SA Library Cataloguing-in-Publication (CIP) data

Statistics South Africa, (2019). Statistical Release P03021, Mid-year population estimates. Pretoria: Stats SA Library Cataloguing-in-Publication (CIP) data

8.3 interviews

category Person interviewed

SHRA officials

1. Rory Gallocher, CEO

2. Alice Puoane, CSM

3. Mpolai Nkopane, Compliance

4. Lebowa Letsoalo, Technical

5. Dewalt Koekemoer, Institutional Support

SHIs/ODAs

6. Madulammoho

7. Imizi

8. SOHCO

9. JOSHCO

10. Tshwane MOE

11. Instratin

12. FMHC

13. The Housing Hub

14. yeast City Housing

15. Own Haven Housing Assoc (OHHA)

Financial institutions

16. Lawrence Lehabe, NHFC, Executive Manager

17. Shiraaz Lorgat, Gauteng Partnership Fund

18. Pierre Venter, BASA, General Manager

19. Megan Sager, Consulting for Sustainable Solutions, Director

Government

20. Palesa Ryan, Presidency

21. Mzikazi Koyana, Eastern Cape

22. Mdu Zungu, KwaZulu-Natal

23. Kahmiela August, Western Cape

24. Gail Eddy, City of Cape Town

25. S’mangele Moloi, eThekwini Metro

26. Petal Thring, City of Tshwane

Sector experts

27. Malcolm McCarthy, NASHO

28. Gafee Vengadajellum, Alcari

29. Alison Wilson

30. Johan Minnie, HDA, CEO

31. Arie Diephout, National Department of Human Settlements, Water and Sanitation, Adviser




mailto:[email protected]







9 aPPENdiCES

9.1 appendix a: methodology

The State of the Social Housing Sector Report is based on a range of data sources, including:

1. An extensive document review of a range of research reports, evaluations, policy papers, speeches, budget statements, frameworks and planning documents, among others. These were sourced from the internet, the SHRA and informants (see references section).

2. Analysis of various data from Quantec, Tenant Profile Network, NASHO and the SHRA (progress reports and audited statements from SHIs).

3. An electronic survey sent to 96 SHIs and 11 ODAs, which elicited 54 responses. 4. One-on-one interviews and group discussions with 31 key stakeholders (see table below) on a

range of policy, performance, management, f inancial and other issues, illustrating both the current state of the sector and possible future scenarios. Stakeholders included officials from the SHRA, social housing public officials from all three spheres of government, CEOs of well-established SHIs, officials from key housing finance organisations that fund social housing, public finance experts and social housing industry experts (see 8.3 above). Interview questionnaires were geared to elicit information on perceptions of sector performance.

Key challenges included:

y Lack of baseline data on the social housing sector and its performance. Available data was dated or unreliable. Gaps included reliable information on SHI performance and investment in the sector, including SHRA operational costs for funding instruments such as CCG and IIG for 2014 to 2019.

y Unavailability of audited financial statements for all 96 SHIs. Statements for only 20 SHIs/MOEs was used.

y Slow response to the internet survey, with some SHIs and ODAs stating that they had no stock under management and would not be able to contribute meaningfully.

y Some stakeholders declined to be interviewed as they had been interviewed earlier in the year and had already aired their views. This could have been due to interview fatigue or a belief that views are solicited but not much is done thereafter.

9.2 appendix B: overview of legislation and Policy

The legislative and policy framework for the social housing sector is found in the following key legislative and policy documents, which frame South Africa’s current human settlement policy:

y Constitution of South Africa, 1996 (Act No 108 of 1996) y Housing Act, 1997 (Act No 107 of 1997 as amended in 2001) y Residential Landlord and Tenant Act, 1997 (Act No 3 of 1997) y Rental Housing Act (Act No 50 of 1999)

The key elements of South Africa’s Social Housing Policy are found in the following legislative and policy documents, which are outlined in more detail in the sections that follow:

y Comprehensive plan ‘Breaking New Ground in Housing Delivery’, National Department of Housing, 2004 (Comprehensive Housing Plan)

y Social Housing Act (Act No 16 of 2008) y Housing Code, 2009 y National Development Plan, 2030 (2012) y Medium-term Strategic Framework (2014 – 2019) y Integrated Urban Development Framework

9.2.1 comprehensive Plan for the development of sustainable human settlements38

The Comprehensive Plan for the Development of Sustainable Human Settlements (2004), popularly known as Breaking New Ground, was the key document that emphasised the formal recognition by the government of social housing and defined the current role that it performs in the housing sector. As a policy document, Breaking New Ground shifted government’s emphasis from the provision of housing to the creation of sustainable human settlements, in a manner that is responsive to the demands of particular segments of society and local situations.

Breaking New Ground focuses on more efficient cities, towns and regions. In support of spatial restructuring, the plan highlights the need to ‘integrate previously excluded groups into the city and the benefits it offers’. The plan flags the need to promote densification, including ‘housing products which provide adequate shelter to households, whilst simultaneously enhancing flexibility and mobility’.

Breaking New Ground indicates that social housing is the key mechanism to achieving these objectives. Importantly, social housing was also linked to other municipal initiatives such as municipal redevelopment projects and the urban development zone tax incentive offered by the South African Revenue Service. The existing funding mechanisms for social housing were also identified as ‘inadequate’ and a new funding mechanism was identified whereby ‘funding support will thus shift away from the current emphasis on uniform individual subsidies, towards equity support for social institutions determined as a percentage of the total capital cost of the project’.

38 NDHS, 2004


9.2.2 social housing act (act No 16 of 2008)

The Social Housing Act provides the regulatory framework that reinforces government’s support to the social housing sector and sets the framework through which social housing is currently implemented, funded and regulated. The purpose of the Act is to:39

y Establish and promote a sustainable social housing environment. y Define the functions of national, provincial and local governments in respect of social

housing. y Provide for the establishment of the Social Housing Regulatory Authority (SHRA) to

regulate all social housing institutions obtaining or having obtained public funds. y Allow for the undertaking of approved projects by other delivery agents with the

benefit of public money. y Give statutory recognition to social housing institutions (SHIs).

The Social Housing Act defines social housing as a (p8) ‘rental or co-operative housing option for low- to medium-income households at a level of scale and built form that requires institutionalised management and is provided by social housing institutions or other delivery agents in approved projects in designated restructuring zones with the benefit of public funding’.

A social housing institution is defined as (p8) ‘an institution accredited or provisionally accredited … which carries or intends to carry on the business of providing rental or co-operative housing options for low- to medium-income households excluding immediate individual ownership… on an affordable basis, ensuring quality and maximum benefits for residents and managing its housing stock over the long term’.

A restructuring zone is defined as (p7/8) ‘a geographic area which has been – (a) identified by the municipality, with the concurrence of the provincial government, for purposes of social housing; and (b) that has been designated by the Minister in the for approved projects’.

39 Social Housing Act, 2008

The Act indicates that social housing must promote inter alia (p10):

y Training opportunities for stakeholders and interested parties who wish to enter the social housing market.

y The establishment, development and maintenance of socially and economically viable communities to ensure the elimination and prevention of slums and slum conditions.

y Social, physical and economic integration of housing development into existing urban and inner-city areas through the creation of quality living environments.

y Medium to higher density in respect of social housing development to ensure an economic utilisation of land and services.

y The provision of social, community and recreational facilities close to social housing development.

y The suitable location of social housing stock in respect of employment opportunities. y The creation of sustainable, viable and independent housing institutions responsible for

providing, developing, holding or managing social housing stock. y The use of public funds in a manner that stimulates or facilitates private sector investment and

participation in the social housing sector.

The Act indicates that the functions of the SHRA are to (p18/19):

y Promote the development and awareness of social housing. y Provide advice and support to the Department in its development of policy for the social housing

sector and facilitate national social housing programmes. y Advise the Minister on developments in the social housing sector. y Promote an enabling environment for the growth and development of the social housing sector. y Provide best practice information and research on the status of the social housing sector. y Support provincial governments with the approval of project applications by SHIs. y Assist with the designation of restructuring zones. y Accredit institutions meeting accreditation criteria as SHIs. y Provide financial assistance to SHIs through grants to enable them to develop institutional

capacity, gain accreditation as social housing institutions, and to submit viable project applications.

y Maintain a register of SHIs. y Enter into suitable agreements with social housing institutions and other delivery agents in

respect of the development of social housing projects in a manner which protects government’s investment.


9.2.3 housing code, 2009

The Housing Code sets out in one comprehensive document the national housing policy of South Africa, most significantly the rules and regulations pertaining to national subsidy programmes. The code is revised on an ongoing basis by the National Department of Housing.

Social housing is set out in Volume 3 of Part 6 of the Code together with community residential units (Volume 1) and institutional housing (Volume 2).

The Social Housing Programme provides grant funding to establish, capacitate and capitalise SHIs so that they develop, hold and administer affordable rental units in identified restructuring zones. A precondition for receiving capital grants is that SHIs are accredited by the SHRA and also access own capital contributions.40

The Social Housing Programme has two primary objectives:41

y To contribute to the national priority of restructuring South African society to address structural, economic, social and spatial dysfunctionalities, thereby contributing to government’s vision of an economically empowered, non-racial and integrated society living in sustainable human settlements.

y To improve and contribute to the overall functioning of the housing sector and in particular the rental sub-component, especially insofar as social housing is able to contribute to widening the range of housing options available to the poor.

The grant provided for social housing differs from other grants in the national housing programme in that it is not linked to individual housing units, but to a project. The intention was that each project would specify a range of housing products targeted at income groups appropriate to the context and to the restructuring aims of the Social Housing Policy and would be awarded a grant in line with this targeting.

9.2.4 National development Plan, 2030

The National Development Plan was developed by the National Planning Commission and offers a long-term vision and proposals for the elimination of poverty and reduction of inequality in South Africa by 2030.

The plan acknowledges the positive direction that human settlement policy has taken since the introduction of Breaking New Ground and endorses an emphasis on increased social housing delivery and inducements for affordable rental accommodation. It indicates further that housing funding should shift away from building single houses to supporting the development of a wide variety of housing types with different tenure arrangements (including affordable rental and social housing). Mixed-use development should be encouraged.

40 Simplified Guide to the Housing Code, page 2341 Housing Code, Vol 6, Part 3 Page 12

9.2.5 medium-term strategic Framework (2019 to 2024)

The Medium-term Strategic Framework 2019 to 2024 focuses on seven priorities of government. Priority 5 focuses on spatial integration, human settlements and local government.

The MTSF sets the five-year target at 42 000 social housing units in priority development areas.

9.2.6 integrated Urban development Framework (2016)

The Integrated Urban Development Framework is a policy initiative coordinated by the Department of Cooperative Governance and Traditional Affairs. It seeks to foster a shared understanding across government and society about how best to manage urbanisation and achieve economic development, job creation and improved living conditions.

The IUDF argues that housing demand is greater than the pace of formal housing delivery and land released due to increased urbanisation and changing demographics (smaller households and migration patterns). Poverty is growing in large urban areas. The lack of well-located land and high property prices mean that residential areas continue to be segregated based on race, social status or class, and housing remains unaffordable to many South Africans. The proliferation of marginalised and disconnected settlements (on the periphery of cities), with no integration with mobility interventions, makes access to socio-economic opportunities difficult, especially for low-income households. There is insufficient social and rental housing for the lower end of the market, especially on well-located land with good access to socio-economic opportunities.

All actors need to work together to reshape the built environment in municipalities. They include housing and land-related public institutions such as the National Home Builders Registration Council, the NHFC, the National Urban Reconstruction and Housing Agency, the SHRA and the HDA

Government’s priority is to finalise the Human Settlements White Paper, which should provide a model for responding to the various challenges. These include informal settlements upgrading, inner-city regeneration and renewal, multisegmented rental housing (including backyard rentals), devolution of the housing function, and access to basic infrastructure and services in new developments. It should also promote the development of housing along transport corridors and areas with economic potential, rather than on the periphery.

reGisTered Name oF The PUBlic eNTiTy

Social Housing Regulatory Authority

reGisTered oFFice address

Sunnyside Off ice ParkSentinel House, Third Floor32 Princess of Wales TerraceParktownJohannesburgSouth Africa

PosTal address Postnet Suite 240Private Bag X30500Houghton2041

TelePhoNe NUmBers 011 274 6200

email address [email protected]

weBsiTe address www.shra.org.za

isBN NUmBer 978-0-621-49288-0