ROLE OF SOUTH AFRICAN GOVERNMENT IN SOCIAL HOUSING. Section 26 of the Constitution enshrines the right to housing as follows:

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1 1 ROLE OF SOUTH AFRICAN GOVERNMENT IN SOCIAL HOUSING Constitution Section 26 of the Constitution enshrines the right to housing as follows: Everyone has the right to have access to adequate housing The state must take reasonable legislative and other measures within its available resources, to achieve the progressive realisation of this right. Initially government policy concentrated on the provision of ownership housing in pursuit of this constitutional right. Rental Housing Act, 1999 and Rental Housing Amendment Act 2007 By 1999 a policy shift to give more emphasis to rental housing started to occur. The Rental Housing Act, 1999 defines the responsibility of government in respect of rental housing property and creates mechanisms to promote the provision of rental housing property. The Rental Housing Act repealed the Rent Control Act of It is aimed at creating mechanisms to improve the functioning of the rental housing market and makes provision for the establishment of Rental Housing Tribunals. General principles governing conflict resolution and for the promotion of sound relations between landlords and tenants are laid out. In terms of government s responsibility to promote rental housing, it must: Promote a stable and growing market that progressively meets the latent demand for affordable rental housing among persons historically disadvantaged by unfair discrimination and poor persons, by the introduction of incentives, mechanisms and other measures that:

2 2 Improve conditions in the rental housing market Encourage investment in urban and rural areas that are in need of revitalisation and resuscitation Correct distorted patterns of residential settlement by initiating, promoting and facilitating new development in or the redevelopment of affected areas Facilitate the provision of rental housing in partnership with the private sector. Social Housing Policy, 2005 To support the implementation of BNG, the Social Housing Policy for South Africa (2005) Towards an enabling environment for social housing development was developed. GOVERNMENT APPROACH TO SOCIAL HOUSING Government policy intent is to extend rental housing opportunities, particularly where the market is presently not providing sufficient stock at affordable rentals. It has three programmes through which it is facilitating this development: Social housing Community residential units (CRU) Informal private rentals. The first two of these are in the process of implementation. The third is still at the stage of policy and programme development. A brief summary of the present policy framework of each of these programmes follows.

3 3 SOCIAL HOUSING The Social Housing Programme has two primary objectives: To contribute to the national priority of restructuring South African society in order to address structural, economic, social and spatial dys-functionalities. This will contribute to government s vision of an economically empowered, nonracial, and integrated society living in sustainable human settlements. To improve and contribute to the overall functioning of the housing sector, and in doing so contribute to widening the range of housing options available to the poor. The Social Housing Programme provides government subsidies and support for the development of medium-density rental housing in better-located parts of certain urban areas. Its primary objectives are the provision of affordable and well-managed rental stock to households in income ranges R1 500 to R7 500, while achieving greater economic and racial integration of the urban areas. Income target This programme is targeted at households with monthly household incomes ranging from R1 500 to R7 500 per month. The financing framework provides higher subsidies where targeted households are from lower-income groups earning less than R However, the present financing model means that most projects cater predominantly for households with monthly incomes between R2 500 and R Government grant The grant (subsidy) is provided in the form of a capital grant. This has two parts: Restructuring Grant national subsidy

4 4 This is a grant provided through the National Government and administered by a government agency called the Social Housing Regulatory Authority (SHRA) linked to very specific criteria regarding the location, viability and sustainability of the social housing project. It is paid to the Social Housing Institution (SHI) responsible for the development and long-term management of the project. The quantum varies based on the number of units and the income profile of the beneficiaries. Institutional Subsidy provincial subsidy This is a subsidy from the provincial government housing budget allocation. It is linked to rental and rent-to-buy tenure options. It requires linking to the allocation of the Restructuring Grant. Capital - loan financing Even if the two grants are allocated to a project it is necessary for the SHI to raise additional loan finance or equity to cover the developmental costs. Repayment on such a loan or equity is recouped through an element in the monthly rental charge. Operational financing. The cost of the administration and management of the stock must be covered in the charging of rentals. Rentals to recoup costs The monthly rental charged is usually made up of four elements: Loan and/or equity repayment charge Administrative costs of managing the units and linked tenancies Management costs of the units and linked tenancies

5 5 Development of a reserve that at least covers planned maintenance costs to maintain the units for a full lifecycle. It is important that such costs are properly controlled as it is essential to keep the rentals at levels that are affordable to the targeted income group, which presently would require rentals between R600 and R2 400 per month. RESPONSIBILITY FOR DEVELOPMENT AND MANAGEMENT OF STOCK AND LINKED TENANCIES The facilitation of the development of the stock and the long-term management is the responsibility of an SHI either not-for-profit or for-profit. In exceptional circumstances it is possible for a for-profit, non-shi to take responsibility for the development as long as it has a viable plan for the long-term management of the stock within the terms of the programme. This option is very rare. SHIs can be either independent or municipal entities. The latter are established in accordance with relevant government legislation including the Municipal Structures Act and the Municipal Finance Management Act (MFMA). Ownership of social housing developments The development must be owned or held on a long-term lease by the SHI. The SHI is not permitted to dispose of any SHI development or use it for any other purposes without the specific agreement of government. Such permission can only be granted within the strict conditions of the legislation and linked grant conditions. Location of social housing developments Since a major objective of the Social Housing Programme is to ensure greater economic and racial integration of urban areas, the grant is only accessible to projects that are in designated Restructuring Zones. These Zones are designated by National Government working with provincial governments and urban municipalities.

6 6 CHALLENGES FOR THE SOCIAL HOUSING PROGRAMME While the Social Housing Programme is growing and achieving many desired outcomes, challenges remain including: Increasing the quantum of the subsidy available for the programme to meet the demand The subsidy amount per unit makes it difficult for SHIs to develop sufficiently in the lower end of the targeted income range Accessing and packaging of more appropriate, well-located land Increasing the number of well-capacitated and well-run SHIs Strengthening of relationships between municipalities and SHIs Ensuring that the cost of utilities and municipal charges do not unnecessarily impact on affordability for lower-income tenants. COMMUNITY RESIDENTIAL UNITS (CRU) AND PUBLIC RENTAL HOUSING Community residential units The CRU Programme, launched in 2007, proposes a public sector response to providing low-income rental accommodation. The introduction of the CRU Programme was intended to encourage more efficient and effective management of the existing public stock while helping provinces and municipalities to develop new stock using their own land and existing buildings. The development of new stock and refurbishment of existing stock is financed through the provision of a government grant covering the full physical development costs of rental stock that must then remain in the ownership of provincial or local government. The operational management and administration costs must be covered through the charging and collecting of Economic Cost Recovery (ECR) rentals. Public rental housing

7 7 Public housing usually refers to housing owned by municipal or provincial government and used for providing rental accommodation for low-income households not specifically as part of an employment contract. Historically such stock was developed mainly in the former black townships. There are presently still many flats and housing units owned by provincial governments and municipalities used to provide rental housing for people on low incomes. However, there are a number of problems with this public rental stock including: Poor management of stock Highly subsidised rentals High levels of non-payment of rentals Lack of control over the targeting of use of rental stock Deteriorating condition of stock because of poor maintenance Financial drain on spheres of government by this stock. During the past five years there has been a policy shift to encourage government to remain involved in the development and management of rental stock for low-income households. INFORMAL RENTAL SECTOR Unsubsidised private rental is an increasingly important component of the housing milieu. An important, but largely unacknowledged sector in South Africa is the smallscale landlord. Studies show that small-scale landlords offer at least as much accommodation as has been delivered through the National Housing Subsidy Scheme between 1994 and 2009.

8 8 An estimated 1, 85 million households (or 15% of South African households) rent accommodation provided by small-scale landlords. Most of these units are located in the backyards of formal dwellings, with between 23% and 33% of rented units being located in informal settlements. Demand for stock is high, with the majority of landlords saying it is easy to find tenants. Small-scale landlords have therefore contributed significantly to the supply and management of affordable rental housing for low-income people while also earning an income for themselves and enhancing the value of their properties. The government is presently undertaking policy research on possible support of this sector. However, as yet there is no coherent government policy or developed programmes in this sub-sector in the rental market. The developing policies and implementation mechanisms are concentrating on how to stimulate the development of private sector backyard and shared accommodation rentals that provide decent basic accommodation as well as enhancing security of tenure for tenants. ROLE OF NATIONAL GOVERNMENT The overall role and responsibilities of national government listed are as follows: Provide overall leadership for the sector Create an enabling environment for rental housing, through the development of policy and enactment of legislation Ensure attention to constitutional responsibilities Provide a regulatory and legislative framework within which actors in the sector must operate Address issues that affect the growth and development of the sector Fund the Rental Housing Programmes

9 9 Administer the standard / fixed restructuring components of the capital grant Approve the designation of Restructuring Zones submitted by provinces and local authorities Approve rental housing projects, programmes and business plans submitted by provinces Establish institutional capacity to support rental housing initiatives Monitor the effective use of government grants for housing including subsidised rental housing. SOCIAL HOUSING REGULATORY AUTHORITY (SHRA) The SHRA has been established as a direct consequence of the Social Housing Act. Its specific mandate is to stimulate and regulate the establishment and running of SHIs responsible for the development and management of social housing rental stock in the country. In doing so it has the responsibility for the assessment of social housing projects and co-ordinate decision making on the allocation of the Restructuring Grant. It further has an important locus in the capacity development of SHIs. This involves: Accrediting SHIs and approving their project applications Accrediting projects to be developed by private sector developers and managers wanting to develop social housing projects in restructuring areas Conducting compliance monitoring Enforcing compliance where necessary Advising the Minister on social housing matters

10 10 Formulating, directing and overseeing the capacity building programme to build the social housing sector. PROVINCIAL GOVERNMENT: Provincial government is responsible for: The overall co-ordination of provincial housing rental policy, strategy and the delivery of housing rental housing to households on lower incomes who qualify within national subsidy policies. Managing the allocation of the Provincial Housing Grant allocated as part of the national budget. In the rental sector this is particularly pertinent to the allocation of CRU subsidy and the institutional subsidy element available for social housing projects. Assisting in the development of capacity of the municipalities to prepare their rental housing strategies as part of their Integrated Development Plans (IDPs) Co-ordinating the implementation of these rental housing projects. Assisting in making available appropriate province-owned land and buildings for use in rental housing within the CRU and social housing programmes Allocating additional grants available for special needs housing which can include rental. Monitoring and evaluating the roll-out of the rental programme in the province and the use of provincial government grant allocations. RENTAL HOUSING TRIBUNALS These were set up at a provincial level in terms of the Rental Housing Act. Their intention is to assist with the resolution of disputes between landlord and tenants in terms of the conditions set down in the Act. Although independent, they are set up by and receive administrative support from provincial government. The effectiveness of rental tribunals varies from province to province.

11 11 MUNICIPALITIES In terms of the Constitution, national legislation and policies, municipalities have a primary responsibility for the realisation of development, particularly for people who were previously disadvantaged living in their areas. This includes facilitating the provision of housing. With regard to rental housing the municipality is expected to: Develop appropriate housing strategies incorporated in its IDP Assess needs, demand and gaps in supply for rental housing Help in securing the resources to respond to these Structure partnership arrangements with key stakeholders to ensure delivery Identify appropriate projects that meet the national policy requirements Apply for or assist in applying for government financing of such projects In some instances directly implement such projects Provide access to municipal infrastructure and services for rental housing, and where appropriate with local fiscal benefits. Roles of municipalities in social housing Identify suitable municipal land for social housing development and release in an appropriate way to SHIs Where identified as a broad Restructuring Zone, municipality to define specific restructuring zones within its area Co-operate with SHIs in their areas through partnerships and Service Level Agreements (SLAs) to ensure effective allocation and management of social housing stock and tenancies Monitor the delivery by SHIs on projects that specifically use municipal resources Provide preferential access to SHIs to acquire local authority rental stock

12 12 Assist SHIs in their establishment stages by providing logistical and resource (financial, human and technical) support Provide grant funding and assist with sourcing additional funding Provide access to bridging finance for SHIs. CONCLUSION In order to ensure mobility of people and promoting a non-racial, integrated society is a key government imperative. The emphasis on the need to deliver housing products that provide adequate shelter to households whilst simultaneously enhancing flexibility and mobility typically entails the establishment of institutional mechanisms to hold housing as a public asset over a period of time. The direct objective of the social housing instrument is accordingly to facilitate the production of effectively managed institutional housing in the areas where demand for institutional or managed housing, of all types, exists. In South Africa Social Housing takes various forms and it is essential that various housing typologies be conceptualized broadly to ensure the inclusion of all income groups. Social housing is understood to accommodate a range of housing product designs to meet spatial and affordability requirements. Social housing products may accordingly include multi-level flat or apartments options for higher income groups (incorporating beneficiary mixes to support the principle of integration and cross-subsidization); cooperative group housing; transitional housing for destitute households; communal housing with a combination of family and single room accommodation with shared facilities and hostels.