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Strategic Research into LEVERAGING AFFORDABLE HOUSING FINANCE FOR GAUTENG PARTNERSHIP FUND
Investment ClimateInvestment Climate
The STRATEGIC FORUMSTRATEGIC FORUM ScenariosFOR THE BUILDING INDUSTRY: 2010-2020
BOUYANT GROWTH> 5 % PA
GDFI > 25 % OF GDP
SUBSIDIES3 - 5 % OF BUDGET
AVERAGE GROWTH 2 - 5 % PA
GDFI 20 - 25 %OF GDP
SUBSIDIES2 - 3 % OF BUDGET
LOW GROWTH0 - 2 % PA
GDFI 15 - 20 %
OF GDPSUBSIDIES
1 - 2 % OF BUDGET
NEGATIVE GROWTH< 0 % PA
GDFI < 15 %OF GDP
SUBSIDIES< 1 % OF BUDGET
NO
CO
NF
IDE
NC
E L
OW
A
VE
RA
GE
H
IGH
CO
NF
IDE
NC
ER
isk
Avo
idan
ce
Ris
k A
vers
ion
R
isk T
ole
ran
ce
Ris
k T
akin
g
PROPERTY A POOR INVESTMENT / AVERAGE / GOOD / A PREFERRED INVESTMENTParadigm Regression Paradigm Paralysis Paradigm Shift Paradigm Reinvention
HIGH ROAD HIGH ROAD
COLUMBUS SCENARIOCOLUMBUS SCENARIOProperty a PREFERRED Investment
Home Ownership PREFERRED
BUOYANT GROWTH
Backlogs eliminated by 2015
UPPER MIDDLE ROAD UPPER MIDDLE ROAD
APOLLO SCENARIOAPOLLO SCENARIOProperty a GOOD Investment
Home Ownership DESIRED
AVERAGE GROWTHErosion of Backlogs
LOWER MIDDLE ROADLOWER MIDDLE ROAD
SOYUZ SCENARIOSOYUZ SCENARIOProperty an AVERAGE Investment
Home Ownership QUESTIONED
LOW GROWTH
Keeping pace with Population
LOW ROAD LOW ROAD
CHALLENGER SCENARIOCHALLENGER SCENARIOProperty a POOR Investment
Home Ownership AVOIDED
NEGATIVE GROWTHIncreasing BACKLOGS
Inv
es
tor
Co
nfi
de
nc
eIn
ve
sto
r C
on
fid
en
ce
Trends in the Building Industry are inextricably responsive to, and influenced by INVESTMENT
CLIMATE, INVESTOR CONFIDENCE and PROPERTY DELIVERY.
Trends in the Building Industry are inextricably responsive to, and influenced by INVESTMENT
CLIMATE, INVESTOR CONFIDENCE and PROPERTY DELIVERY.
Property
deliv
ery
Property
deliv
ery
Dr. Llewellyn B Lewis
P r i n c i p a l C o n s u l t a n t B M I B u i l d i n g R e s e a r c h S t r a t e g y C o n s u l t i n g U n i t c c P O B o x 7 8 4 1 3 3 S A N D T O N 2 1 4 6 S o u t h A f r i c a T e l . I n t . ( 2 7 1 1 ) 8 8 4 - 2 0 7 5 T e l . L o c a l ( 0 1 1 ) 8 8 4 - 2 0 7 5 F a x L o c a l 0 8 6 6 4 7 2 4 9 4 r e s e a r c h @ b m i - b r s c u . c o . z a s t r a t e g y @ b m i - b r s c u . c o . z a w w w . s t r a t e g i c f o r u m . c o . z a
The Affordable Housing delivery process is part of the Sustainable Integrated Development strategy of Government. The strategy followed by GPF as a Partner of choice in the mobilization and facilitation of funding for the delivery of affordable housing is mindful of this dynamic in the market place. In the assessment of financing Partnership opportunities GPF is committed to support Government policy in creating Environments for Investment and great experiences in quality environments. It is recognized that a collaborative effort is required between Government, Private Sector and the Community, involving all types of housing solutions and tenure options to solve the housing crisis. GPF is also mindful of the importance to align its vision with that of all the Stakeholders in the Affordable Housing environment.
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Page 1
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Studium Ad Prosperandum
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BUILDING RESEARCHSTRATEGY CONSULTINGUNIT cc
Reg. No. 2002/105109/23
•
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Studium Ad Prosperandum
Voluntas in Conveniendum
BUILDING RESEARCH
STRATEGY CONSULTING
UNIT cc
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BMI•
BMI
Studium Ad Prosperandum
Voluntas in Conveniendum
BUILDING RESEARCHSTRATEGY CONSULTINGUNIT cc
Reg. No. 2002/105109/23
•
BMI
Studium Ad Prosperandum
Voluntas in Conveniendum
BUILDING RESEARCH
STRATEGY CONSULTING
UNIT cc
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BMI•
BMI•
BMI•
All rights reserved. No part of this document may be reproduced, photocopied or transmitted in any form, nor may part of this document be distributed to any person not a full-time
employee of the subscriber, without the prior written consent of the consultants. The subscriber agrees to take all reasonable measures to safeguard this
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Although reasonable care has been taken to ensure the accuracy of this report, no legal responsibility can be accepted by BMI Building Research Strategy Consulting
Unit cc for the information and views expressed herein.
© May 2012
BMI Building Research Strategy Consulting Unit ccAll rights reserved
__________________________________________________________________________________________Leveraging Affordable Housing Finance
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GAUTENG PARTNERSHIP FUND (GPF) LEVERAGING HOUSING FINANCE IN SUSTAINABLE INTEGRATED HOUSING DEVELOPMENTS
RESEARCH BY BMI BUILDING RESEARCH STRATEGY CONSULTING UNIT CC
INDEX PAGE
1. INTRODUCTION 3
2. THE SUSTAINABLE INTEGRATED HOUSING ENVIRONMENT 5
3. THE AFFORDABLE HOUSING CHALLENGE 12
4. CURRENT REALITY 23
4.1 The Dynamics of Building Industry activity 23 4.2 The Dynamics of the formal Residential market 25 4.3 The Dynamics of the Affordable Housing market and the Role of GPF 27
5. THE DYNAMICS OF THE RESIDENTIAL PROPERTY MARKET 34
5.1 The Dynamics of the Mortgage Bond Market 34 5.2 The Dynamics of the Rental Market 36 5.3 The Dynamics of the Property Market 43
6. FORCES AT PLAY IN AFFORDABLE HOUSING 51 6.1 Demand side forces 51 6.2 Supply side forces 55 7. ALIGNMENT
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GAUTENG PARTNERSHIP FUND (GPF)
LEVERAGING HOUSING FINANCE IN SUSTAINABLE INTEGRATED HOUSING DEVELOPMENTS RESEARCH BY BMI BUILDING RESEARCH STRATEGY CONSULTING UNIT cc
1.
INTRODUCTION
The Vision of the Gauteng Partnership Fund is To be the pre-eminent partner in the mobilisation and optimisation of alternative funding; and a leading catalyst in the development of affordable housing in Gauteng. The Mission of the Gauteng Partnership Fund In achieving the above vision, the GPF defines its mission as follows: As a development finance institution, we pro-actively leverage affordable housing, by: � Facilitating dynamic collaboration with the eco-system of public and private sector
partners, � Securing new and innovative funding streams, � Gearing private sector finance to ensure better bankability of projects, � Ensuring accountability, monitoring and efficiency in the long-term management of
projects, thereby ensuring that housing financiers enter the affordable housing market on a sustainable basis – in support of sustainable human settlements and quality household life. (www.gpf.org.za)
Mandate The Gauteng Partnership Trust, trading as the Gauteng Partnership Fund (GPF) is a Trust which was established in 2002 by the then, Gauteng Department of Housing. It is listed as a Schedule 3C public entity under the Public Finance Management Act (PFMA). The GPF is further governed by its trust deed. On inception in 2002, the central mandate of the GPF was to “resuscitate the social housing market with a focus on rental housing in Gauteng”. In 2008 and beyond, this originally narrower definition has been operationally expanded and broadened by the Board and DLGH to enable the GPF to operate across the whole affordable housing value chain; the goal being to facilitate, catalyse, secure and optimise investment into affordable housing within the Gauteng Province, in support of Provincial Priorities and Outcomes. In delivering upon this mandate, the GPF defines its target market as: ”those defined as beneficiaries of the state, by current definition.” The level will track CPI annually. The GPF key goal is to facilitate and catalyse the development of affordable housing in Gauteng, through leveraging key strategic partnerships with full value chain stakeholders, and thereby innovating financial investment opportunities. (www.gpf.org.za) It is understood that the GPF has a specific mandate to: � Form partnerships to address blockages and bottlenecks across the entire lower-cost
housing service delivery value chain; � Facilitate integrated developments as per the sustainable human settlements policy
framework.
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� Normalise the Social Housing Market in Gauteng through innovative funding interventions (as a mechanism to entice capital market investment into this market);
� Provide enhanced gearing for private commercial funding; � Facilitate private bank funding into this sector. It is within this context then that the GPF defines its purpose and strategic intent. (www.gpf.org.za) Strategy The Gauteng Partnership Fund, is aligned to both national and provincial strategic priorities and outcomes, and the Department of Local Government and Housing (DLGH) Strategic Plan. In keeping with the focus of the DLGH, the GPF supports Provincial Outcome 6, as a proactive contributor to the development of sustainable human settlements and quality of household life in Gauteng. Within Outcome 6, the GPF supports the following provincial outputs 1. Accelerated delivery of housing opportunities 2. More efficient land utilisation 3. Improved property market
The Gauteng Partnership Fund envisages that in achieving its mandate, purpose, vision and mission outlined above, its overarching strategic goal is to increase, leverage and involve private sector funding for affordable housing in Gauteng. In order to realise this goal, the GPF seeks to enhance its visibility and credibility in the market through strategic collaboration with a well-informed stakeholder base (both internal and external stakeholders); play a catalytic role in shaping the affordable housing agenda in Gauteng, and provide timely and accurate performance information and data on all aspects of its work. This enhanced recognition will be because of success in ensuring the facilitation and funding of affordable housing development in Gauteng, and building a self-sustaining and relevant business model, which enables the GPF to speak authoritatively on the issues facing the
__________________________________________________________________________________________Leveraging Affordable Housing Finance
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affordable housing segment of the market. This will require the GPF to ensure the optimised management of its own internal resources and processes and will necessitate deal flow and the creation of new revenue streams; and a focus on cost efficiencies and the consolidating of provincial resources to benefit from economies of scale. It is realised that to achieve this lofty goal, the GPF must equally focus on effective and excellent management of its own internal processes and systems, and on attracting, retaining and developing the best possible resources, able to contribute meaningfully to the achievement of these stated goals. In this light, the Strategic Objectives of the Gauteng Partnership Fund are: 1. To enhance the visibility and maintain the credibility of the GPF. 2. To ensure the facilitation of, and funding for, housing developments 3. To ensure a sustainable and effective operating model. 4. To ensure optimised financial and systems management and good governance. 5. To attract and retain skilled performing individuals to ensure the achievement of GPF
strategic objectives.
2. THE SUSTAINABLE INTEGRATED HOUSING ENVIRONMENT
The Strategic Development rationale provides the context in making sense of the sustainable integrated housing environment. The unique environmental forces in the South African housing domain leads to the opportunities and threats peculiar to this market. The resources and capabilities available in Government and the Industry lead to the strengths and weaknesses in the system. This is filtered through the development paradigm in the development of the industry foresight, informed by an understanding of the environment and the industry. The contribution of the various stakeholders is premised on the Vision and Mission of the National Department of Human Settlements: VISION A nation housed in sustainable human settlements with access to socio-economic infrastructure. MISSION To establish and facilitate a sustainable process that provides equitable access to adequate housing or all within the context of affordability of housing and services and access to social amenities and economic opportunities.
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The Affordable Housing delivery process is part of the Sustainable Integrated Development strategy of Government as shown in the graphic. The strategy followed by GPF as a Partner of choice in the mobilization and facilitation of funding for the delivery of affordable housing is mindful of this dynamic in the market place.
In the assessment of financing Partnership opportunities GPF is committed to support Government policy in creating Environments for Investment and great experiences in quality environments.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
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VISION•To develop an ambitious, city-within-a-city mixed-use developments of excellence, symbolic of the destination –‘City of Africa’.
•The developments encapsulate an international city-within-a-city quality of lifestyle in mixed-use developments and attracts a cosmopolitan group of buy-to-live residents, professionals and corporates to sustainable MIXED USE INTEGRATED DEVELOPMENT precincts that are vibrant and alive 24 hours a day.
MICRO ENVIRONMENT:MIXED USE INTEGRATED
DEVELOPMENT
VISION • A nation housed in
sustainable human settlements with access to socio-economic infrastructure
MISSION• To establish and facilitate a
sustainable process that provides equitable access to adequate housing or all within the context of affordability of housing and services and access to social amenities and economic opportunities.
• Typified by that of The City of Johannesburg, that it will
• work with all partners and stakeholders to lead an Inner City Housing Plan that provides or ensures at least 50 000 (and ideally 75 000) new residential units by 2015, either in the Inner City or near to it. On rough estimates of demand it is projected that some 20 000 of these units must be affordable to households in lower income bands if the collective problem of a stressed Inner City residential environment is to be solved.
• The City of Johannesburg envisages the creation of the largest mixed income community in the country, built on the basis of inclusionary housing.
VISION • A province where all
households inhabit quality homes in vibrant and sustainable communities.
MISSION • To provide appropriate
quality services, tenure, housing in targeted precincts and communities working in partnership with stakeholders.
VALUES • Batho Pele • Discipline • Transparency • Independence • Accountability • Responsibility • Fairness • Social Responsibility
MACRO ENVIRONMENT: GDHS
MACRO ENVIRONMENT: LOCAL AUTHORITIES
MACRO ENVIRONMENT: NDHS
STAKEHOLDER VISIONS
THERE IS ADDED VALUE THROUGH THE ALIGNMENT OF THE VISIONS OF MIXED USE INTEGRATED DEVELOPMENTS AND INVESTORS, NDHS, GDHS, PROVINCES AND LOCAL AUTHORITIES
It is recognized that a collaborative effort is required
between Government,
Private Sector and the Community, involving all types of housing solutions and tenure options to solve the housing crisis. GPF is also mindful of the importance to align its vision with that of all the Stakeholders in the Affordable Housing environment.
The matrix of housing solutions for Household Incomes (HHI) across the housing spectrum is shown in the next graphic. It is noted that Public Private amenities are required in every housing solution.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
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AFFORDABLE RENTAL SOCIAL HOUSINGSUBSIDY AND CREDIT LINKED
AVERAGE COST R58 - R150 000
(20%)CONTRACTOR BUILT
HHI R1500 – R3500
PUBLIC (RDP) GIVEAWAY HOUSINGSUBSIDY FUNDED
AVERAGE COST < R58 000
(30%)CONTRACTOR BUILT
HHI < R1500 PM
ENTREPRENEURIALRENTAL SOCIAL HOUSING MORTGAGE LINKED AVERAGE COST
R150 000 – R325 000
(40%)CONTRACTOR BUILT
HHI R3500 – R10000
ENTREPRENEURIALRENTAL SOCIAL HOUSING MORTGAGE LINKED AVERAGE COST
> R325 000
(10%)CONTRACTOR BUILT
HHI R10000 – R15000.
SUSTAINABLE INTEGRATED DEVELOPMENT
COMPETITIVE POSITIONING: MIXED USE INTEGRATED DEVELOPMENTS
PUBLIC/PRIVATEAMENITIES
Public/Private Partnerships,
Schools, Clinics,
Shopping Centres, Offices,
Industrial.
CONTRACTOR BUILT
The competitive positioning of Mixed Use Integrated Developments includes the Residential and Non Residential components. It can be noted that the Residential component is spread across the segments. The Non Residential sector is related to the Residential (as a percentage of m2). The different segments of Non Residential are also spread across the total of the sector.
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LOCALITYACCESSIBILITY
TRANSPORTIMPACT
BRANDINGUSP
MARKETINGPROMOTION
BUILDINGSTYLE
THEMATIC DESIGN
STANDARDS
ECOLOGICALIMPACT
FACILITIESMANAGEMENT
SECURITY
INVESTMENTFEASIBILITYAMENITIES
PUBLIC SPACES
LANDSCAPINGGARDENS
PAVING
OPTIMALMIXED USE
RESIDENTIALAND
NON RES
EVENTSATTRACTIONS
UNIQUE FEATURES
ADDED VALUE ?
ADDED VALUE ?
ADDED VALUE ?
Market SegmentsValue chain
SCHOOLS
OFFICES
LUXURY HOUSINGAPARTMENTS
FLATSRETIREMENT HOUSING
MIDDLE INCOME HOUSINGAFFORDABLE HOUSING
RETAILING, RESTAURANTS
CLINICS, HOSPITAL
• 30% Affordable “GIVE AWAY” RDP housing development
(< R75 000); • 20% Middle-income GAP housing (R75 000-R150 000);
• 40% Middle income GAP housing (R150000 – R325 000);• 10% Middle income Bond Housing units (R325 000 – R450 000 +).
COMPREHENSIVE MIXED-USE DEVELOPMENT OFFERING
HOTELS, CONVENTION CENTRES
THE HOUSING CHALLENGECOMPETITIVE POSITIONING: MIXED USE INTEGRATED DEVELOPMENTS
THE MIXED USE INTEGRATED DEVELOPMENT is the preferred destination to Corporate South Africa.
Non Residential m2 = 33,9% of Residential m2. • Offices and Showroom space (28,94%);
• Retail and Mixed use Developments (28,24%); • Warehouse and Commercial (42,82%).
The MIXED USE INTEGRATED DEVELOPMENT, will serve all types of residents, workers, shoppers and tourists. Proximity to a Railway Station an advantage.
INDUSTRIAL, WAREHOUSING
The previous graphic shows the competitive positioning of Mixed Use Integrated Developments from the point of view of the Residential component. It will be noted that the Rental Market can operate from a Household Income (HHI) of > R1500 per month and up to R15000 per month. This would involve Housing solutions from R75000 to R450 000 and upward.
There has been a global movement towards a preference for Rental Housing instead of purchase. Rental is particularly relevant to the lower to middle income groups from a Household Income of R1500 – R15000 per month.
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It is within this environment that the development facilitation process takes place. GPF provides venture capital funds and helps to mobilise Institutional funding for Affordable Rental or Entrepreneurial Rental Social Housing.
Financial Institutions provide
development finance and typically the developer provides equity in the form of serviced or un-serviced land as well as the resources and skills to design, negotiate the contract and manage the project on behalf of the
NEWCO consortium. The strategy to leverage affordable
housing finance followed by GPF as a Partner of choice in the mobilization and facilitation of funding for the delivery of affordable housing is premised on the development facilitation process. In the development process the developer may have access to the land as owner or part owner and can access Institutional subsidies for Affordable Rental or Entrepreneurial Rental Social Housing.
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GPF facilitates the process through participation in the provision of Venture Capital Funding. A SPV may be formed between GPF as Investment Partner, a Financial Institution or Institutions and the Developer. The SPV would then appoint or outsource the management of the development, thus ensuring a quality environment.
The development facilitation process provides Win-Win potential to all participating Stakeholders.
• Leveraged Venture Capital Funds by GPF provide potential for lowering Cost of Affordable Housing Finance;
• The Bank/s benefit through Financial Charter (FSC) Points, and risk sharing (Bankruptcy remote); There is an exit or re-mortgaging potential after second exit point;
• The DEVELOPER has potential to buy out Banks and Investor through re-mortgaging and to become sole Property Landlord at second exit point;
• The Contractor can focus on productivity and quality and is assured of timeous payment;
• The DHS Vision of Sustainable Integrated Housing is achieved;
• The Tennant can develop credit rating to obtain mortgage for Home Ownership should they so desire (Banks or NHFC);
• Newco can outsource to Professional Managing Agent (e.g. JHC, Trafalgar);
• Commitment and sustainability of Institutional Funding provide NEWCO with major Differentiating feature;
• The Investor has the option of exit at Second Exit Point with Funds recycled into other developments.
GPF adds value to the process through:
• Ensuring that the NDHS vision of integrated sustainable developments are adhered to in terms of design philosophy and community needs;
• The provision of leveraged financing thus lowering the cost of financing;
__________________________________________________________________________________________Leveraging Affordable Housing Finance
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• The provision of venture capital and risk sharing at least up to the completion of construction and as long as required thereafter;
• Participation and overseeing the management of the rental stock of the development to ensure good governance and to protect its investment.
3. THE AFFORDABLE HOUSING CHALLENGE
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CUMULATIVE PERCENTAGE OF LSM G1- 6 AND LSM G7-10 HOUSEHOLDS
EARNING LESS THAN A GIVEN INCOME INCOME : 2010(Source: AMPS 2009, BMI-BRSCU Workings)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1-499 500-799 800-1499 1500-1999 2000-2499 2500-3499 3500-5999 6000-8999 9000-10999 11000-
11999
HOUSEHOLD INCOME CATEGORIES
CU
MU
LA
TIV
E P
ER
CE
NT
AG
E
LSM GROUP 1-6 HOUSEHOLDS
LSM GROUP 7-10 HOUSEHOLDS
INCOME GAP
Highest Gini coefficient in the World.
THE HOUSING CHALLENGEThe Income Gap: 2011
The housing challenge is the consequence of the lack of affordability and the high unemployment rate. This has led to the introduction of subsidies which has resulted in the building of over 2 million affordable houses since 1994. Nevertheless the backlog is still some 2,3 million units and the housing delivery will have to be increased substantially over the next 15 years to eliminate the backlog.
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• Affordability: High inequality of income(Based on AMPS 2010)
• Ambitious Housing Code
• Lack of end-user finance– R1 Billion Mortgage Guarantee fund
– Reluctance of formal financial institutions to lend in certain areas and to certain groups
• New trend toward facilitating Rental Housing Development
Socio-political and environmental issues
• Backlog
• High expectations
• Lack of delivery
• Poor consumer education
• Low levels of household expenditure dedicated to housing
• Limited perceptions of housing as an investment
• Non-payment
• Crime and violence
• Other issues, such as traditional tenure
• Trend towards preference for Rental due to preference for mobility et al
Income category Percentage Number
households
� R10000
R3500-R10000
R2500-R3500
R1500-R2500
R800-R1500
R0-R800
25,0%
32,9%
9,1%
12,5%
15,3%
5,3%
3,4m
4,5m
1,2m
1,7m
2,1m
0,7m
Total 100% 13,6m
South Africa has probably the most ambitious housing subsidy policy in the
world, and its success in delivering houses
these past 19 years to a population previously excluded from the property
market is internationally renowned, hugely
respected, and the envy of many nations. (Kecia Rust, Feb 2010)
(Based on Kecia Rust, Finmark Trust)
1 723 544 872 093 3 449 359 2 426 746 1 320 766 1 021 479 287 475 989 673 1 487 221
12
.69
%
6.4
2%
25
.40
%
17
.87
%
9.7
3%
7.5
2%
2.1
2%
7.2
9% 10
.95
%
0%
5%
10%
15%
20%
25%
30%
35%
40%4.88 5.06 4.04 4.84 4.97 4.44 4.98 4.68 4.04
0200 000400 000600 000800 000
1 000 0001 200 0001 400 0001 600 0001 800 0002 000 0002 200 0002 400 0002 600 0002 800 0003 000 0003 200 0003 400 0003 600 000
- E
aste
rn C
ap
e
-M
ph
um
ala
ng
a
- G
au
ten
g
-K
wa
zulu
/Na
tal
- N
ort
hw
est
- N
ort
he
rnC
ape
- L
imp
op
o
- F
ree
Sta
te
We
ste
rn C
ap
e
PE
RC
EN
TA
GE
Household Size
NU
MB
ER
S O
F H
OU
SIN
G
TOTAL DWELLINGS IN SOUTH AFRICA BY PROVINCE : 2011(Total = 13,578 Million Housing Units)
(Source: StatsSA, AMPS 2010, BMI-BRSCU Workings)
It will be shown later that even if housing delivery is increased to nearly 425 000 per annum by 2020 resulting in the provision of over 3 million units by that time, the backlog will still be over one million units. This has inevitably led to the conclusion that rental housing should be encouraged, because not everybody can or wants to own a home. The graphic highlights the issues and confirms the trend towards preference for rental due to the preference for mobility.
Providing affordable housing and addressing the spatial disparities of South Africa’s urban landscapes are policy priorities. More than 3 million housing units have been delivered since 1994, but there is a remaining backlog estimated at 2.1 million houses. Population growth trends, including continued urban-rural migration patterns, put pressure on cities to adapt and expand infrastructure quickly. Nearly 70 per cent of the housing backlog is in urban areas. While demand is increasing, the pace of delivery has declined, partly due to higher building and land costs. The persistence of large informal settlements has necessitated a shift towards developing serviced sites, security of tenure and affordable rental housing. To support this outcome, R50.5 billion is allocated for low-income housing and upgrading informal settlements in secondary cities, as well as R27 billion for upgrading informal settlements in large cities over the next three years. (2012 Budget Review, Chapter 7).
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3 491 746
4 553 622
1 013 782
395 426
125 312
641 078
1 318 921
1 585 199
16 420
4 622
391 203
41 022
13 578 355
House or brick structure on a separate stand or yard < 80 m2
House or brick structure on a separate stand or yard > 80 m2
Flat in block of flats + Town/cluster/semi-detached house (simplex:duplex: triplex)
House/flat/room in back yard
Room/flatlet not in back yard but on a shared property
Informal dwelling/shack in back yard
Informal dwelling/shack NOT in back yard e.g. in an informal/squattersettlement
Traditional dwelling/hut/structure made of traditional materials
Caravan or tent
Private ship/boat
Workers Hostel/Bedroom
Other
TOTAL
Housing Stock in South Africa by type of Dwelling: 2011: Units(Source: StatsSA, Census 2007; Extrapolation to 2011 by BMI-BRSCU Workings)
Black, 10 438 205, 77%
Coloured, 1 018 273, 7%
Asian, 343 142, 3%
White, 1 778 735, 13%
DWELLING UNITS OWNED OR OCCUPIED BY RACIAL GROUP: 2011: UNITS(Total = 13 578 355)
(Source: StatsSA, Census 2007; Extrapolation to 2011 by BMI-BRSCU Workings)
BLACKS OWN OR OCCUPY 77% OF THE
DWELLINGS IN SA BY NUMBER
Nation building
through Home
Ownership
The total dwellings in South Africa (all types) exceeds 13,5 million with formal urban housing some 9,6 million units. The value of Residential property (land included) exceeds R5 Trillion, compared with Non Residential Building of just over 2 Trillion. All property has a value including traditional dwellings built of traditional materials. This represents the wealth of the nation.
Blacks own or occupy 77% of the dwellings in South Africa by number of units, Asians 3%, Coloureds 7% and Whites 13%. Home ownership has an important role to play in Nation Building.
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HOME OWNERSHIP PER LIVING STANDARDS MEASURE GROUP: 2010(Source: AMPS 2011, BMI-BRSCU database)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
LSM G1 LSM G2 LSM G3 LSM G4 LSM G5 LSM G6 LSM G7 LSM G8 LSM G9 LSM G10
LIVING STANDARD MEASURE GROUP
HO
US
EH
OL
DS
*1000 (
BA
R)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1,351 1,575 1,885 2,582 3,515 6,090 9,644 13,262 18,223 27,647
AVERAGE HOUSEHOLD INCOME (R/M)
PE
RC
EN
TA
GE
(L
INE
)
OF
HO
US
EH
OL
DS
Ow
nin
g t
heir
Ho
mes
in
LS
M G
rou
p
7,038 Million Households in
LSM Groups 1-6 (76,97%) own
their own Homes
3,220 Million Households in LSM
Groups 7-10 (76,25%) own their own Homes
Home ownership is high at over 76% for both LSM Groups 1-6 and 7-10.
Affordable housing
comprises 90% of the annual housing need (in numbers) and 53% of total housing invest
Affordable housing
comprises 53% of total housing investment.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 17
1835 3130 3670 3778 4210 2591 2051 2159R 0
R 200 000
R 400 000
R 600 000
R 800 000
R 1 000 000
R 1 200 000
R 1 400 000
R 1 600 000
R 1 800 000
LU
X/L
US
H
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
11000-11999 12000-13999 14000-15999 16000-19999 20000-24999 25000-29999 30000-39999 40000+
HO
US
E P
RIC
E W
HIC
H C
AN
BE
AF
FO
RD
ED
* *E
xclu
din
g c
ost
of
sta
nd
House Type
UN
ITS
Household Income
NEW HOUSING NEED PER (HIGH) INCOME CATEGORY AND AFFORDABILITY : 2011(Source: AMPS 2010, BMI-BRSCU Workings)
Housing Provision (Units) Affordable House at 9,5% Interest Rate
Total number of units across the housing spectrum = 249 756
Total number of Upper Middle to Luxury Units = 23 424
Due to the inequality in income the housing profile is skewed to the left. The major housing
need is for housing costing less than R325 000 for those 75% of households earning less
than R10 000 per month.
The total number of units across the housing spectrum in 2011 was 249 756. Of these there
were some 23 424 units costing more than R325 000, for those households earning more
than R11 000 per month.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 18
In the Affordable and Private Housing spectrum the relationship between Household Income
and affordability is illustrated across the entire income and housing solution spectrum. It is
evident that 48,14% of households earn less than R3 500 and qualify for houses costing up
to R150 000. Less than 10% of households earn more than R11 000 pm and qualify for a
house costing more than R325 000.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 19
-80%-70%-60%-50%-40%-30%-20%-10%0%10%20%30%40%50%60%70%80%90%100%110%120%130%
Gold
bo
om
SA
SO
L II
SA
SO
L III
Auste
rity
packa
ge
Ru
bic
on
sp
ee
ch
De
bt sta
nd
still
Eco
no
mic
re
covery
Ma
nde
la's
re
lea
se
De
mocra
tic E
lectio
n
Tra
nsitio
n to
De
mo
cra
cy
Cu
rren
cy c
olla
pse
Worl
d T
rade
Ce
ntr
e
BN
G H
ou
sin
g P
rog
ram
me
Sub
Pri
me
Cri
sis
(N
CA
)
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
Y/Y
Pe
rce
na
tag
e C
ha
ng
eDefining Events
R M
illi
on
s (
Cu
rren
t V
alu
e)
Total Mortgage Loans and Readvances: 1979-2011 (Current Values) (Source: SARB, BMI-BRSCU Workings)
R233 Billion taken out of the system
in two years!
IncomeHouse cost
% pop
(2110)
Estimated backlog
Ownership Rental
>R11000
“Normal”
Suburban > R325 000
9,66%
(should be 21,7%)
40-60 000
(unintended consequences)
Banks reluctant
to lend. Delivery
down to 23423 pa (s/b 35048)
Declined 80% from 2005-2011.
(9328-1874)
R11 000 Entrepreneurial
Rental Social Housing
Potential
111 682 Units pa
R325 000 42,2%
(should be
36,2%)
± 850 000 units
<R325 000 and growing
Average
118912 units
delivered annually
(2002-2011)
Social housing stock: <75 000
units total
nationally
rental
R3 500
Affordable
Rental
Social
R150 000 10,41%
(should be 9,1%)
Affordable Housing Backlog About 2,3 mio units
26 245 units
delivered in
2011
Some private
sector rental:
inner city & backyard
R2 500 Housing
Programme
Potential
62 152 Units pa
R125 000 14,2%
(should be
12,5%)
± 2,3m subsidised units delivered to date
35 907
subsidised
houses
delivered in 2011
Backyard
rental; informal
settlement;
overcrowding
R1 500
R0
R75 000 23,5%
(should be
20,6%)
59 268
subsidised houses
delivered in
2011
Backyard
rental; informal settlement;
overcrowding
G
A
P
(Based on Kecia Rust, Finmark Trust)
THE HOUSING CHALLENGEThe housing opportunity spectrum: 2011
The housing opportunity spectrum is put into perspective in the above graphic. It is evident
that the Rental market is historically not well served in the HHI range below R11 000 pm for
houses costing less than R325 000. This is mainly backyard rental or informal settlements.
The Rental market in the HHI range above R11 000 pm is under threat because the rental
stock is not being added to in sufficient numbers. Typically this market is provided for by
individual investors in the buy-to-let sector and not by institutional investors. There is not one
listed property fund in the residential sector.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 20
It will be shown later that the buy-to-let
market has declined from some 25% in
2005 to less than 8% currently. This is bad
enough but simultaneously the annual
housing delivery in this segment
(Dwellings > 80 m2 and Flats and
Townhouses) declined from 46 639 to
23 423 units. This followed the sub-prime
crisis, the introduction of the NCA and the
continued reluctance of the Banks to grant
mortgage bonds for first homes and even
more so for buy-to-let or holiday homes.
The earlier graphic shows that from
2007 to 2009 a massive R233 Billion
was taken out of the system with near
disaster impact on the building
industry.
This confirms that the strategy of GPF to
encourage the building of rental stock is
appropriate. The market and pricing
segment is also well chosen.
The Gauteng Partnership Fund's role is to
bridge the gap between government and
the private sector on affordable housing
projects.
• Rental Housing Fund and
Empowerment Property Fund
• Social Housing Fund
• Management of social housing
institutional subsidies
• Strategic partnerships projects (banks and development finance institutions)
• Sustainable Housing Fund (integrated housing developments)
Fundamental to the GPF strategy is the Social Housing Rental and the Entrepreneurial
Social Housing Rental fund.
DEFINITION OF SOCIAL HOUSING
Social housing is defined as:
• A rental or co-operative housing option for low income persons at a level of scale and
built form which requires institutionalised management and which is provided by
accredited social housing institutions or in accredited social housing projects in
designated restructuring zones. (SOCIAL AND RENTAL INTERVENTIONS: SOCIAL
HOUSING POLICY | PART 3 (OF THE NATIONAL HOUSING CODE) | 2009)
Of almost 6 million residential properties on
the Deeds Registry, 3.5 million (58%) are
valued at less than R500,000.
Of about 6886 suburbs on the deeds
registry, about 3500 have an average
property value of less than R500 000.
• Just under half (47%) of affordable market
properties are found in former-black
townships
• Only about 4% of properties in the
affordable market are in Sectional Title
schemes
• So far, in 2010, 80% of all new build has
been in the affordable market; vs. about
35% of all resale
• The Free State is the most affordable
province, with 83% of its properties valued
at less than R500 000 each
• The ABSA house price index (December
2011) estimates that the average nominal
value of a home in the small houses (40m2-
79m2) segment of the market is about
R706,367 (www.alhdc.org.za)
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 21
SOCIAL HOUSING PROGRAMME
Security of tenure remains one of the fundamental principles of housing policy.
Where other programmes provide freehold tenure to households, there has been an
increasing need for affordable rental units which provide secure tenure to households
which prefer the mobility provided by rental accommodation. The Social Housing Programme
therefore applies only to “restructuring zones” which are identified by municipalities as areas
of economic opportunity and where urban renewal/restructuring impacts can best be
achieved. The Programme also aims at developing affordable rental in areas where bulk
infrastructure (sanitation, water, transport) may be under-utilised, therefore improving urban
efficiency.
The Programme provides for grant funding to establish, capacitate and capitalise social
housing institutions which may develop, hold and administer affordable rental units within
identified restructuring zones. A precondition for receiving capital grants is that social
housing institutions need to be accredited and also access own capital contributions.
IMPORTANT CONSIDERATIONS
A Social Housing Regulatory Authority will deal with the accreditation of Social Housing
Institutions in terms of legislation and regulations.
Social housing projects need to demonstrate their viability in each specific settlement
context, but always with the objective of achieving the goals of integration and restructuring.
Subsidy funding will be provided on a sliding scale based on the number of poor
households accommodated subject to certain conditions.
THE ROLE-PLAYERS AND DECISION-MAKERS
The following institutions each have an important role to play in the implementation of Social
Housing Projects:
• Social Housing Regulatory Authority;
• Municipalities;
• The Provincial Departments;
• The National Department;
• Delivery Agents; and
• National Housing Finance Corporation.
INSTITUTIONAL SUBSIDIES
Security of tenure remains one of the fundamental principles of housing policy.
Where other programmes provide freehold tenure to households, there has been an
increasing need for affordable rental units that provide secure tenure to households,
which prefer the mobility provided by rental accommodation.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 22
Owing to a variety of reasons the market has not provided adequate units in the lower end of
the rental market.
As the Social Housing Programme focuses mainly on achieving urban integration and
upgrading and is applicable only in declared restructuring zones, the need remains for a
programme that will provide for affordable rental accommodation in other parts of settlements
(e.g. as part of informal settlement upgrades where such settlements are not well located
with regard to employment opportunities but where certain members of the community may
need rental accommodation).
Hence an Institutional Housing Subsidy Programme has been introduced to provide
capital grants to social housing institutions which construct and manage affordable rental
units. The Programme also provides for the sale of units by the social housing institution after
at least four years have lapsed.
Housing institutions need to meet certain criteria to qualify for the subsidy. These are:
• The institution must have legal status;
• The main object of applying for the subsidy must be the development and holding of
immovable property for occupation;
• The institution must be financially viable;
• Institutions must make a financial contribution in addition to the subsidy; and
• Institutions will normally be required to own immovable property, although longterm leases
may be found acceptable.
The institution must ensure that beneficiaries are granted secure tenure rights.
Institutions who meet the designated criteria may apply to the MEC for an institutional
subsidy in respect of a lease agreement, instalment sale or share-block agreement
scheme. Qualifying beneficiaries then apply to the housing institution to occupy the rental
stock.
Thereafter institutions need to conform to the requirements governing their accreditation and
in doing so are required to submit regular progress reports to the Provincial Department.
THE ROLE- PLAYERS AND DECISION-MAKERS
Housing Institutions apply to the MEC for the subsidy.
The MEC assesses an institution’s application and if the application is acceptable, grants the
subsidy to the institution.
The institution is responsible for the construction/provision of the rental stock and all
maintenance of the said stock and to operate the stock in terms of the conditions of
accreditation.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 23
4. CURRENT REALITY
An accurate, insightful view of current reality is as important as a clear vision
4.1 The Dynamics of Building Industry activity
The Building Industry plays an important role in the economy. It is a large Industry, it has critical mass and momentum and a good future.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 24
R*Million % m2*1000 %
2 255 1.46% 906 2.31%
13 372 8.67% 2 774 7.07%
4 845 3.14% 996 2.54%
863 0.56% 150 0.38%
7 871 5.11% 1 763 4.49%
20924 13.57% 8404 21.43%
2940 1.91% 1181 3.01%
70 0.05% 28 0.07%
7923 5.14% 3182 8.12%
61064 39.61% 19 384 49.43%
2 352 1.53% 382 0.97%
3 309 2.15% 583 1.49%
3 140 2.04% 785 2.00%
1 269 0.82% 247 0.63%
3 601 2.34% 693 1.77%
12 157 7.89% 2392 6.10%
5 617 3.64% 1105 2.82%
29 506 19.14% 5807 14.81%
60951 39.53% 11995 30.59%
28 117 18.24% 6851 17.47%
4 046 2.62% 986 2.51%
154 177 100.00% 39 215 100.00%
TOTAL NON RESIDENTIAL
Unrecorded Res Adds and Alts
Unrecorded Non Res Adds and Alts
GRAND TOTAL
(Source: BMI-BRSCU)
PUBLIC NON-RESIDENTIAL
General Government
Public corporations
Private Business Enterprises
Offices
Shops
Industrial & warehouse
Other
Additions & Alterations
Public corporations
Private Business Enterprises
TOTAL RESIDENTIAL
PRIVATE NON-RESIDENTIAL
Additions & alterations
PUBLIC RESIDENTIAL
Affordable Housing
General Government
INVESTMENT IN BUILDING: 2011: R MILLION AND M2*1000
PRIVATE RESIDENTIAL
Dwelling-houses < 80 m2
Dwelling-houses > 80 m2
Townhouses & Flats
Other (Incl. hotels & casinos)
Warren Buffett says 'hormones' will save the housing market. But this time he's not saying exactly when. In his annual letter to Berkshire Hathaway shareholders, which was released in February, Buffett says he still believes a real estate recovery is on the horizon. Yet, the Oracle of Omaha admits that on housing his crystal ball has been cloudy. Last year, Buffett said the real estate market would recover in 2011 or early 2012. While home sales have risen recently, it would be a stretch to call the past year a recovery, and Buffett doesn't try. 'I was dead wrong,' he writes. Nonetheless, Buffett says a turnaround for housing is in the works. Buffett's argument mostly rests on demographics and, in part, on sex. He says the housing bust was created by the fact that home builders put up houses faster than there were new families to fill them. Recently, that trend has reversed. 'People may postpone hitching up during uncertain times, but eventually hormones take over,' he writes. 'And while 'doubling-up' may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.' (Fortune, February 2012)
The following graphic shows the Investment in Building in both m2 and value.
Affordable housing is an important aspect of Government policy. In the above table and graphic it is shown as about R21 Billion. However it is a known fact that the average cost of an affordable house is in the region of R120 000. If this is the case then the R21 Billion could easily be double at more than R40 Billion. This makes Affordable Housing a very important sector.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 25
2 255
13 372
4 845
863
7 871
20 924
2 940
70
7 923
61 064
2 352
3 309
3 140
1 269
3 601
12 157
5 617
29 506
60 951
28 117
4 046
0 10 000 20 000 30 000 40 000 50 000 60 000
PRIVATE RESIDENTIAL
Dwelling-houses < 80 m2
Dwelling-houses > 80 m2
Townhouses & Flats
Other (Incl. hotels & casinos)
Additions & alterations
PUBLIC RESIDENTIAL
Affordable Housing
General Government
Public corporations
Private business enterprises
TOTAL RESIDENTIAL
PRIVATE NON-RESIDENTIAL
Offices
Shops
Industrial & warehouse
Other
Additions & Alterations
PUBLIC NON-RESIDENTIAL
General Government
Public Corporations
Private business enterprises
TOTAL NON RESIDENTIAL
Unrecorded Res Add's and Alt's
Unrecorded Non Res Add's and Alt's
INVESTMENT IN BUILDING BY SECTOR AND BY SEGMENT: 2011: R MILLIONS (2011 VALUES)(TOTAL = R154 177)
(Source: SARB, StatsSA, MFA, BMI-BRSCU Workings)
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Nu
mb
er
of
Un
its
BPP & BC Residential Dwellings < 80 m2: 1993-2012 by month: Number of Units (JAN)(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: DW < 80 UNITS)
BC RES DWELLINGS < 80 M2: NUMBER BPP RES DWELLINGS < 80 M2: NUMBER
12 per. Mov. Avg. (BC RES DWELLINGS < 80 M2: NUMBER) 12 per. Mov. Avg. (BPP RES DWELLINGS < 80 M2: NUMBER)
500
700
900
1 100
1 300
1 500
1 700
1 900
2 100
2 300
2 500
2 700
2 900
3 100
3 300
3 500
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Nu
mb
er
of
Un
its
BPP & BC Residential Dwellings > 80 m2: 1993-2012 by month: Number of Units (JAN)(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: DW > 80 UNITS)
BC RES DWELLINGS > 80 M2: NUMBER BC RES DWELLINGS > 80 M2: NUMBER
12 per. Mov. Avg. (BC RES DWELLINGS > 80 M2: NUMBER) 12 per. Mov. Avg. (BC RES DWELLINGS > 80 M2: NUMBER)
4.2 The Dynamics of the formal Residential market
The provision of
Dwellings < 80 m2
as reported by
StatsSA has
declined steadily
since about 2000.
The same trend is
evident for
Dwellings > 80 m2
and for Flats and
Townhouses but
the decline started
in 2007.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 26
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2 200
2 400
2 600
2 800
3 000
3 200
3 400
3 600
3 800
4 000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Nu
mb
er
of
Un
its
BPP & BC Residential Flats and Townhouses: 1993-2012 by month: Number of Units (JAN)(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: F&TH UNITS)
BC FLATS AND TOWNHOUSES: UNITS BPP FLATS AND TOWNHOUSES: UNITS
12 per. Mov. Avg. (BC FLATS AND TOWNHOUSES: UNITS) 12 per. Mov. Avg. (BPP FLATS AND TOWNHOUSES: UNITS)
2010 2011 2012
Dwelling Houses > 80 m2 753 945 796 735 1025 830 1053 1007 897 976 1004 835 578 832 1056 753 901 1068 1053 1050 1094 1084 1100 886 812
Dwelling Houses < 80 m2 1138 1602 1738 1289 1727 1205 1374 1507 1454 1981 2275 1568 652 1761 2330 1786 1391 1463 2057 1795 1648 1432 1607 1573 1470
BC FLATS AND TOWNHOUSES: UNITS 409 649 1097 1076 857 846 1026 989 935 914 1236 931 575 713 1034 656 669 975 603 432 1038 1174 1014 662 603
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2 200
2 400
2 600
2 800
3 000
3 200
3 400
3 600
3 800
4 000
4 200
4 400
4 600
Nu
mb
er
of
Un
its
BC Residential Flats and Townhouses, Dwelling Houses < and > 80 m2: 1993-2012 by month: Number of Units (JAN)
(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: F&TH UNITS)
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
NU
MB
ER
OF
UN
ITS
INVESTMENT IN RESIDENTIAL BUILDING: 1993 -2011: ( UNITS)2012-2020: LOWER MIDDLE ROAD SCENARIO (UNITS)
(Source: StatsSA, SARB, MFA, BMI-BRSCU Workings)
Dwelling Houses < 80 m2 Dwelling Houses > 80 m2 Townhouses and Flats DHS Delivery: Affordable Housing
The mix in
numbers of these
housing segments
is shown in the
graphic for 2010
up to January
2012.
The expectation is
that the trend to
2020 under the
Lower Middle
Road Scenario will
remain fairly flat.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 27
5 4
80 9
806
43
98
3
14
56
5
21
34
2 26
24
5
48
16
4
37
20
5
19
54
3
1 8
35
3 1
30
3 6
70
3 7
78
4 2
10
2 5
91
2 0
51
2 1
59
0
15 000
30 000
45 000
SH
EL
P 1
SH
EL
P 2
INC
/SH
EC
H
INC
/SH
ES
H
CO
NV
/LIS
H
CO
NV
/LA
SH
ST
D/M
ISH
ST
D/M
AS
H
ST
D/M
US
H
LU
X/L
US
H
1-499 500-799 800-1499
1500-1999
2000-2499
2500-3499
3500-5999
6000-8999
9000-10999
11000-11999
12000-13999
14000-15999
16000-19999
20000-24999
25000-29999
30000-39999
40000+
UN
ITS
HOUSING MARKET PER LSM GROUP: 2011: UNITS(Source: StatsSA, AMPS 2010, BMI-BRSCU Workings)
GAP Market111 682 Units
Affordable Rental Social Housing
(62 152 Units)
Entrepreneurial Rental Social Housing(111 682 units)
4.3 The Dynamics of the Affordable Housing market and the role of GPF
The strategic intent and overarching strategic goal of GPF is to increase and leverage the involvement of private sector funding for affordable housing in Gauteng, but with the underlying objective to expand countrywide. As stated by CEO, Kutoane Kutoane ‘I will be making a proposal to central government for the GPF’s model to extend beyond the province, whether that means we need to transform or create a new entity doesn’t matter’. Gauteng Partnership Fund plays a pivotal role in the provision of affordable housing, acting as a catalyst for investment by matching private-sector funding with public-sector contributions. However, CEO Kutoane Kutoane wants to build more than just houses; he wants to build communities. Of particular interest to GPF is the encouragement of Affordable Rental Social Housing and Entrepreneurial Rental Social Housing. The intent is to facilitate the building of 20 000 rental units in the next 3 years. From the above graphic it can be seen that the potential market for Affordable Rental Social Housing, countrywide is 62 152 for 2011 or about 186 456 in 3 years. The potential market for Entrepreneurial Rental Social Housing is 111 682 for 2011 or 335 046 for 3 years, thus a total of 521 502. Some 40% of this total will be in Gauteng, thus about 208 600. Market National
Market size (3 years)
GPF Strategic Intent (3 years)
GPF share of National Market (3 years)
Gauteng Market Size (3 years)
GPF share of Gauteng Market (3 years)
Affordable Rental Social Housing
186 456 10 000 5,4% 74 582 13,4%
Entrepreneurial Rental Social Housing
335 046 10 000 3,0% 134 018 7,5%
Total 521 502 20 000 3,8% 208 600 9,6% The 20 000 unit intent of GPF would thus represent about 10% market share of the Gauteng market and 3,8% of the national market. GPF have developed specific product offerings, the Rental Housing Fund and the Social Housing Fund for the purpose of participating in the market. The GPF seeks to continually develop products aimed at addressing housing market funding challenges. GPF products are reviewed annually to determine their effectiveness.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 28
The Gauteng Partnership fund (GPF) was established by the Gauteng Department of Housing to address funding challenges in the affordable housing sector. The table shows the estimated Residential and Non Residential investment in Sustainable Integrated Developments in 2011. It can be seen that the approximately 250 000 houses built in the year resulted in investment of R159 Billion (land excluded). And . . . created 266 000 jobs in the process. Clearly this is an extremely important sector of the economy. The GPF assists the affordable housing sector by:
• Providing public funding as equity cushion to investors.
• Providing prospective funders with sustainable entry into the social housing financing market by means of various products.
• On a project-by-project basis, GPF will assist the housing companies to procure finance at the most favourable terms in order to promote affordable, quality accommodation that is well managed for the target market.
Rental Housing Fund The Rental Housing Fund was developed for entrepreneurial rental housing institutions that require an equity injection to the project. The GPF equity enhances the debt to equity ratio for projects to enable lenders to finance, on favourable terms. Any company or project (SPV) with a recognised legal form that provides rental or delayed ownership schemes to majority families with household with monthly income less than R15 000 (Adjusted according to CPI) can qualify. The institution must demonstrate to GPF that they have the technical resource capacity to succsesfully complete the project as well as efficiently manage the property thereafter. Types of Projects ■ Inner-city residential refurbishments. ■ Conversion of offices to residential units. ■ Greenfield developments. Social Housing Fund The Social Housing Fund was developed for social housing institutions that require an equity injection to the project. The GPF equity enhances the debt to equity ratio for projects to enable lenders to finance, on favourable terms. Who Qualifies Any not for profit entity or project (SPV) with a recognised legal form that provides rental or delayed ownership schemes to majority families with a household monthly income less than R15 000 (adjusted according to CPI) The institution must demonstrate to GPF that they have the technical resource capacity to successfully complete the project as well as efficiently manage the property thereafter. Types of Projects ■ Inner-city refurbishments or predominantly residential buildings ■ Conversion of offices to residential units ■ Greenfield developments for social housing
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 29
Zo
nin
gT
yp
e
Den
sit
y (
Gro
ss)
Un
its
m2/U
nit
To
tal m
2R
/m2
R/U
nit
Sta
nd
To
tal R
/Un
it
R M
illio
n*
%%
Giv
eaw
ay R
DP
(H
HI
< R
1500)
Resi
dentia
l 2R
ow
Housi
ng
90 U
nits
/Ha
62 0
37
46
2 8
53 7
03
2 4
90
114 5
26
11 4
53
125 9
79
7 1
05
5.4
0%
4.4
7%
Aff
ord
able
Renta
l Socia
l H
ousin
g (
HH
I R
1500 -
R3500)
Resi
dentia
l 3W
alk
-ups
125 U
nits/H
a41 3
58
46
1 9
02 4
68
2 4
90
114 5
26
11 4
53
125 9
79
4 7
37
3.6
0%
2.9
8%
Entr
epre
neuri
al R
enta
l S
ocia
l H
ousi
ng (
HH
I R
3500 -
R10000)
Resi
dentia
l 11 H
ouse/S
tand
200 m
2-4
50 m
282 7
16
68
5 6
24 6
89
4 8
21
327 8
41
32 7
84
360 6
25
27 1
18
20.6
0%
17.0
8%
Entr
epre
neuri
al R
enta
l S
ocia
l H
ousi
ng (
HH
I R
10000 -
R15000)
Resi
dentia
l 11 H
ouse
/Sta
nd +
F&
TH
201 m
2-4
50 m
220 6
79
113
2 3
36 7
27
4 8
63
549 4
79
54 9
48
604 4
27
11 3
63
8.6
3%
7.1
5%
Su
b-T
ota
l206 7
90
62
12 7
17 5
88
3 9
57
243 3
47
243 3
47
50 3
22
38.2
3%
31.6
9%
Mid
dle
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 1D
eta
tched
190 m
219 5
43
113
2 2
08 3
42
4 8
21
544 7
95
54 4
80
599 2
75
10 6
47
8.0
9%
6.7
0%
Mid
dle
to U
pper
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 1D
eta
tched
1 p
er
350 m
211 2
50
180
2 0
25 0
45
4 8
21
867 8
15
86 7
82
954 5
97
9 7
63
7.4
2%
6.1
5%
Mid
dle
to U
pper
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 2F
lats
& T
ow
nhouses
1 p
er
200 m
212 1
73
180
2 1
91 1
01
4 8
21
867 8
15
86 7
82
954 5
97
10 5
64
8.0
3%
6.6
5%
To
tal M
idd
le t
o U
pp
er
23 4
23
180
4 2
16 1
45
7 3
46
1 3
22 3
61
132 2
36
1 3
22 3
61
30 9
74
23.5
3%
19.5
0%
To
tal A
ffo
rdab
le H
ou
sin
g226 3
33
14 9
25 9
30
359 1
86
81 2
96
61.7
7%
51.1
9%
To
tal H
ou
sin
g249 7
56
19 1
42 0
75
526 9
84
131 6
17
100.0
0%
82.8
8%
Zo
nin
gU
nit
sm
2/U
nit
To
tal m
2R
/m2
R/U
nit
Sta
nd
T
ota
lR
Mill
ion
*%
%
Off
ices
& B
anki
ng
Busi
ness
376
5 0
00
1 8
78 2
20
6 1
57
30 7
85 7
10
3 0
78 5
71
33 8
64 2
81
11 5
64
42.5
3%
7.2
8%
Industr
ial a
nd W
are
housi
ng
Industr
ial
367
5 0
00
1 8
32 8
24
4 0
39
20 1
95 0
00
2 0
19 5
00
22 2
14 5
00
7 4
03
27.2
2%
4.6
6%
Shoppin
g &
Com
merc
ial
Busi
ness
556
5 0
00
2 7
78 5
34
2 9
60
14 8
00 0
00
1 4
80 0
00
16 2
80 0
00
8 2
24
30.2
5%
5.1
8%
To
tal N
on
Resid
en
tial
1 2
98
5 0
00
6 4
89 5
79
4 1
90
20 9
50 2
87
6 5
78 0
71
72 3
58 7
81
27 1
92
100.0
0%
17.1
2%
Gra
nd
To
tal
10 7
05 7
24
158 8
09
100.0
0%
266 8
38
136 5
97
0.6
035
603520
(Sourc
e:
BM
I-B
RS
CU
Est
imate
)
Susta
inable
Inte
gra
ted H
ousi
ng
Settle
ments
Off
ices &
Bankin
g
Indust
rial and W
are
housi
ng
Shoppin
g &
Com
merc
ial
To
tal N
on
Resid
en
tial
Gra
nd
To
tal
ES
TIM
AT
ED
RE
SID
EN
TIA
L IN
VE
ST
ME
NT
IN
SU
ST
AIN
AB
LE
IN
TE
GR
AT
ED
DE
VE
LO
PM
EN
TS
: 2011
Resid
en
tial
Inte
gra
ted H
ousi
ng
Settle
ments
ES
TIM
AT
ED
NO
N R
ES
IDE
NT
IAL
IN
VE
ST
ME
NT
IN
SU
ST
AIN
AB
LE
IN
TE
GR
AT
ED
DE
VE
LO
PM
EN
TS
No
n R
esid
en
tial (m
2)
Typ
e
Em
plo
ym
ent cre
ate
d p
er
annum
for
one A
fford
able
House
Em
plo
ym
ent cre
ate
d p
er
annum
for
1000000 A
fford
able
House
s
* Land e
xclu
ded
Em
plo
ym
ent cre
ate
d p
er
annum
for
Resid
ential A
H
and N
on R
esid
ential I
nte
gra
ted D
eve
lopm
ent
Em
plo
ym
ent cre
ate
d p
er
annum
for
Aff
ord
able
Housi
ng M
ark
et
0
5 000
10 000
15 000
20 000
25 000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
R M
ILL
ION
S (
CU
RR
EN
T A
ND
CO
NS
TA
NT
2011 V
AL
UE
)
INVESTMENT IN RESIDENTIAL BUILDING: 2002 -2011: R MILLIONS (CURRENT VALUE)2012-2020: LOWER MIDDLE ROAD SCENARIO (CONSTANT 2011 VALUE)
(Source: StatsSA, SARB, MFA, BMI-BRSCU Workings)
Dwelling Houses < 80 m2 Dwelling Houses > 80 m2 Townhouses and Flats Affordable Housing Investment
It is estimated that the 250 000 houses built in 2011 resulted in investment of R130 Billion (land excluded). And . . . created 266 000 jobs in the process.
The Investment in Affordable Housing exceeds that of Dwellings > 80 m2, Dwellings < 80 m2 and Flats and Townhouses.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 30
0
50 000
100 000
150 000
200 000
250 000
300 000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
UN
ITS
AFFORDABLE HOUSING DELIVERY: 2002-2011 (UNITS)LOWER MIDDLE ROAD SOYUZ SCENARIO: 2012-2020
(Source: StatsSA and BMI-BRSCU Workings)
Houses < 80 m2 DHS Delivery
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
1 800 000
2 000 000
2 200 000
2 400 000
2 600 000
2 800 000
3 000 000
3 200 000
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
500 000
550 000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
AN
NU
AL
HO
US
ING
BA
KL
OG
(U
NIT
S)
AN
NU
AL
HO
US
ING
DE
LIV
ER
Y (
UN
ITS
)
AFFORDABLE HOUSING DELIVERY AND BACKLOG: 2002-2011LOWER MIDDLE ROAD SOYUZ AND HIGH ROAD COLUMBUS SCENARIO: 2012-2020
(Source: StatsSA and BMI-BRSCU Workings)
DOH Delivery: Lower Middle Road Soyuz Scenario DOH Delivery: High Road Columbus Scenario
Annual Housing Backlog under Columbus Scenario Annual Housing Backlog under Soyuz Scenario
Under the Lower Middle Road Scenario the annual housing delivery will remain fairly flat and the current housing backlog of some 2,3 million units will increase to some 3 million by 2020. The flat future applies to both DHS and Private Sector delivery (dwellings < 80 m2).
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 31
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
1 800 000
2 000 000
2 200 000
2 400 000
2 600 000
2 800 000
3 000 000
3 200 000
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
500 000
550 000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
AN
NU
AL
HO
US
ING
BA
KL
OG
(U
NIT
S)
AN
NU
AL
HO
US
ING
DE
LIV
ER
Y (
UN
ITS
)AFFORDABLE HOUSING DELIVERY AND BACKLOG: 2002-2011
LOWER MIDDLE ROAD SOYUZ AND HIGH ROAD COLUMBUS SCENARIO: 2012-2020(Source: StatsSA and BMI-BRSCU Workings)
DOH Delivery: Lower Middle Road Soyuz Scenario DOH Delivery: High Road Columbus Scenario
Annual Housing Backlog under Columbus Scenario Annual Housing Backlog under Soyuz Scenario
Under the High Road Scenario 3,43 Million houses built
in next 9 years and
Backlog reduced to I,4 million by 2020.
The target must be the eradication of all
slums, or informal settlements. For progress to be made, some 3,43 million new units
must be delivered from 2012-2020.
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Subsidies granted: Lower Middle Road Soyuz Scenario 7.86 7.79 7.50 7.25 9.16 9.67 10.67 13.22 18.74 20.92 21.25 20.88 19.75 19.37 19.66 20.05 20.55 21.17 21.80
Subsidies granted: High Road Columbus Scenario 7.856 7.794 7.496 7.255 9.165 9.669 10.67 13.22 18.74 20.92 27.76 31.75 36.19 41.16 46.84 50.12 53.64 57.2 59.78
0
5
10
15
20
25
30
35
40
45
50
55
60
R B
ILL
ION
S (
CU
RR
EN
T A
ND
CO
NS
TA
NT
201
1 V
AL
UE
S)
SUBSIDIES GRANTED: 2002-2010 (CURRENT VALUES)LOWER MIDDLE ROAD SOYUZ AND HIGH ROAD COLUMBUS SCENARIOS: 2011-2020 (R BILLIONS)
(CONSTANT 2011 VALUES)(Source: DHS and BMI-BRSCU Workings)
Under the High Road Scenario, annual housing delivery must steadily increase to reach some 425 000 units by 2020. Under this scenario the housing delivery from 2012 to 2020 will be about 3,2 million units and the backlog will reduce to just more than 1,4 million units. If social problems are to be avoided it seems that the high road strategy is advisable. Of course Subsidies and the trend toward rental housing is part of the solution.
Under the Lower Middle Road Scenario the annual subsidy will remain at about R22 Billion
per annum (at 2011 value). Under the High Road Scenario it would have to increase to about
R60 Billion by 2020.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 32
DHS Delivery,
185225, 82%
Houses < 80 m2,
18858, 8%
Houses > 80 m2,
10856, 5%Flats and Townhouses,
12173, 5%
THE TOTAL RESIDENTIAL MARKET: 2011 (UNITS)
(Total = 249 756)
The Taxpayer Contribution would amount to R297 (lower middle road) to R517 Billion (high
road) OVER NEXT 9 YEARS IN THE PROVISION OF OVER 3 MILLION Affordable Housing
Units and creating employment in the process of Growth through Redistribution.
The credit belongs to both Government, in providing the leadership and vision, and the
Taxpayer in providing the finance.
The table overleaf shows that if the 2,3 million houses can be built in the next 9 years
under the Lower Middle Road Scenario this will result in investment of R1,9 Trillion
(land excluded).
And 428 000 sustainable jobs would be created in the process.
If the 4 million
houses can be
built in the next
9 years under
the High Road
Scenario this
will result in
investment of
R2,08 Trillion
(land excluded).
And 466 000
sustainable jobs
would be
created in the
process.
As shown earlier, the total Residential market in 2011 was 249 756 units, of which 82% was
accounted for by DHS. Dwellings < 80 m2 accounted for 8%, Dwellings > 80 m2 5% and
Flats and Townhouses 5%.
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Cum Subsidies granted: Lower Middle Road Soyuz Scenario 7.86 15.65 23.15 30.40 39.57 49.23 59.91 73.13 91.87 112.8 134.0 154.9 174.6 194.0 213.7 233.7 254.3 275.4 297.2
Cum Subsidies granted: High Road Columbus Scenario 7.86 15.65 23.15 30.40 39.57 49.23 59.91 73.13 91.87 112.8 140.5 172.3 208.4 249.6 296.5 346.6 400.2 457.4 517.2
0
40
80
120
160
200
240
280
320
360
400
440
480
520
R B
ILL
ION
S (
CU
RR
EN
T A
ND
CO
NS
TA
NT
2
01
1 V
AL
UE
S)
CUM SUBSIDIES GRANTED: 2002-2011 (R Billions) (Current Values)2012-2020: HIGH & LOWER MIDDLE ROAD SCENARIOS (Current 2011 Values)
(Source: DHS and BMI-BRSCU Workings)
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 33
Zo
nin
gT
yp
e
Den
sit
y )
Gro
ss)
Un
its
m2/U
nit
To
tal m
2R
/m2
R/U
nit
Sta
nd
To
tal R
/Un
it
R M
illio
n*
%%
Giv
eaw
ay R
DP
(H
HI
< R
1500)
Resi
dentia
l 2R
ow
Housi
ng
90 U
nits
/Ha
1 0
30 2
96
46
47 3
93 6
20
2 4
90
114 5
26
11 4
53
125 9
79
117 9
96
5.6
7%
4.7
2%
Aff
ord
able
Renta
l Socia
l Housi
ng (
HH
I R
1500 -
R3500)
Resi
dentia
l 3W
alk
-ups
125 U
nits
/Ha
686 8
64
46
31 5
95 7
47
2 4
90
114 5
26
11 4
53
125 9
79
78 6
64
3.7
8%
3.1
5%
Entr
epre
neuri
al R
enta
l Socia
l Housi
ng (
HH
I R
3500 -
R10000)
Resi
dentia
l 11 H
ouse
/Sta
nd
200 m
2-4
50 m
21 3
73 7
28
68
93 4
13 5
12
4 8
21
327 8
41
32 7
84
360 6
25
450 3
65
21.6
5%
18.0
1%
Entr
epre
neuri
al R
enta
l Socia
l Housi
ng (
HH
I R
10000 -
R15000)
Resi
dentia
l 11 H
ouse
/Sta
nd +
F&
TH
201 m
2-4
50 m
2343 4
32
113
38 8
07 8
19
4 8
63
549 4
79
54 9
48
604 4
27
188 7
09
9.0
7%
7.5
5%
Su
b-T
ota
lS
ub
-To
tal
3 4
34 3
20
62
211 2
10 6
99
3 9
57
243 3
47
243 3
47
835 7
33
40.1
7%
33.4
2%
Mid
dle
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 1D
eta
tched
190 m
2246 3
79
113
27 8
40 7
76
4 8
21
544 7
95
54 4
80
599 2
75
134 2
26
6.4
5%
5.3
7%
Mid
dle
to U
pper
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 1D
eta
tched
1 p
er
350 m
2141 8
33
180
25 5
29 9
29
4 8
21
867 8
15
86 7
82
954 5
97
123 0
85
5.9
2%
4.9
2%
Mid
dle
to U
pper
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 2F
lats
& T
ow
nhouse
s1 p
er
200 m
2174 6
72
180
31 4
41 0
48
4 8
21
867 8
15
86 7
82
954 5
97
151 5
83
7.2
9%
6.0
6%
To
tal M
idd
le t
o U
pp
er
To
tal M
idd
le t
o U
pp
er
316 5
05
180
56 9
70 9
77
7 1
77
1 2
91 9
02
129 1
90
1 2
91 9
02
408 8
94
19.6
5%
16.3
5%
To
tal A
ffo
rdab
le H
ou
sin
gT
ota
l A
ffo
rdab
le H
ou
sin
g3 6
80 6
99
239 0
51 4
75
338 1
50
1 2
44 6
27
59.8
3%
49.7
7%
To
tal H
ou
sin
gT
ota
l H
ou
sin
g3 9
97 2
04
296 0
22 4
51
520 4
54
2 0
80 3
60
100.0
0%
83.1
9%
Zo
nin
gU
nit
sm
2/U
nit
To
tal m
2R
/m2
R/U
nit
Sta
nd
T
ota
lR
Mill
ion
*%
Off
ices
& B
anki
ng
Busi
ness
5 8
09
5 0
00
29 0
45 7
20
6 1
57
30 7
85 7
10
3 0
78 5
71
33 8
64 2
81
178 8
39
42.5
3%
7.1
5%
Indust
rial a
nd W
are
housi
ng
Indust
rial
5 6
69
5 0
00
28 3
43 6
94
4 0
39
20 1
95 0
00
2 0
19 5
00
22 2
14 5
00
114 4
80
27.2
2%
4.5
8%
Shoppin
g &
Com
merc
ial
Busi
ness
8 5
94
5 0
00
42 9
68 6
19
2 9
60
14 8
00 0
00
1 4
80 0
00
16 2
80 0
00
127 1
87
30.2
5%
5.0
9%
To
tal N
on
Resid
en
tial
20 0
72
5 0
00
100 3
58 0
34
4 1
90
20 9
50 2
87
6 5
78 0
71
72 3
58 7
81
420 5
06
100.0
0%
16.8
1%
Gra
nd
To
tal
157 3
29 0
11
2 5
00 8
66
100.0
0%
466 8
97
232 3
64
0.0
631
63131
ES
TIM
AT
ED
RE
SID
EN
TIA
L IN
VE
ST
ME
NT
IN
SU
ST
AIN
AB
LE
IN
TE
GR
AT
ED
DE
VE
LO
PM
EN
TS
: 2012-2
020:
HIG
H R
OA
D C
OL
UM
BU
S S
CE
NA
RIO
Typ
e
Sust
ain
able
Inte
gra
ted H
ousi
ng
Settl
em
ents
ES
TIM
AT
ED
NO
N R
ES
IDE
NT
IAL
IN
VE
ST
ME
NT
IN
SU
ST
AIN
AB
LE
IN
TE
GR
AT
ED
DE
VE
LO
PM
EN
TS
Resid
en
tial
(Sourc
e:
BM
I-B
RS
CU
Est
imate
)
No
n R
esid
en
tial (m
2)
* Land e
xclu
ded
Em
plo
ym
ent cre
ate
d p
er
annum
for
Resi
dentia
l AH
and N
on R
esi
dentia
l Inte
gra
ted D
eve
lopm
ent
Em
plo
ym
ent cre
ate
d p
er
annum
for
Aff
ord
able
Housi
ng M
ark
et
Em
plo
ym
ent cre
ate
d p
er
annum
for
one A
fford
able
House
Em
plo
ym
ent cre
ate
d p
er
annum
for
1000000 A
fford
able
House
s
Off
ices
& B
anki
ng
Indust
rial a
nd W
are
housi
ng
Shoppin
g &
Com
merc
ial
To
tal N
on
Resid
en
tial
Gra
nd
To
tal
Sust
ain
able
Inte
gra
ted H
ousi
ng
Settl
em
ents
Zo
nin
gT
yp
e
Den
sit
y )
Gro
ss)
Un
its
m2/U
nit
To
tal m
2R
/m2
R/U
nit
Sta
nd
To
tal R
/Un
it
R M
illio
n*
%%
Giv
eaw
ay R
DP
(H
HI
< R
1500)
Resi
dentia
l 2R
ow
Housi
ng
90 U
nits
/Ha
546 9
67
46
25 1
60 4
72
2 4
90
114 5
26
11 4
53
125 9
79
62 6
42
3.2
8%
2.7
4%
Aff
ord
able
Renta
l Socia
l Housi
ng (
HH
I R
1500 -
R3500)
Resi
dentia
l 3W
alk
-ups
125 U
nits
/Ha
686 8
64
46
31 5
95 7
47
2 4
90
114 5
26
11 4
53
125 9
79
78 6
64
4.1
1%
3.4
4%
Entr
epre
neuri
al R
enta
l Socia
l Housi
ng (
HH
I R
3500 -
R10000)
Resi
dentia
l 11 H
ouse
/Sta
nd
200 m
2-4
50 m
21 3
73 7
28
68
93 4
13 5
12
4 8
21
327 8
41
32 7
84
360 6
25
450 3
65
23.5
5%
19.7
2%
Entr
epre
neuri
al R
enta
l Socia
l Housi
ng (
HH
I R
10000 -
R15000)
Resi
dentia
l 11 H
ouse
/Sta
nd +
F&
TH
201 m
2-4
50 m
2343 4
32
113
38 8
07 8
19
4 8
63
549 4
79
54 9
48
604 4
27
188 7
09
9.8
7%
8.2
6%
Su
b-T
ota
l1 8
23 2
23
104
188 9
77 5
51
4 1
29
428 0
22
428 0
22
780 3
79
40.8
1%
34.1
6%
Mid
dle
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 1D
eta
tched
190 m
2213 6
30
113
24 1
40 1
96
4 8
21
544 7
95
54 4
80
599 2
75
116 3
85
6.0
9%
5.0
9%
Mid
dle
to U
pper
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 1D
eta
tched
1 p
er
350 m
2113 5
62
180
20 4
41 2
39
4 8
21
867 8
15
86 7
82
954 5
97
98 5
51
5.1
5%
4.3
1%
Mid
dle
to U
pper
Bonded o
r R
enta
l (H
HI
> R
15000)
Resi
dentia
l 2F
lats
& T
ow
nhouse
s1 p
er
200 m
2157 4
03
180
28 3
32 5
28
4 8
21
867 8
15
86 7
82
954 5
97
136 5
97
7.1
4%
5.9
8%
To
tal M
idd
le t
o U
pp
er
270 9
65
180
48 7
73 7
67
7 2
07
1 2
97 3
33
129 7
33
1 2
97 3
33
351 5
32
18.3
8%
15.3
9%
To
tal A
ffo
rdab
le H
ou
sin
g2 0
36 8
53
213 1
17 7
47
555 7
16
1 1
31 9
12
59.1
9%
49.5
5%
To
tal H
ou
sin
g2 3
07 8
18
261 8
91 5
14
828 6
14
1 9
12 2
91
100.0
0%
83.7
1%
Zo
nin
gU
nit
sm
2/U
nit
To
tal m
2R
/m2
R/U
nit
Sta
nd
T
ota
lR
Mill
ion
*%
%
Off
ices
& B
anki
ng
Busi
ness
5 1
39
5 0
00
25 6
96 7
93
6 1
57
30 7
85 7
10
3 0
78 5
71
33 8
64 2
81
158 2
19
42.5
3%
6.9
3%
Indust
rial a
nd W
are
housi
ng
Indust
rial
5 0
15
5 0
00
25 0
75 7
10
4 0
39
20 1
95 0
00
2 0
19 5
00
22 2
14 5
00
101 2
81
27.2
2%
4.4
3%
Shoppin
g &
Com
merc
ial
Busi
ness
7 6
03
5 0
00
38 0
14 4
03
2 9
60
14 8
00 0
00
1 4
80 0
00
16 2
80 0
00
112 5
23
30.2
5%
4.9
3%
To
tal N
on
Resid
en
tial
17 7
57
5 0
00
88 7
86 9
06
4 1
90
20 9
50 2
87
6 5
78 0
71
72 3
58 7
81
372 0
22
100.0
0%
16.2
9%
Gra
nd
To
tal
137 5
60 6
73
2 2
84 3
13
100.0
0%
426 4
68
211 3
21
0.1
037
103749
Em
plo
ym
ent cre
ate
d p
er
annum
for
Resi
dentia
l AH
and N
on R
esi
dentia
l Inte
gra
ted D
eve
lopm
ent
Em
plo
ym
ent cre
ate
d p
er
annum
for
Aff
ord
able
Housi
ng M
ark
et
Em
plo
ym
ent cre
ate
d p
er
annum
for
1000000 A
fford
able
House
s
Em
plo
ym
en
t cre
ate
d p
er
an
nu
m f
or
on
e A
ffo
rdab
le H
ou
se
* Land e
xclu
ded
No
n R
esid
en
tial (m
2)
ES
TIM
AT
ED
RE
SID
EN
TIA
L IN
VE
ST
ME
NT
IN
SU
ST
AIN
AB
LE
IN
TE
GR
AT
ED
DE
VE
LO
PM
EN
TS
: 2012-2
020:
LO
WE
R M
IDD
LE
RO
AD
SO
YU
Z S
CE
NA
RIO
Resid
en
tial
(Sourc
e:
BM
I-B
RS
CU
Est
imate
)
Inte
gra
ted H
ousi
ng
Sust
ain
able
Inte
gra
ted H
ousi
ng
Settl
em
ents
Typ
e
Off
ices
& B
anki
ng
Indust
rial a
nd W
are
housi
ng
Shoppin
g &
Com
merc
ial
To
tal N
on
Resid
en
tial
Gra
nd
To
tal
ES
TIM
AT
ED
NO
N R
ES
IDE
NT
IAL
IN
VE
ST
ME
NT
IN
SU
ST
AIN
AB
LE
IN
TE
GR
AT
ED
DE
VE
LO
PM
EN
TS
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 34
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
R M
illi
on
s (
Cu
rren
t V
alu
e)
Gross new mortgage loans and re-advances for construction of new buildings vs Residential BC: By Month: Jan 1993- Dec 2011
(Source: SARB, BMI-BRSCU Workings)
Gross new mortgage loans and re-advances for construction of buildings
Residential BC
12 per. Mov. Avg. (Gross new mortgage loans and re-advances for construction of buildings )
12 per. Mov. Avg. (Residential BC)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mortgages Advanced for Construction of Buildings 10 879 13 391 14 891 15 897 27 565 32 446 30 941 28 574 30 076 17 064 13 123 15 565
Y/Y Percentage Change 91.73% 23.09% 11.20% 6.76% 73.40% 17.71% -4.64% -7.65% 5.26% -43.26% -23.10% 18.61%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000Y
/Y P
erc
en
tag
e C
han
ge
R M
illio
ns (
Cu
rren
t V
alu
es)
Mortgages Advanced for Construction of Buildings: 2000-2011(Source: SARB; BMI-BRSCU Workings)
5. THE DYNAMICS OF THE RESIDENTIAL PROPERTY MARKET
5.1
The Dynamics of the Mortgage Bond Market
There is a direct relationship between Mortgage Advances for the construction of new
buildings and Buildings Completed. Since 2005 the Mortgage advances have halved and this
has of course had an adverse impact on Buildings Completed.
The outlook for Mortgage Advances is also flat and it is unlikely that the 2007 level will be
reached again in a decade.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 35
-70%-60%-50%-40%-30%-20%-10%0%10%20%30%40%50%60%70%80%90%100%110%120%130%
Gold
boom
SA
SO
L II
SA
SO
L III
Au
ste
rity
packa
ge
Ru
bic
on
sp
ee
ch
De
bt
sta
ndstill
Eco
no
mic
reco
very
Ma
nd
ela
's r
ele
ase
De
mocra
tic E
lectio
n
Tra
nsitio
n t
o D
em
ocra
cy
Cu
rre
ncy c
olla
pse
Worl
d T
rad
e C
entr
e
BN
G H
ou
sin
g P
rog
ram
me
Su
b P
rim
e C
risis
(N
CA
)
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
Y/Y
Perc
en
ata
ge
Ch
an
ge
Defining Events
R M
illio
ns (
Cu
rre
nt
Va
lue 1
979-2
011
; C
on
sta
nt
valu
e 2
012
-202
0)
Mortgage Loans on Construction of Buildings: 1979-2010Lower Middle Road Scenario: 2011-2020 (Source: SARB, BMI-BRSCU Workings)
Strategic Forum Lower Middle Road Scenario
IndicatorMarch
2012
March
2011
Change yr on yr
(March 12 vs Mar 11)
February
2012
Change month
on month
(March 12 to Jan 12)
Avg purchase price 874,228 860,492 1,6% 868,174 0,7%
Avg purchase price
of first time buyer629,789 623,179 1,1% 663,092 -5,0%
Avg approved bond size 730,904 729,876 0,1% 738,835 -1,1%
Avg deposit (as % of
purchase price)
16.4%
(R143,324)
15.2%
(R130,616)7,9%
14.9%
(R129,339)10,1%
Avg age of applicant 37 37 No change 37 No change
Avg initial decline ratio
(first bank decline)47.0% 44.7% 2.3% 48,2% -1,2%
Ratio of applications declined
by one lender but approved
by another
24.3% 22.7% 1,6% 22,8% 1,5%
Effective approval ratio 64.4% 65.5% -1,1% 62,8% 1,6%
HOUSE PRICE GROWTH MARCH 2012(Source: oobarometer, March 2012)
(Source: www.ooba.co.za)
According to the latest statistics released by ooba - South Africa's leading bond originator - property prices showed positive year-on-year growth of 1.6% in March, as well as positive month-on-month growth of 0.7%, making this the fifth consecutive month ooba has recorded an increase in residential property prices. The March oobarometer price index reveals that the average house price rose to R874 228 from R860 492 a year earlier.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 36
13.7%
4.0%
72.4%
31.5%
32.5%
67.2%
48.7%
13.5%
80.1%
76.1%
59.5%
67.9%
0.0%
20.3%
0% 20% 40% 60% 80% 100%
Dwelling/House or brick structure on a separate stand or yar
Traditional dwelling/Hut/Structure made of traditional mater
Flat or apartment in a block of flats
Town/Cluster/Semi-detached house (Simplex, Duplex or Triplex
Unit in retirement village
Dwelling/House/Flat/room in backyard
Informal dwelling/Shack in backyard
Informal dwelling/Shack not in backyard, e.g. in an informal
Room/Flatlet
Caravan/Tent
Other
Unspecified
Not applicable
Total
Typ
e o
f M
ain
Dw
ell
ing
Ho
us
eh
old
Oc
cu
pie
s
Total Rent Paid past month by Type of Main Dwelling occupied(Source: General Household Survey: 2008; BMI-BRSCU Workings)
INTERPRETATION
* 20,3% of Households are Renters;
* 80,1% of Rooms/Flatlets are rented;
* 76,1% of Caravans/Tents are rented;
* 72,4% of Flats or Apartments are rented.
The average purchase price amongst first time buyers continues to show a year-on-year increase of 1.1% to R629 789 from R623 179 recorded in March 2011. According to Saul Geffen, CEO of ooba, the value of home loan approvals for March was up 49% year-on-year. This is the company's best performance since April 2008, 4 years ago. The average approved bond size showed a nominal increase of 0.1% to R730 904 from R729 876 a year ago, while the average deposit increased by 7.9% to R143 324 from R130 616 in March 2011. The average deposit is now equivalent to 16.4% of the purchase price. The percentage of First Time Buyers dropped in March to 47.7% of ooba's applications received, which is the lowest level it has been since October 2010. Geffen says that this may be attributed to an increased proportion of existing homebuyers who are entering the market as indicated by the recent significant increase in volume of transactions, and supported by more positive sentiment generally. The initial bank decline ratio increased by 2.3% year-on-year to 47% but decreased 1.2% month-on-month in March. The ratio of applicants declined by one lender but approved by another increased 1.6% year-on-year to 24.3%. Geffen explains the month on month improvement in the effective approval rate can be attributed to certain banks easing their lending criteria towards the end of February. The effective approval ratio showed a year-on-year decrease of 1.1% to 64.4% and a month-on-month increase of 1.6%. (www.ooba.co.za)
5.2 The dynamics of the Rental Market
Indications are . . . that the demand for rental housing will increase significantly. In 2001 approximately one million households were renting in metropolitan areas in South Africa, out of a total of 1.8 million households who were renting nationally. This figure is expected to rise in metropolitan areas to 1.5 million in 2006 and 2.2 million in 2011. Indications are that for the income group R19,201 - R38,400 per annum (R1,600 – R3,200 per month), the total formal renting requirement between 2006 and 2011 will increase by an average of approximately 7% per annum on a metropolitan basis, with higher increases in some areas such as Johannesburg. (The National Housing Code: Volume 6: Part 3, Social Housing Policy: 31)
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 37
64.9%
10.5%
4.2%
1.4%
0.2%
3.2%
5.3%
8.1%
1.1%
0.1%
0.8%
0.2%
0.0%
0% 10% 20% 30% 40% 50% 60% 70%
Dwelling/House or brick structure on a separate stand or yar
Traditional dwelling/Hut/Structure made of traditional mater
Flat or apartment in a block of flats
Town/Cluster/Semi-detached house (Simplex, Duplex or Triplex
Unit in retirement village
Dwelling/House/Flat/room in backyard
Informal dwelling/Shack in backyard
Informal dwelling/Shack not in backyard, e.g. in an informal
Room/Flatlet
Caravan/Tent
Other
Unspecified
Not applicable
Total Rent paid past month by type of main Dwelling occupied(Source: General Household Survey: 2008; BMI-BRSCU Workings)
INTERPRETATION
* 64,9% of all rentals are for Dwelling
Houses;
* Only 4,2% of rentals paid last month
is for Flat or Apartment.
The General Household Survey conducted by StatsSA is a stratified, random sample of approximately 30 000 households interviewed during consecutive years using face-to-face interviews and data collection is spread over three months. It provides a good indication of the dynamics of the housing market.
About 20,3% of Households are renters. The most common form of rental accommodation is a Room/Flatlet. A Flat or Apartment in a Block of Flats is the most commonly used accommodation amongst the formal units available, followed by Town/Cluster/Semi-detached house (Simplex, Duplex or Triplex). According to StatsSA there has been continued growth since 2002 in the ownership of dwellings, from 53,1% in 2002 to 58,1% in 2010. Concurrently the percentage of the households who were renting decreased from 22,5% in 2007 to 20,6% in 2010 while the percentage of dwellings that were partially owned declined jaggedly to 10,9%. The rapid economic growth that took place between 2002 and 2007 probably fueled increases in full ownership. An increase of 2,1% in the ownership of dwellings was most likely to be caused by the recovery from recession which impacted severely on households’ liquidity during most of 2009. There has been an inverse relationship between fully owned dwellings and renting since 2002. This was expected – as ownership increases, renting decreases. The percentage of households whose tenure status was classified as ‘other’ decreased slightly from 11,8% in 2002 to 10,4% in 2010. (General Household Survey, 2010: StatsSA, P0318: 21)
Nearly 65% of total rent paid is a Dwelling house or brick structure on a separate stand and only 4,2% for a Flat or Apartment in a block of Flats. The GHS 2010 included a number of questions aimed at establishing the extent to which subsidized housing provided by the state is used, the quality of these dwellings as well as the use of waiting lists. At the time of the survey, 18,9% of South African households were living in an ‘RDP’ or state-subsidised dwelling while a further 13% had at least one household member on a demand database/waiting list for state-subsidised housing.
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Page 38
11.1%
13.1%
2.2%
6.3%
18.6%
7.4%
24.4%
7.0%
9.9%
0%
5%
10%
15%
20%
25%
Western Cape Eastern Cape Northern Cape Free State KwaZulu-Natal North West Gauteng Mpumalanga Limpopo
Total Rent paid past month by Province(Source: General Household Survey: 2008; BMI-BRSCU Workings)
INTERPRETATION
* 24,4% of Rentals paid are in Gauteng
The percentage of households that reported receiving a government housing subsidy has increased from 5,5% in 2002 to 9,7% in 2010. The results further indicate that a larger percentage of female-headed households received subsidies compared to male-headed households. In 2010, as in preceding years, female-headed households (11,1%) were more likely to receive a housing subsidy than male-headed households (8,8%).(General Household Survey, 2010: StatsSA, P0318: 22)
Most of the rent paid is in Gauteng. This confirms that the initial strategy of GPF is to exploit the opportunities in Gauteng first. Then when geographic expansion is indicated the other Provinces can follow systematically as the learning gained from Gauteng is applied more broadly.
It can be noted that 78% of the rent paid is less than R2000 per month.
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Page 39
WC EC NC FS KZN NW Gau Mpum Limp Row Total
Column total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Occupied as boarder 2.3% 0.1% 0.4% 0.2% 0.2% 0.6% 0.7% 0.5% 0.6%
Occupied rent-free not as part of employment contract
of family member4.1% 2.4% 4.3% 4.7% 1.5% 2.6% 6.8% 2.5% 0.6% 3.5%
Occupied rent-free as part of employment contract of
family member3.6% 2.6% 6.3% 4.3% 2.0% 3.1% 3.8% 3.9% 3.3% 3.3%
Rented 21.8% 10.6% 13.0% 14.4% 15.3% 20.4% 25.7% 9.9% 5.2% 16.8%
Owned, but not yet fully paid off (e.g. with a mortgage) 22.3% 3.4% 5.0% 7.5% 6.0% 4.1% 16.2% 5.8% 2.4% 9.5%
Owned and fully paid off 45.7% 80.7% 71.0% 68.9% 75.1% 69.6% 46.8% 77.1% 87.8% 66.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Ownership of Dwelling by Province
(Source: General Household Survey: 2008; BMI-BRSCU Workings)
Owned and fully
paid off
Owned, but not
yet fully paid off
(e.g. with a
mortgage)
Rented
Occupied rent-
free as part of
employment
contract of family
member
Occupied rent-
free not as part of
employment
contract of family
member
Occupied as
boarderUnspecified Column Total
Row Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Limp 13.2% 2.5% 3.1% 10.0% 1.8% 9.2% 16.4% 9.9%
Mpum 8.1% 4.2% 4.1% 8.2% 5.0% 9.0% 3.0% 7.0%
Gau 17.2% 41.5% 37.2% 28.2% 47.0% 25.8% 35.2% 24.4%
NW 7.8% 3.2% 9.0% 7.0% 5.5% 2.9% 2.2% 7.4%
KZN 21.1% 11.8% 16.9% 11.3% 7.8% 15.4% 18.6%
FS 6.6% 5.0% 5.4% 8.3% 8.5% 2.6% 1.1% 6.3%
NC 2.4% 1.2% 1.7% 4.3% 2.7% 1.7% 2.2%
EC 15.9% 4.7% 8.2% 10.4% 9.0% 3.2% 6.7% 13.1%
WC 7.7% 26.1% 14.4% 12.4% 12.8% 45.5% 20.0% 11.1%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Ownership of Dwelling by Province
(Source: General Household Survey: 2008; BMI-BRSCU Workings)
© BMI-BRSCU© BMI-BRSCU
For South Africa as a whole Ownership is high at some 76% with 16,8% renters. In Gauteng Ownership is 63% with Renters the highest in the Country at 25,7%. The Strategic Intent of GPF is to promote the Rental of Property and therefore Gauteng is the logical place to start.
Gauteng commands 24,4% of all types of ownership in the country, ownership is 58,7% and 37,2% of all rented property in the country is in Gauteng.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 40
The Quarterly Monthly Flat Rental for a 2 bedroom, standard unit of average quality in Johannesburg is about R4000 per month and the long-term growth rate is about 2,52% per quarter.
The Quarterly Monthly Flat Rental for a 2 bedroom, standard unit of average quality in Durban is about R4000 per month and the long-term growth rate is about 2,51% per quarter.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 41
The Quarterly Monthly Flat Rental for a 2 bedroom, standard unit of average quality in Cape Town is about R4000 per month and the long-term growth rate is about 2,52% per quarter. It is evident that rentals for comparable units are very similar in the main metropolitan areas and it is possible that the Johannesburg market sets the pace. The analysis shows a remarkably similar profile even as far as the unusual temporary spike in 2008 is concerned.
Analysis of the Q/Q percentage change for the three metropolitan areas confirms the coinciding nature of the series. It appears to be more than just coincidence.
__________________________________________________________________________________________Leveraging Affordable Housing Finance
Page 42
-40%
-20%
0%
20%
40%
60%
80%
19
89
:2
19
89
:4
19
90
:2
19
90
:4
19
91
:2
19
91
:4
19
92
:2
19
92
:4
19
93
:2
19
93
:4
19
94
:2
19
94
:4
19
95
:2
19
95
:4
19
96
:2
19
96
:4
19
97
:2
19
97
:4
19
98
:2
19
98
:4
19
99
:2
19
99
:4
20
00
:2
20
00
:4
20
01
:2
20
01
:4
20
02
:2
20
02
:4
20
03
:2
20
03
:4
20
04
:2
20
04
:4
20
05
:2
20
05
:4
20
06
:2
20
06
:4
20
07
:2
20
07
:4
20
08
:2
20
08
:4
20
09
:2
20
09
:4
20
10
:2
20
10
:4
20
11
:2
Monthly Market Flat Rental: Johnnesburg, Durban, Cape Town:
2 bedrooms (standard units; average)
Q/Q Percentage Change: Q2 1989 - Q3 2011(Source: Rode; BMI-BRSCU Workings)
Q/Q Percentage Change: Cape Town
Q/Q Percentage Change: Johannesburg
Q/Q Percentage Change: Durban
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
19
90
:1
19
90
:3
19
91
:1
19
91
:3
19
92
:1
19
92
:3
19
93
:1
19
93
:3
19
94
:1
19
94
:3
19
95
:1
19
95
:3
19
96
:1
19
96
:3
19
97
:1
19
97
:3
19
98
:1
19
98
:3
19
99
:1
19
99
:3
20
00
:1
20
00
:3
20
01
:1
20
01
:3
20
02
:1
20
02
:3
20
03
:1
20
03
:3
20
04
:1
20
04
:3
20
05
:1
20
05
:3
20
06
:1
20
06
:3
20
07
:1
20
07
:3
20
08
:1
20
08
:3
20
09
:1
20
09
:3
20
10
:1
20
10
:3
20
11
:1
20
11
:3
Quarterly Monthly Market Flat Rental: Johannesburg, Durban, Cape Town:
2 Bedrooms (standard units; average)
Cum Quarterly Rental Y/Y % Change: Q1 1991 - Q3 2011 (Current Value)(Source: Rode; BMI-BRSCU Workings)
Cum Quarterly Rental Y/Y % Change: Cape Town
Cum Quarterly Rental Y/Y % Change: Johannesburg
Cum Quarterly Rental Y/Y % Change: Durban
The cumulative Y/Y percentage change also exhibits the coinciding pattern. It does appear
as if Johannesburg is the price leader.
It may well be because of the influence of institutional ownership of flats (as opposed to the
individual nature of housing ownership) with head offices determining the flat prices for the
country.
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-20
-10
0
10
20
30
40
02 03 04 05 06 07 08 09 10 11
y/y
% c
ha
nge
House price growth(80m²-400m², ≤R3,5 million)
(Source: ABSA HPI, Q4 2011)
Nominal
Real
-15
-10
-5
0
5
10
15
20
25
30
02 03 04 05 06 07 08 09 10 11
y/y
% c
ha
ng
e
Luxury house price growth(>R3,5 million-R12,8 million)
(Source: ABSA HPI, Q4 2011)
Nominal Real
-10
-5
0
5
10
15
20
25
30
02 03 04 05 06 07 08 09 10 11
y/y
% c
han
ge
Affordable house price growth(40m²-79m², ≤R480 000)
(Source: ABSA HPI, Q4 2011)
Nominal Real
5.3 The dynamics of the Property Market
The house price boom occurred from about 2000 to 2008. Then the sub-prime crisis which started in America, rapidly spread throughout the world and inevitably affected South Africa. At the same time the introduction of the National Credit Act initiated a severe clampdown on mortgage advances. The impact on house prices followed inevitably and all categories were affected < R480000 – R3,5 Million and > R3,5 Million –R12,8 Million.
The ABSA HPI shows the trend. It does appear as if a mild recovery in house prices is underway, but it could take many years to return to the levels prevailing in 2008. According to Jacques du Toit, Senior Property Analyst of ABSA Homeloans, house prices in the South African residential property market continued to show relatively low nominal growth on a year-on-year basis in February 2012, with month-on-month price trends under pressure since late last year.
In real terms, i.e. after adjustment for the effect of inflation, house prices deflated further up to January this year, based on headline consumer price inflation of 6,3% year-on-year (y/y) in the month. Average nominal price levels of houses in the various categories of the middle segment of the market were as follows in February 2012:
• Small homes (80m²-141m²): R649700;
• Medium-sized homes (141m²-220 m²): R975 000
• Large homes (221m²-400m²): R1 530 300.
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0
2
4
6
8
10
12
14
16
18
20
02 03 04 05 06 07 08 09 10 11
y/y
% c
ha
ng
e
Building cost of new houses(80m²-400m², ≤R3,5 million)
(Source: ABSA HPI, Q4 2011)
8
9
10
11
12
13
14
15
16
17
02 03 04 05 06 07 08 09 10 11
% Mortgage interest rate(Source: ABSA HPI, Q4 2011)
90
100
110
120
130
140
150
160
170
02 03 04 05 06 07 08 09 10 11
Affordability of housing(Source: ABSA HPI, Q4 2011)
Repayment/ HHDI
House price / HHDI
Index: 2000= 100
According to Jacques du Toit, Senior Property Analyst of ABSA Homeloans the slowdown in the pace of house price growth can be attributed to the combined effect of the following factors, which affect consumers and eventually impact housing demand, growth in mortgage finance and house price trends:
• After interest rates were cut by 50 basis points in late 2008 and another 450 basis points in 2009, rates were lowered by a further 150 basis points in 2010.
• Last year saw interest rates remaining unchanged, not providing any further stimulus to the housing market.
• Many consumers continued to experience some financial strain up to late 2011 against the background of a low level of household savings; rising consumer price inflation, impacting spending power; relatively high levels of household debt in relation to income; and damaged consumer credit records, affecting the accessibility of credit.
• Employment remained under pressure in the first half of 2011, improving only slightly in the third quarter of the year.
• Consumer confidence was relatively low in 2011 compared with 2010, especially in the second half of last year.
The residential property market is still impacted by economic and confidence factors affecting the household sector. Many home owners and prospective home buyers have to deal with various factors impacting their finances, such as rising inflation, a relatively high debt-to-income ratio and damaged credit records. These factors affect the affordability of housing and the accessibility of mortgage finance. The affordability of housing, as measured by the ratios of house prices and mortgage repayments to household disposable income (HHDI), improved in the past four to five years on the back of low house price growth, lower interest rates and rising disposable income (see graphs below). However, many households’ ability to take advantage of the improved housing affordability continued to be hampered by the abovementioned factors affecting their finances. (ABSA Homeloans, 7 March 2012)
The building cost of new houses has been on a decline since about 2004 and this is a positive sign for new home buyers. At the same time the interest rate is the lowest that it has been for decades. Thus it has a direct impact on affordability. Affordability has been increasing steadily as the ratio of house prices to household disposable incomes has declined. Similarly the ratio of repayments on mortgage bonds to disposable household incomes has declined.
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-4
0
4
8
12
16
20
24
28
32
36
100 000
300 000
500 000
700 000
900 000
1100 000
1300 000
1500 000
1700 000
02 03 04 05 06 07 08 09 10 11
% difference Existing New
Rand %
Average price of new and existing houses (Nominal, 80m²-400m², ≤R3,5 million)
(Source: ABSA HPI, Q4 2011)
The percentage difference between the average price of existing houses and new houses is some 35%. This provides the prospective home buyers the opportunity to save substantially on the this major investment o0f a lifetime for the
average household.
It is interesting to note the important factor of seasonality in influencing perceptions of near term activity levels. Included in seasonality is of course the difference in the seasons and the effect that this has on the environment, in terms of gardens and general outlook on life. The purchase of a house is an emotional decision based on perceptions. The other aspect of seasonality is the cyclical pattern of the property market. Investment decisions are also powerfully influenced by confidence levels (general pessimism or positive mindset) and the perception of risk. The uncertainty plaguing the world economy (economic stress) has an impact on the investment climate and the judgement whether property is a good investment.
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The strict credit environment has a fundamental influence on the ability to obtain a mortgage bond and the percentage deposit that is required which affects pricing and affordability.
The FNB Home
Investment confidence
indicator reflects the mindset of home buyers and supports the general perception and reality that mortgage bonds are very difficult to obtain. It is interesting to note that the activity level by price segment is best in the middle to low income sector and lowest in the upper income to high net worth segments.
It is of course a buyers market at the moment as indicated by the fact that 90% of properties are sold at less than asking price.
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The average percentage drop in asking prices is only 13 percent which doesn’t appear to be catastrophic at first sight. However it may well be that the asking price has already been adjusted downward in anticipation. It was stated earlier that the residential rental market is mainly served by individuals relying on buy-to-let investments. This market has reduced substantially from 28% of total mortgage advances at the peak to 5% currently. In absolute terms the decline was a massive 80% from 2005-2011 (from 9328 -1874 in numbers). The confidence indicator reflects the mood of the market. This confirms that the rental market in the household income range from R1500 to R15000 is in urgent need of development.
The estimated average gross yield on residential property is currently about 8,5%. Thus
households in the household income range of R1500 to R15000 per month can typically pay
R375 to R3750 per month (at 25% of gross HHI).
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78.7%
72.0%
83.1%83.3%
80.6% 81.3%
78.5%
74.2%
60%
70%
80%
90%
Q1-2010 Q3-2010 Q1-2011
TPN Percentage of Residential Rental Tenants in Good Standing(Source: FNB Property Barometer)
Below R3000/mRental Segment
R3000-R7000/mRental Segment
R7000-R12000/mRental Segment
Higher thanR12000/m RentalSegment
Data source: TPN (www.tpn.co.za)
This implies that up to a HHI of R10000 pm subsidised housing and Affordable or
Entrepreneurial Rental Social Housing in Sustainable Integrated mixed use Developments
are required, with affordable rental commencing at R375 pm through to R3750 pm.
The percentage of Residential Tenants in good standing shows that the best tenants are in the lower middle Rental Segment from R3000 – R7000 pm together with the upper middle segment from R7000 – R12000 pm with more than eighty percent of tenants in good standing. Ironically it is the lower segment and the upper segment that are the worst tenants at between 72% and 74% in good standing.
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The proportion of First Time Buyers (FTHB) as a percentage of total declined from 2005 to 2008, during the property boom years when people thought you couldn’t go wrong investing in property. Since 2009 the proportion of first time buyers has gradually increased from the low of 2008 to 23% in 2011. This is a positive trend and indicates an active FTHB market with a propensity to invest in property.
Primary Residential demand comprises the core of the property market at some 80% of total. It is evident that the proportion of buy-to-let investors has declined from 2007 to 2011 and this could have consequences for the rental market in future as the preference for rent versus ownership increases simultaneously. As mentioned earlier the lower to middle income rental market has been neglected in the past and the Affordable or Entrepreneurial Rental Social Housing programme is intended to redress this situation and GPF has a pivotal role to play in facilitating and encouraging the process.
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Another positive trend is evident in the percentage of Black suburban buyers. In the longer term this will certainly represent more than 50% of the total as the percentage of White suburban buyers declines closer to the demographic profile of the country. This obviously represents a very positive development for the suburban housing market. This is further evidenced by the growing percentage of Black population group buyers in the “former White suburban Regions”. Section 26 of the Constitution of the Republic of South Africa, 1996, preserves the right to housing, as follows: (1) Everyone has the right to have access to adequate housing. (2) The State must take reasonable legislative and other measures within its available resources, to achieve the progressive realisation of this right. Once again this trend evidences in a natural normalising process in suburban housing as the next graphic demonstrates.
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6.60
6.40
6.00
5.70
5.30
5.30
5.20
5.20
3.90
3.50
3.10
1.00 1.86 2.71 3.57 4.43 5.29 6.14 7.00
The development has all supporting infrastructure (eg policing, shopping, schools,
community hall, community park/playground, sport facilities, informal trading
facilities, clinics, taxi ranks, bus routes).
The development has easy access to employment opportunities
The development is Clean and safe
The development has an Attractive environment, aesthetics (flowers, trees, banners,
window display etc)
The development is programmed and promoted (information kiosks, walk-abouts etc)
The development has a range of tenure options (rent, rent-to-buy, purchase)
The public spaces are welcoming (painted, in good repair, good signage, good access,
good promotion etc)
The development has Attractive street life (active or planned, eg cafes, vending,
events etc)
The development has Vibrant cross functional users (retail, arts, entertainment)
The development is Easily interconnected with total experience of place
The development has a compelling Theme story (visual communication)
STATE OF PLAY OF AFFORDABLE HOUSING: FORCES OF PLAY ON DEMAND SIDE
(Source: BMI-BRSCU Research)
STRENGTH OF FORCES
< 1,86 = Extremely weak
> 1,85 and < 2,71 = Very weak
> 2,71 and < 3,57 = Fairly weak
> 3,57 and < 4,43 = Neutral
> 4,43 and <5,29 = Fairly strong
> 5,29 and < 6,14 = Very Strong
> 6,14 = Extremely strong
6.
FORCES AT PLAY IN AFFORDABLE HOUSING
Research was conducted into the opportunities for leveraging Affordable Housing Finance, with specific reference to affordable rental for households with a monthly income < R15 000. A structured questionnaire was developed and leading Stakeholders in this area were requested to provide their input into informing the understanding of the industry. In the preamble to the questionnaire it was emphasised that providing affordable housing and addressing the spatial disparities of South Africa’s urban landscapes are policy priorities. Quoting from the 2012 Budget Review it was pointed out that “- - - more than 3 million housing units have been delivered since 1994, but there is a remaining backlog estimated at 2.1 million houses. Population growth trends, including continued urban-rural migration patterns, put pressure on cities to adapt and expand infrastructure quickly. Nearly 70 per cent of the housing backlog is in urban areas. While demand is increasing, the pace of delivery has declined, partly due to higher building and land costs. The persistence of large informal settlements has necessitated a shift towards developing serviced sites, security of tenure and affordable rental housing. To support this outcome, R50.5 billion is allocated for low-income housing and upgrading informal settlements in secondary cities, as well as R27 billion for upgrading informal settlements in large cities over the next three years.” (2012 Budget Review, Chapter 7) The Stakeholders that completed the questionnaire are all experienced opinion leaders in the field and can be regarded as a proxy for the universe.
6.1 Demand Side Forces
To understand the state of play with respect to the affordable housing built programme, the forces of play on the demand side, the policy dynamics and the dynamics of various tenure options and choices available to individual households thereof respondents were requested to rate the forces on a scale of 1-7 (with 1= Extremely weak; 2 = Very weak; 3 = Fairly weak; 4 = Neither weak nor strong/neutral; 5 = Fairly strong; 6 = Very Strong; 7 = Extremely strong)
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55.56%
30.00%
40.00%
22.22%
-11.11%
-45.45%
-10.00%
-20.00%
54.55%
18.18%
20.00%
-80.00% -60.00% -40.00% -20.00% 0.00% 20.00% 40.00% 60.00% 80.00%
The development has all supporting infrastructure (eg policing, shopping, schools,
community hall, community park/playground, sport facilities, informal trading…
The development has easy access to employment opportunities
The development is Clean and safe
The development has an Attractive environment, aesthetics (flowers, trees,
banners, window display etc)
The development is programmed and promoted (information kiosks, walk-abouts
etc)
The development has a range of tenure options (rent, rent-to-buy, purchase)
The public spaces are welcoming (painted, in good repair, good signage, good
access, good promotion etc)
The development has Attractive street life (active or planned, eg cafes, vending,
events etc)
The development has Vibrant cross functional users (retail, arts, entertainment)
The development is Easily interconnected with total experience of place
The development has a compelling Theme story (visual communication)
STATE OF PLAY OF AFFORDABLE HOUSING: FORCES OF PLAY ON DEMAND SIDE
EXTENT TO WHICH CURRENT DEVELOPMENTS COMPARE ON THE FORCES
(Source: BMI-BRSCU Research)
CURRENT DEVELOPMENTS
COMPARE POORLY
CURRENT DEVELOPMENTS
COMPARE WELL
Most of the demand side forces were rated from fairly strong to extremely strong. The highest rated forces in descending order (and the rating of current developments against these forces) were:
Rating of forces in descending order
Rating of current developments against these forces
Compare poorly
Compare well
Net Result
1. The development has all supporting infrastructure (eg policing, shopping, schools, community hall, community park/playground, sport facilities, informal trading facilities, clinics, taxi ranks, bus routes)
- 11,11% +66,67% +55,56%
2. The development has easy access to employment opportunities;
-20,0% +50,0% +30,0%
3. The development is Clean and safe; -10,0% +50,0% +30,0% 4. The development has an Attractive environment,
aesthetics (flowers, trees, banners, window display etc);
-22,22% +44,44% +22,22%
5. The development is programmed and promoted (information kiosks, walk-abouts etc);
-54,55% +9,09% -45,45%
6. The development has a range of tenure options (rent, rent-to-buy, purchase);
-33,33% +22,22% -11,11%
7. The public spaces are welcoming (painted, in good repair, good signage, good access, good promotion etc);
-40,0% +10,0% -30,0%
8. The development has Attractive street life (active or planned, eg cafes, vending, events etc)
-50,0% +30,0% -20,0%
9. The development has Vibrant cross functional users (retail, arts, entertainment)
0,0% +54,55% +54,55%
10. The development is easily interconnected with total experience of place
-27,27% +45,45% +18,18%
11. The development has a compelling theme story (visual communication)
-20,0% +40,0% +20,0%
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Rental, 62.50%
Rental, 10.00%
Rental, 63.64%
Rental, 45.45%
Rental, 41.67%
Rental, 66.67%
Rental, 36.36%
Rental, 44.93%
Purchase, 37.50%
Purchase, 60.00%
Purchase, 18.18%
Purchase, 54.55%
Purchase, 58.33%
Purchase, 16.67%
Purchase, 54.55%
Purchase, 44.93%
0.00%
30.00%
18.18%
0.00%
0.00%
16.67%
9.09%
10.14%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120%
Indicate the main preference of SOCIAL HOUSING HOME-SEEKERS (HHI range R1 500 –
R3 500)
Indicate the main preference of SOCIAL HOUSING MARKET DEVELOPERS (In the House
Price range from R80 000 – R150 000)
Indicate the main preference of SOCIAL HOUSING INSTITUTIONS (In the HHI range
R1 500 – R3 500)
Indicate the main preference of ENTREPRENEURIAL RENTAL SOCIAL HOUSING market
HOME SEEKERS (In the HHI range R3 500 – R15 000)
Indicate the main preference of ENTREPRENEURIAL RENTAL SOCIAL HOUSING market
DEVELOPERS (In the House Price range from R150 000 – R450 000)
Indicate the main preference of SOCIAL HOUSING INSTITUTION developers (In the HHI
range R1 500 – R3 500)
Indicate the main preference of Financial Institutions (in the HHI range from R3 500 to
R15 000)
Total
Preference for Rental or Purchase
Ten
ure
Op
tio
ns
FORCES AT PLAY IN AFFORDABLE HOUSING:
DYNAMICS OF TENURE OPTIONS AND CHOICES AS RATED BY STAKEHOLDERS
(Source: BMI-BRSCU Research)
Rental Purchase Rent-to-buy
It is evident from the foregoing table where the priority focus has to be in existing as well as new developments. Factors 5, 7 and 8 have to do with soft design and promotional issues whilst factor 6 has to do with fundamental policy issues. It can be argued that the rating of these forces is typical of all discerning and normal suburban households. They contribute to a powerful place image and an environment attractive for investment. It is important to pay attention to these factors in the design of successful Integrated Housing Developments. As stated by one respondent:
The bricks and mortar upgrades are happening. However, the social infrastructure to turn these areas into communities is not developing. Public spaces, parks, schools and community centres are not being provided.
To quote from the Social Housing Policy:
“. . . government has become increasingly concerned about the quality and the sustainability of the living environments it creates. Social housing is seen as a potentially important contributor to achieving such quality environments. Of central importance, however, is the recognition that quality is only partially a function of the housing units themselves. Equally or even more important is attention to the public environment. By moving away from a policy based on subsidising individual units - to a project- based approach, consideration of the public environment can be made integral to project design.” (Social Housing Policy: Part 3: The National Housing Code: 2009: 39)
To understand the state of play with respect to the affordable housing built programme, the dynamics of various tenure options and choices available to individual households thereof respondents were requested to indicate THEIR VIEW of the preference for the following tenure options and choices in the Institutional and Entrepreneurial Rental Housing market.
The majority of respondents felt that: • SOCIAL HOUSING HOME SEEKERS would prefer RENTAL (62,5%) over purchase;
• SOCIAL HOUSING MARKET DEVELOPERS would prefer PURCHASE (60%) or RENT-TO-BUY (30%);
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6.40
6.40
6.10
1.00 1.86 2.71 3.57 4.43 5.29 6.14 7.00
Affordable Rental Social Housing Subsidy Programme (For monthly HHI range R1 500 – R3 500)
Institutional Subsidy Programme
Entrepreneurial Rental Social Housing Subsidy Programme (For monthly HHI range R3 500 – R15 000)
FORCES AT PLAY IN AFFORDABLE HOUSING: IMPORTANCE OF POLICY DYNAMICS
(Source: BMI-BRSCU Research)
RATING OF IMPORTANCE
< 1,86 = Extremely unimportant
> 1,85 and < 2,71 = Very unimportant
> 2,71 and < 3,57 = Fairly unimportant
> 3,57 and < 4,43 = Neutral
> 4,43 and <5,29 = Fairly important
> 5,29 and < 6,14 = Very important
> 6,14 = Extremely important
• SOCIAL HOUSING INSTITUTIONS would prefer RENTAL (63,64%) or RENT-TO-BUY (18,18%);
• ENTREPRENEURIAL SOCIAL HOUSING HOME SEEKERS would prefer PURCHASE (54,55%) over rental;
• ENTREPRENEURIAL SOCIAL HOUSING DEVELOPERS would prefer PURCHASE (58,33%) over rental;
• SOCIAL HOUSING INSTITUTION DEVELOPERS would prefer RENTAL (66,67%) or RENT-TO-BUY (16,67%);
• FINANCIAL INSTITUTIONS would prefer PURCHASE (54,55%) or RENT-TO-BUY (9,09%);
The (unweighted) TOTAL preference is for PURCHASE (44,93%) or RENT-TO-BUY (10,14%). Note: Rent-to-buy can serve as proxy for both PURCHASE or RENTAL depending on the majority preference between purchase or rental.
To understand the state of play with respect to the affordable housing built programme, respondents were requested to give their view on the Policy dynamics by rating on a scale of 1-7 how important the following policies and stakeholders are in the Institutional and Entrepreneurial Rental Housing market (1= not at all important; 2 = fairly unimportant; 3 = very unimportant; 4 = neutral; 5 = fairly important; 6 = very important; 7 = extremely important)
All the Policies are perceived to be very to extremely important. One respondent commented as follows: 1. There is currently a complete lack of any viable policy to deal with low income and
indigent households in the inner city.
2. Failure of National/Provincial/Local government to deal decisively with this problem is
severely hampering the private sector in their efforts to acquire and upgrade building in
order to provide affordable rental accommodation in the inner city.
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3.90
3.7
2.9
2.8
2.5
2.1
1.00 1.86 2.71 3.57 4.43 5.29 6.14 7.00
Availability of serviced land
Availability of development financing
Availability of Developer Driven Individual Subsidy Scheme
Availability of Affordable Rental Housing Subsidy
Availability of Individual Subsidy Scheme
Availability of Entrepreneurial Rental Social Housing Subsidy
STATE OF PLAY IN AFFORDABLE HOUSING: FORCES OF PLAY ON SUPPLY SIDE
(Source: BMI-BRSCU Research)
RATING OF AVAILABILITY
< 1,86 = Totally unavailable
> 1,85 and < 2,71 = Very unavailable
> 2,71 and < 3,57 = Fairly unavailable
> 3,57 and < 4,43 = Neutral
> 4,43 and <5,29 = Fairly available
> 5,29 and < 6,14 = Very available
> 6,14 = Extremely available
3. The inner city property scheme has failed to deliver a single refurbished building to house
poor and indigent households so that developers can clear derelict and run-down
buildings and turn these into decent affordable rental units.
4. National and Provincial government must recognise that it is far more effective and cost
efficient to refurbish the hundreds of Bad Buildings in the inner city than to start
Greenfields projects outside the city, far away from jobs and amenities.
6.2 Supply Side Forces
The respondents rate all the Supply side forces as negative from neutral to Totally Unavailable. Clearly this is part of the delivery problem of practitioners in getting meaningfully engaged in this very important sector. The policies are seen to be sound and progressive and extremely positive but the difficulties arise in the implementation. There is great frustration in bureaucratic procedures that are seen to stifle access to essential resources. The respondents made some suggestions: Other: Availability of affordable electricity, water and other municipal services at preferential rates/tariffs for low income tenants living in the inner city. Comments: 1. The City Council/Provincial/National government should be providing incentives to get
private developers to invest in the inner city. The opposite is the case – the council
seems to go out of its way to make conditions as onerous as possible for private
developers.
2. Because of the constraints imposed by recent rulings in the Constitutional Court, the
process of clearing over-crowded and unsafe buildings has ground to a halt. There are
currently approximately 600 Bad Buildings in Johannesburg, which are log-jammed
because of these legal shackles of City Council/Provincial inaction to break the log jam.
The creation of additional affordable rental housing stock is being severely hampered as
a result.
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5.40
5.00
4.80
3.80
3.60
3.10
2.90
1.00 1.86 2.71 3.57 4.43 5.29 6.14 7.00
The National Housing Code
Social Housing Policy
Institutional subsidies
Social and Rental Interventions
Financial Intervention policy
Integrated Development Plans
Community Residential Units
Effectiveness of Legislative and Provincial Government Policy Framework
(Source: BMI-BRSCU Research)
RATING OF EFFECTIVENESS
< 1,86 = Totally ineffective
> 1,85 and < 2,71 = Very ineffective
> 2,71 and < 3,57 = Fairly ineffective
> 3,57 and < 4,43 = Neutral
> 4,43 and <5,29 = Fairly effective
> 5,29 and < 6,14 = Very effective
> 6,14 = Extremely effective
The intent of Government is good and sincere. There must be a greater effort to develop the
collaborative effort between Government and the Private Sector. This, after all is the so-
called “Golden Triangle” which is characteristic in a successful democracy. As stated in the
Social Housing Policy;
With regard to delivery, SHIs are envisaged to be a key delivery agent of social housing units
(either as SHIs or via PPPs). In addition, the possibility of the private sector as a deliverer of
social housing via accredited projects will be introduced. Partnerships between SHIs and
Local Governments (LGs) are important and SHIs and LGs should jointly identify
restructuring projects (delivery initiation) and together submit proposals for funding. It is also
proposed that the South African Local Government Association (SALGA) should facilitate the
role of local governments in social housing through the development of guidelines for its
members in co-operation with ND.(Social Housing Policy: Part 3: National Housing Code:
2009: 51)
The respondents rate The National Housing Code as very effective, Social Housing Policy as
fairly effective and Institutional Subsidies as fairly effective.
They rate Social and Rental and Financial intervention policy as neutral, Integrated
Development Plans as fairly ineffective and Community Residential Units as very ineffective.
All of these interventions and policies are well intended and sound, but again it is in the
implementation that the process breaks down.
If the bottlenecks could be ameliorated the Government Housing Policy will make a major
contribution in solving the housing challenge.
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6.80
6.40
6.10
6.10
5.30
5.20
4.80
4.70
1.00 1.86 2.71 3.57 4.43 5.29 6.14 7.00
Delivery Agents/Developers
National Housing Finance Corporation
Municipalities
Social Housing Institutions
The Provincial Departments of Human Settlements
Social Housing Foundation
Social Housing Regulatory Authority
The National Department of Human Settlements
IMPORTANCE OF PLAYERS IN THE AFFORDABLE HOUSING MARKET
(Source: BMI-BRSCU Research)
RATING OF IMPORTANCE
< 1,86 = Extremely unimportant
> 1,85 and < 2,71 = Very unimportant
> 2,71 and < 3,57 = Fairly unimportant
> 3,57 and < 4,43 = Neutral
> 4,43 and <5,29 = Fairly important
> 5,29 and < 6,14 = Very important
> 6,14 = Extremely important
Respondents were asked for their view on the importance of the players in the affordable
housing market by rating their perceived importance on a scale of 1-7 (1= not at all important;
2 = fairly unimportant; 3 = very unimportant; 4 = neutral; 5 = fairly important; 6 = very
important; 7 = extremely important)
In the above graphic the players are ranked in descending order of perceived importance in
the Affordable Housing market. It can be seen that Delivery Agents/Developers and the
National Housing Finance Corporation (NHFC) are rated as extremely important,
Municipalities, Social Housing Institutions and the Provincial Departments of Human
Settlements as very important and the Social Housing Regulatory Authority and The National
Department of Human Settlements as fairly important.
It is concluded once again that all players are important and it is the quality of relationships
that is required as the cement to weld them together in collaborative effort. It can be
observed that the perception is that the closer to the action on the ground the more important
the player. The quality of policy making is above reproach but perhaps the in-depth
knowledge of the policies is lacking as well as the sense of urgency in addressing this most
important challenge.
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Sell-off, 80.00%
Sell-off, 22.22%
Sell-off, 41.67%
Sell-off, 22.22%
Sell-off, 22.22%
Sell-off, 22.22%
Sell-off, 45.45%
Sell-off, 11.11%
Sell-off, 34.62%
Ownership, 20.00%
Ownership, 77.78%
Ownership, 58.33%
Ownership, 77.78%
Ownership, 77.78%
Ownership, 77.78%
Ownership, 54.55%
Ownership, 88.89%
Ownership, 65.38%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Developers (e.g. Calgro M3, RBA etc)
Financiers (e.g. Gauteng Partnership Fund)
Social Housing Institutions (e.g. NURCHA)
National Department of Human Settlements
Provincial Departments of Human Settlements
Municipalities
Financial Institutions/Banks
NHFC
Total
Percentage of Stakeholders Preferring Sell-off versus Purchase
Sta
eh
old
ers
STAKEHOLDER CHOICE OF SELL-OFF OR OWNERSHIP OF DEVELOPMENT
(Source: BMI-BRSCU Research)
Respondents were requested to give THEIR VIEW of the choices made by various
Stakeholders, developers/institutions relating to SELL-OFF versus OWNERSHIP of rental
stock.
One respondent commented that apart from Developers the other institutions listed do not have the skills and resources to manage rental stock once they have facilitated/financed the development. They should sell these units to companies which specialise in the rental business.
It can be seen that the respondents believe that, of all the stakeholders listed, only the
Developers would prefer to SELL-OFF the rental stock rather than have the ownership,
implying that they would prefer not to manage it. As the one respondent mentioned the
Developers are probably the best equipped to manage the rental stock. However it is the
view of the Consultant that such a management role would have to be performed by
representatives of all the participants/equity partners involved in the SPV established. Over
time there will be a phase out of certain players as their role in the venture diminishes.
Respondents were asked to give THEIR VIEW on the attitude of financial institutions towards
FINANCING OF AFFORDABLE RENTAL VERSUS END USER FINANCING.
The overwhelming perception of the respondents is that the Banks/Financial Institutions will
prefer outright purchase rather than rental.
Naturally if this perception is factual then it would be difficult to obtain equity participation
from them in an SPV to facilitate Affordable or Entrepreneurial Rental Social Housing.
This could present a serious stumbling block to the Rental Housing process.
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Affordable Rental, 22.22%
Affordable Rental, 36.36%
Affordable Rental, 36.36%
Affordable Rental, 16.67%
Affordable Rental, 37.50%
Affordable Rental, 0.00%
Affordable Rental, 0.00%
Affordable Rental, 26.42%
Purchase, 77.78%
Purchase, 63.64%
Purchase, 63.64%
Purchase, 83.33%
Purchase, 62.50%
Purchase, 100.00%
Purchase, 100.00%
Purchase, 73.58%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
ABSA Bank
First National Bank
Standard Bank
Investec Bank
Nedbank
S A Home Loans
SANLAM
Total
Stakeholder view
Fin
an
cia
l In
stit
uti
on
STAKEHOLDER VIEW ON ATTITUDE OF FINANCIAL INSTITUTIONS TOWARDS
FINANCING OF AFFORDABLE RENTAL VS END-USER FINANCING
(Source: BMI-BRSCU Research)
Affordable Rental Purchase
7.00
6.80
6.70
6.20
6.00
5.90
5.60
5.30
4.70
4.60
1.00 1.86 2.71 3.57 4.43 5.29 6.14 7.00
Credentials of Developer in delivery of projects
Credentials of Planning team
Credentials of Developer/outsource as Landlord in maintenance of project, rent
collection and Administration
Possibility to convert percentage of Rental Stock to Sale with end-user financing over
time
Access to Institutional Subsidy (for Affordable Rental Social Housing or Affordable
Entrepreneurial Social Housing)
Government participation in project through provision of Affordable Rental Social
Housing and Entrepreneurial Rental Social Housing Subsidies
Credentials of Equity Partners
Access to reduced Cost of Finance through Equity Partners
Equity participation of Partners
Equity participation by Developer
Importance of Risk Dynamics
Ris
k D
yn
am
ics
IMPORTANCE OF RISK DYNAMICS UNDER CONSIDERATION IN FINANCING
AFFORDABLE RENTAL HOUSING
(Source: BMI-BRSCU Research)
RATING OF IMPORTANCE
< 1,86 = Extremely unimportant
> 1,85 and < 2,71 = Very unimportant
> 2,71 and < 3,57 = Fairly unimportant
> 3,57 and < 4,43 = Neutral
> 4,43 and <5,29 = Fairly important
> 5,29 and < 6,14 = Very important
> 6,14 = Extremely important
Respondents were asked to give THEIR VIEW on the RISK DYNAMICS under consideration
towards financing of affordable rental housing by rating on a scale of 1-7 the importance of
the listed RISK DYNAMICS in the Institutional and Entrepreneurial Rental Housing market
(1= not at all important; 2 = fairly unimportant; 3 = very unimportant; 4 = neutral; 5 = fairly
important; 6 = very important; 7 = extremely important)
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It is interesting to note that all the factors listed were rated from fairly important to extremely
important. It does reinforce the necessity of collaboration in the delivery and ongoing
management of rental projects.
As stated by a respondent:
Municipal and Provincial government must create an investor-friendly environment and
private sector will create the required volume of affordable rental housing stock.
For low-end social housing stock (R1000 – R3500 p.m.), government should provide
subsidies that enable private developers to rent at low rentals.
The credentials of the Developer in the delivery of projects was rated the most important,
followed by the credentials of the planning team and the developer as landlord in the ongoing
maintenance of the project, rent collection and administration.
The possibility to convert percentage of Rental Stock to Sale with end-user financing over
time is also rated as extremely important.
This is followed by four very important factors ie Access to Institutional Subsidy (for
Affordable Rental Social Housing or Affordable Entrepreneurial Social Housing); Government
participation in project through provision of Affordable Rental Social Housing and
Entrepreneurial Rental Social Housing Subsidies; Credentials of Equity Partners and Access
to reduced Cost of Finance through Equity Partners.
The last two factors in order of importance, Equity participation of Partners and Equity
participation by Developer, are nevertheless still rated as fairly important. This emphasizes
the complex and high risk nature of this type of development and provides the rationale for
risk sharing amongst trusted and credible partners.
As stated by the National Housing Policy:
There are a number of generic risks applicable to social housing projects that need to be
considered, including:
• Development Risk comprising the risks related to undertaking the rental housing
development, specifically design and construction risks and marketing risks.
• Property Management Risks comprising operating (cost management), revenue (rental
collection) and market (demand) risk.
• Financing Risk which comprises interest rate and default/income interruption risk.
• Institutional Risks that include governance, fraud and theft, and IT system risks.
It is not possible to develop generic responses to all of the risks at a policy level. However, it
is desirable that best practice and norms and standards be developed that define, offset and
manage these risks. A function of the Social Housing Corporation will be to promote this
process of appropriate risk management. (Social Housing Policy: Part 3: The National
Housing Code: 2009: 80,81)
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6.90
6.70
6.50
6.50
6.40
6.30
6.30
6.30
6.00
5.80
5.60
5.60
5.40
1.00 1.86 2.71 3.57 4.43 5.29 6.14 7.00
Access to Institutional and Entrepreneurial Rental Funding
Strategic Risk Management
Relationship with Affordable Housing Development Stakeholders
Ability to develop Alliances and Partnerships with all Participants
Skill in facilitating Affordable Housing Development, Public, Private Sector
Partnerships
Access to low interest funding
Fast application turnaround time
Product support, quality service
Pre-knowledge of planned Developments and contact with all Sustainable Integrated
Housing Development Stakeholders
Networking, Negotiating, deal making
Institutional Subsidy and Venture Capital management
Alliance relationships
Relationship with Key Personnel in DHS by Province
Importance of Strategic Issues as rated by Stakeholders
Str
ate
gic
Iss
ue
s
IMPORTANCE OF STRATEGIC ISSUES IN FACILITATING FUNDING FOR
AFFORDABLE RENTAL(Source: BMI-BRSCU Research)
RATING OF IMPORTANCE
< 1,86 = Extremely unimportant
> 1,85 and < 2,71 = Very unimportant
> 2,71 and < 3,57 = Fairly unimportant
> 3,57 and < 4,43 = Neutral
> 4,43 and <5,29 = Fairly important
> 5,29 and < 6,14 = Very important
> 6,14 = Extremely important
Respondents were requested to give THEIR VIEW on the STRATEGIC ISSUES that should
guide Companies in their strategy to facilitate increased funding for affordable rental in order
to realize the Provincial strategic outcome towards development of affordable rental stock at
scale by 2014, by rating on a scale of 1-7 how important the listed STRATEGIC ISSUES are
in the Institutional and Entrepreneurial Rental Housing market (1= not at all important; 2 =
fairly unimportant; 3 = very unimportant; 4 = neutral; 5 = fairly important; 6 = very important; 7
= extremely important)
It is interesting to note that all the Strategic Issues listed were rated from very important to
extremely important.
The top eight Strategic Issues listed were rated as extremely important.
1. Access to Institutional and Entrepreneurial Rental Funding;
2. Strategic Risk Management;
3. Relationship with Affordable Housing Development Stakeholders;
4. Ability to develop Alliances and Partnerships with all Participants;
5. Skill in facilitating Affordable Housing Development, Public, Private Sector Partnerships;
6. Access to low interest funding;
7. Fast application turnaround time;
8. Product support, quality service.
The last 5 Strategic Issues listed were rated as very important:
9. Pre-knowledge of planned Developments and contact with all Sustainable Integrated
Housing Development Stakeholders;
10. Networking, Negotiating, deal making;
11. Institutional Subsidy and Venture Capital management;
12. Alliance relationships;
13. Relationship with Key Personnel in DHS by Province.
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7. ALIGNMENT
As the foregoing analysis demonstrates, the success of any policy will depend on the extent
to which alignment behind a compelling vision can be mobilized. It has been demonstrated
that in fact an igniting National Housing Vision does exist and that alignment to this Vision
has been achieved by the important Stakeholders including GPF. What remains is the
collaborative effort required to achieve the laudable goals articulated by the Stakeholders.
The Social Housing Policy has the following to say about alignment:
Three primary areas of alignment are considered in this section: alignment of social housing
policy with government priorities, alignment with the principles of vertical and horizontal
equity, and alignment with the broader housing market to avoid distortions.
Secondary alignment is considered with respect to existing ND programmes and other
government department programmes. Furthermore, the policy document needs to be aligned
with the new strategy and direction of the National Department.
With respect to alignment with national government priorities, a strong case has been made
for social housing to be used as a targeted instrument of urban restructuring. This
conceptualisation aligns with broader national priorities of government. In addition, social
housing is in line with the importance accorded to rental stock, access to infrastructure,
facilities and amenities, improving the quality of life of people, and urban renewal
programmes.
Alignment has also been considered with principles of vertical and horizontal equity. Social
housing promotes vertical equity through facilitating access to quality accommodation in well-
located areas for low income earners who are largely excluded from such housing in the
market place. Horizontal equity is more problematic insofar as the magnitude of the subsidy
is higher than that which may apply to equally poor people who are beneficiaries of, for
example, government’s incremental housing programme. This differential is justified however
because the primary purpose of the programme is restructuring not bulk housing provision.
Moreover horizontal equity is served by retaining the stock produced for the long term
advantage of the poor and not transferring the benefit of ownership to individual occupants.
The beneficiaries of other government housing programmes, whilst receiving smaller
subsidies, can use these subsidies for private gain.
With regard to alignment with the housing market, it is recognized that the introduction of
social housing will have an impact on the market in some areas. These impacts are both
positive and negative in nature. However an element of distortion is cause for concern, and is
countered by the proposal that the private sector is also able to access social housing grants
for social housing delivery. Thus private sector delivery through accredited social housing
projects, therefore, should significantly limit the market distorting potential of these proposals
and encourage further delivery.
The social housing policy relates to a number of existing housing programmes and
instruments, including:
• institutional subsidy
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• the hostels policy
• the phasing out of government stock and the discount benefit scheme
• the Job Summit
In general social housing is compatible with most of these programmes and can be used in
support of the programmes. However it must be noted that the social housing policy and
SHIs must not be seen as easy solutions to existing complex problems such as the
management of hostels and public housing stock.
It should be noted that the social housing policy is located within the Social (Medium-density)
Housing Programme identified in the ND’s Plan for the Development of Human Settlements
(2004), noted above. This programme aims “to facilitate the production of effectively
managed institutional housing in the areas where demand for institutional or managed
housing, of all types, exists”. Social housing forms one component of this ‘managed
institutional housing’, along with household rental housing, hostels, state-owned rental
housing, transitional housing and communal housing. (Social Housing Policy: Part 3: The
National Housing Code: 2009: 85, 86)
Dr.Llewellyn B Lewis, Principal Consultant, BMI Building Research Strategy Consulting Unit cc, 9 Adrienne Street, Strathavon, Sandton, PO Box 784133, Sandton 2146. [email protected] www.strategicforum.co.za Tel: (011) 884 2075 Cell 082 884 0063 Fax 086 6472 494
April 2012