Authority to speed up delivery of social housing projects

THE SOCIAL Housing Regulatory Authority wants to pull in the construction sector through proactive invitations to participate in empowerment deals to speed up the delivery of social housing projects, said SHRA chairperson Bathabile Dlamini.

Writing in the 2020 State of the Social Housing Report, she said the construction sector had valuable expertise and experience to support the transformation drive, deliver at pace, and create and maintain jobs in the social housing sector, and a new social housing programme had been developed in the past year.

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

Well-known economist and construction sector analyst Dr Roelof Botha of Optimum Group said any new programme to speed up affordable housing needed to be applauded, because of the “massive” multiplier effects to the economy.

He said a key component of such a programme should be to provide owners with a title deed, as that would make the homes financially viable for banks, and would also provide homeowners with collateral and security of ownership.

Dlamini said the new programme aimed to double the production rate for social housing in the 2020/21 to 2024/25 term compared with the 2015/16 to 2019/20 period, and triple in the five years thereafter, thus adding a further 87 500 affordable-rental housing units and growing the social housing portfolio to 125 000 units.

Since 2005, 135 projects had been delivered through the Social Housing Programme, providing 33 241 units.

A further 38 projects were in progress, which would bring the number of projects to 173, providing 52 683 units.

However, the envisaged role of the private sector in capital financing of the social housing sector had not materialised to the extent expected.

Dlamini said the financial viability and structure of the projects did not attract private sector investment.

Few commercial banks or other private funders were willing to provide loans. Most debt finance was provided by Development Finance Institutions, predominantly the National Housing Finance Corporation and the Gauteng Partnership Fund. The latter no longer provided finance and the NHFC limited the number of social housing projects it funded. This did not accommodate the SHRA’s 30 000-unit annual target.

In addition, said Dlamini, the Social Housing Act and regulations did not allow the SHRA to borrow or leverage its current capital allocation.

However, while private sector involvement had been minimal, it had slowly increased over the past five years. Factors that curbed private investment included that investment decision makers did not have a thorough understanding of social housing and how to achieve the returns they required. Some investors were concerned that they could not protect their investment by default, by holding a bond over the property, which they consider a necessary last resort.

“The concern that as social housing is linked to government, it is more susceptible to political pressure that could negatively affect financial sustainability of projects.

“This is exacerbated by increasing numbers of organised rental boycotts in the sector,” said Dlamini.

She said private investors, including other development agencies, needed greater clarity on the terms and conditions for equity withdrawal to properly calculate their likely returns.

Investors also consider many of the newer, less-experienced social housing institutions high risk as they had no proven track record of delivery and lacked business development support while they gained the necessary experience and expertise.

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

Dlamini said the new plan developed in the past year called for revisions to policy and the funding framework and for processes to administer social housing.

“The intention is to adopt a bold expenditure-driven policy that establishes social housing as a strong and reliable contributor to infrastructure spending and job creation,” she said.

The proposed a reform of the budget, by progressively growing the proportion invested in social housing to a greater share of the overall human settlements vote. A multiyear budgeting process against public sector budgeting should be considered, with the use of surpluses and other funding.

A shortlist of essential policy reforms would be approved, including policy reforms that stipulated what was built and that lightened the regulatory burden and bureaucratic risks that accompany where to build.

“Essentially, the minimum norms and standards must accommodate more smaller but higher density units, and the rules governing how restructuring zones are gazetted should be revised to speed up the process.”

The SHRA intended also to actively manage waste, leakage, inefficiency, bribery, corruption, extortion and inefficiency, so that perverse incentives were identified and managed and there was less leakage and less public money not being used effectively.

She said a medium- to high-density sectional title ownership programme needed to be considered, not inside the affordable rental housing programme where “rent to buy” would confuse and make the rental programme unsustainable by introducing unintended risks, but alongside affordable rental houses.