Govt, private sector to fast-track housing delivery

The South African government and the private sector, including property developers and banks, have agreed to speed up housing delivery in a bid to address the massive backlog. At a recent Housing Indaba (conference) in Cape Town, participants signed a social contract for rapid housing delivery, with the overall aim of boosting the supply of low-cost homes to tackle the country's 2.4 million unit shortfall. A key aspect of the agreement was government's commitment to reduce the time taken to process housing development approvals by 50 percent, and remove the delays in making payments to contractors building state housing for the poor. Property owners, developers and the financial sector, among other interested parties, agreed to a wide range of support programmes. The financial sector committed itself to making available R42 billion ($6.5 billion) to finance housing purchases for people earning between R1,500 (US $232) and R7,500 ($1,162) per month, who were not catered for in South Africa's booming property market, according to department of housing spokesman Ndivhuwo Mabaya. Housing Minister Lindiwe Sisulu noted at the conference that "the incontrovertible fact of our transition [to democracy] is that, despite achievements in the economy, as a direct consequence of apartheid we remain a country with some steep contradictions". Notwithstanding public investment in housing of R29.5 billion ($4.5 billion) over the last 10 years, she commented that "apartheid's legacy remains strongly tenacious". Sisulu noted that between 1999 and 2001 "the number of households living in shacks in informal settlements and backyards increased from 1.45 million to 1.84 million, reflecting an increase of 26 percent - far greater than the 11 percent increase in population over the same period". About 2.4 million households lived in informal housing structures, a situation exacerbated by rapid urbanisation. Informal settlements lacked the basic services and infrastructure that were the norm in developed areas. "This inequality is no more palpable than at the level we are dealing with, where, at one end of the spectrum there has been a property boom, with housing prices recording the highest growth in the world, and at the other end we have 2.4 million people living in conditions that are unacceptable in a country such as ours," Sisulu added. Neil Gopal, chief executive officer of the South African Property Owners Association (SAPOA), was a signatory to the social contract for housing delivery. He told IRIN that SAPOA, whose members include property owners, developers, managers/brokers and banks, signed the contract in the "firm belief that we can provide certain solutions and assistance to government, particularly in terms of eradicating the housing backlog". "We don't only have developers as members but also owners with the potential to make certain land holdings available [for development], and we have expertise to contribute," Gopal said. Developers had agreed, in principle, to set aside a percentage of the total project value of commercially driven housing developments in a certain price range for investment in the low-cost home sector as part of their social responsibility. The details were still to be finalised. "The clause does indicate that the details must be thrashed out, as there may be many permutations on those [unknown] x and y values, and the industry and government need the opportunity to brainstorm this," Gopal noted. Addressing the housing backlog would require more than just building new homes in rural areas. "If we do that we could end up in the same situation because of rapid urbanisation. Locality is important - you want to get people close to working opportunities and services," he commented. Both sides were keen to point out the positive economic spinoffs of speeding up delivery. "The government is of the view that if we do go down the route of eradicating the backlog then the spinoff effects could take the economic growth rate up to 6 percent, largely because of the amount of jobs created in the construction industry," Gopal explained. Mabaya stressed that government was not asking developers "to build a R150,000 [$23,255] house next to a R5 million [$775,194] home" by setting aside a percentage of the value of their commercially driven housing developments. "What we have agreed at the Indaba is that, as a principle, in South Africa when you develop accommodation for high-income earners you must take into consideration the fact that there are low-income earners," he said. "What we are finding very interesting is that some developers have already started integrating such developments. For example, in the Gauteng province, Cosmo City is a combination of subsidised [low-income] houses, and within that complex there are also houses valued at R400,000 [$62,015] to R500,000 [$77,519] for mid-income earners," he commented. Government was well aware of the need to respect market forces in the property sector. "We know there is a market for low-cost homes - just within the government sphere there are a lot of teachers, soldiers, police officers who are within the R1,500 to R7,000 monthly salary bracket. Those are the people who can only afford houses that are around R100,000 [$15,503] to 150,000 [$23,255]," Mabaya said. Yet South Africa lacked housing stock near urban centres for people in this income bracket. "Because of the shortage of stock close to cities, people are living in informal settlements and backyards. So we are telling developers that if you build your R5 million per cluster [home] housing estates, then provide us with a percentage of that project's value in affordable housing in areas close to cities, close to transport, basic services etc.," Mabaya explained. Developers could not afford to concentrate on "penthouses and golf estates" only, "but neither are we saying accommodation must be free - there is a market for low-cost homes, and we believe there's a duty and responsibility among all of us to ensure that we provide that stock", he concluded. Jopie van Honschooten, coordinator of the low-income housing finance initiative at the Banking Association South Africa, said the plan required the commitment of all stakeholders. "It's no good just creating the demand by making finance available [to low-income earners] without there being the supply of a sustainable form of housing, which is such that people want to preserve it - in other words, not the dormitory kind of accommodation," he said. "It's my sincere hope that the social contract for rapid delivery alerted all the role players to this, as reducing the backlog is not just going to happen through financial engineering," van Honschooten pointed out. "We have to have the builders, developers, suppliers on board, and it will require some very innovative thinking and partnerships."