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PART 3 Social Housing PolicyThe National Housing CodeSOCIAL & RENTAL INTERVENTIONSCommunity Residential UnitsInstitutional SubsidiesSocial Housing PolicySubsidy Quantum - Social & Rental InterventionsVolume 6

SOCIAL AND RENTAL INTERVENTIONS: SOCIAL HOUSING POLICY PART 3 (OF THE NATIONAL HOUSING CODE) 2009TABLE OF CONTENTSPREAMBLE . 51POLICY OBJECTIVES. 111.1 RESTRUCTURING. 111.1.1 SPATIAL . 111.1.2 ECONOMIC. 121.1.3 SOCIAL . 121.2 FUNCTIONING HOUSING SECTOR . 132DEFINITION OF SOCIAL HOUSING . 173GUIDING PRINCIPLES FOR SOCIAL HOUSING. 234THE TARGET MARKET OF SOCIAL HOUSING . 294.1 TYPICAL HOUSEHOLDS RENTING IN SA: THE DEMANDFOR RENTAL HOUSING. 304.2 DEEPENING THE REACH OF SOCIAL HOUSING . 314.3 SHIFTING FROM INCOME-BASED ELIGIBILITY TESTING TOGREATER SELF-TARGETING. 324.4 SHIFTING FROM A SUBSIDY-BAND APPROACH TO A PROJECTBASED APPROACH. 334.5 ESCALATING RENTALS . 344.6 AN UPPER INCOME LIMIT FOR ACCESS TO SUBSIDISED UNITS . 345BRINGING GREATER QUALITY INTO HOUSING ENVIRONMENTS . 396GEARING TO SCALE. 416.1 STRATEGY FOR GEARING UP CAPACITY . 417LEGISLATIVE, INSTITUTIONAL AND REGULATORY ENVIRONMENT. 457.1 LEGISLATIVE ENVIRONMENT. 451

SOCIAL AND RENTAL INTERVENTIONS: SOCIAL HOUSING POLICY PART 3 (OF THE NATIONAL HOUSING CODE) 20097.2 INSTITUTIONAL ARRANGEMENTS FOR THE SECTOR . 467.2.1 LEADERSHIP . 467.2.2 FUNDING . 497.2.3 DELIVERY. 517.2.4 REGULATION . 527.2.5 FACILITATION. 537.3 REGULATION . 567.3.1 ACCREDITATION AND THE ESTABLISHMENT OFA SOCIAL HOUSING CORPORATION. 577.3.1.1 ACCREDITATION OF SHIS. 577.3.1.2 PERFORMANCE MONITORING . 597.3.1.3 INCENTIVES AND SANCTIONS . 607.3.2 ACCREDITED PROJECTS. 607.3.2.1 THE INSTITUTIONAL COMPONENT. 607.3.2.2 THE PROJECT COMPONENT . 617.3.2.3 INCENTIVES AND SANCTIONS . 618CAPACITY BUILDING IN THE SOCIAL HOUSING SECTOR . 658.1 PLACING THE DEVELOPMENT OF VIABLE PROJECTS AT THECENTRE OF THE CAPACITY BUILDING EFFORT. 658.2 TYPES OF CAPACITY BUILDING INTERVENTIONS . 668.3 SHI CAPACITY-BUILDING GRANTS. 668.4 CAPACITY BUILDING FRAMEWORK AND PROGRAMME FORTHE SECTOR. 688.5 CAPACITY BUILDING OF OTHER SUPPORT ORGANISATIONS. 688.6 CO-ORDINATING CAPACITY BUILDING INITIATIVES . 689FINANCE FOR SOCIAL HOUSING . 739.1 OVERALL APPROACH . 739.2 CAPITAL GRANTS FOR SOCIAL HOUSING PROJECTS. 759.3 FINDING A BALANCE BETWEEN FLEXIBILITY AND TRANSPARENCY . 769.3.1 SPLITTING THE CAPITAL GRANT INTO TWO COMPONENTS. 772

SOCIAL AND RENTAL INTERVENTIONS: SOCIAL HOUSING POLICY PART 3 (OF THE NATIONAL HOUSING CODE) 20099.3.2 SUBSIDY EFFICIENCY MEASURES . 789.3.3 FISCAL IMPLICATIONS . 799.4 DEBT FUNDING. 799.5 TAX INCENTIVES FOR SHIS . 799.6 RISK MITIGATION MEASURES. 809.6.1 RISK MITIGATION REQUIREMENTS . 809.6.2 INSURANCE COVER . 819.6.3 COMPLEMENTARY POLICY INITIATIVES . 8110 ALIGNMENT . 8511 POLICY IMPLEMENTATION: A ROLL-OUT STRATEGY . 87ANNEXURE A - LEGISLATIVE ENVIRONMENT AFFECTING SOCIAL HOUSINGSECTOR . 893

SOCIAL AND RENTAL INTERVENTIONS: SOCIAL HOUSING POLICY PART 3 (OF THE NATIONAL HOUSING CODE) 20094

SOCIAL AND RENTAL INTERVENTIONS: SOCIAL HOUSING POLICY PART 3 (OF THE NATIONAL HOUSING CODE) 2009PREAMBLESocial housing development in the context of the broader housingdevelopment programme of the Government.In his opening address to parliament in 2001, the President announced theGovernment’s commitment towards the regeneration of inner cities in the country, thedevelopment of well located land and the intention to broaden the current housingassistance programmes to accommodate higher density development and to addressthe increasing demand for rental housing in urban areas.Furthermore, in the State of the Nation address in May 2004, the President referredto “a comprehensive (housing) programme dealing with human settlementand social infrastructure, including rental-housing stock for the poor”. Healso referred to the need to address “the broader question of spatial settlementpatterns and implications of this in our efforts to build a non-racial society”.Subsequently, in September 2004 the National Department of Housing released itsComprehensive Plan for the Development of Sustainable Human Settlements.Entitled ‘Breaking New Ground’, this document “reinforces the vision of theDepartment of Housing to promote the achievement of a non-racial, integratedsociety through the development of sustainable human settlements andquality housing”.While the 2004 plan notes the continued relevance of the state housing programmeintroduced in 1994, it flags the need to redirect and enhance various aspects ofpolicy, and commits the Department to meeting a range of specific objectives.Amongst others, these objectives include: Utilising housing as an instrument for the development of sustainable humansettlements, in support of spatial restructuring; Combating crime, promoting social cohesion and improving quality of life for thepoor; Leveraging growth in the economy; and Utilising the provision of housing as a major job creation strategy.The plan notes the shift in emphasis from the provision of housing to the creation ofsustainable human settlements. This includes the promotion of more efficient cities,towns and regions. In support of spatial restructuring, the plan highlights the need to“integrate previously excluded groups into the city and the benefits it offers”.The plan flags the need to promote densification, including “housing products whichprovide adequate shelter to households whilst simultaneously enhancing flexibilityand mobility”.5

SOCIAL AND RENTAL INTERVENTIONS: SOCIAL HOUSING POLICY PART 3 (OF THE NATIONAL HOUSING CODE) 2009The Social Housing Policy described in this document, while comprising only oneaspect of the overall housing strategy, is a key component of meeting theseobjectives. Social housing has shown that it is able to significantly contribute tourban regeneration and to urban efficiency. It can meet objectives of good location,integration, and viability. The sector can facilitate local economic developmentthrough supporting local economies. It makes a financial contribution to localauthorities by way of regular payments for rates and services. Social housing hasbeen shown to promote the effective and efficient management of rental and/orcollective forms of accommodation (with emphasis on long term management andmaintenance). This contributes to social integration, social stabilisation and crimereduction. Therefore social housing is not only able to contribute to theDepartment’s objectives noted above, but also to the government’s macroobjectives of promoting citizenship, democracy and good governance.Social housing institutions and projects have been developed in South Africa since1997 with the introduction of the institutional subsidy mechanism. To dateapproximately 60 social housing institutions (SHIs) have been formed deliveringapproximately 30,332 units throughout the country. The SHIs have developed socialhousing stock using the institutional subsidy together with loan funding from theNHFC and have relied on donor funding and local authority grant funding to coverinstitutional set-up and operational costs.This has resulted in a unsustainablesituation where the majority of the SHIs have developed and currently depend ondonor funding. The delivery models have been diverse and vary from pure rental, toco-operative housing, instalment sale options, and hybrids of these delivery models.Recent reviews of the performance of the sector (the Job Summit Pilot Project MidTerm Review and the EU Mid Term Review) have shown mixed results. Keyconclusions of these reviews are pertinent to the development of the policyframework for the sector. The reviews of the sector note the following: Scale is hard to achieve in the sector within the current context, given that thecapacity and experience base is limited and needs to be consolidated and properlyreinforced if scale is an objective. The overall funding framework and the current institutional subsidy is not tailoredto the production of viable medium to higher density housing products andprojects, and has no proper provisions for the operating and management costsof the housing stock. Financial pressures are immense and the parameters of the current subsidyapproach are too tight to allow the provision of social housing too far downmarket. In most cases SHIs display serious financial distress.6

SOCIAL AND RENTAL INTERVENTIONS: SOCIAL HOUSING POLICY PART 3 (OF THE NATIONAL HOUSING CODE) 2009 Capacity building initiatives for the sector have largely centred on education andtraining initiatives and the pre-establishment phase of the SHI. This has resultedin a focus on the establishment of SHIs with limited emphasis on the projectpackaging, project implementation, and project operations skills needed to runviable institutions. A lack of suitable governance and management capacity has been evident withinsome of the SHIs, yet there has been no agency with the necessary authority tointervene and correct the situation. The sector has been moving out of the low income market into the middleincome markets due to the financial pressures and subsidy constraints andtherefore competing with private sector players causing potential marketdistortions.Moreover it is fair to say that social housing currently operates in a policy vacuum.This Social Housing Policy document endeavours to fill this policy vacuum and toaddress the key challenges of the sector. The policy framework presented is anaggressive and bold indication of government’s commitment to making the socialhousing sector work because of the benefits that it brings to the country.Among the major features of the policy are the following: The specific purpose and focus of social housing in relation to government’spolitical and development goals and in relation to other housing policies isclarified. The idea of focusing social housing investment in designated restructuring zones is givenprominence. A new approach to targeting beneficiaries is introduced which constitutes aradical departure from previous app