social housing bill 29 of 2007 preliminary response odette crofton acting chief director social /...
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Social Housing Bill 29 of 2007Preliminary response
Odette CroftonActing Chief Director
Social / Rental housing & PHP12 September 2007
Outline
• Context
• Social housing policy
• Social housing Bill Chapters– Chapter 1– Chapter 2– Chapter 3– Chapter 4– Chapter 5
Context• Socio-economic
demographics• Migration Patterns• Rapid rate of
urbanisation• ⅓ of low-income renters
in metro’s are in backyard shacks & informal settlements
• The poor struggle to access limited rental opportunities provided by formal market (especially in good locations)
Province R0 – R800 R801 – R3, 200
R3, 201 – R6, 400
Eastern Cape 52.8% 33.72% 13.41%
Free State 56.06% 33.19% 10.75%
Gauteng 41.62% 43.88% 14.49%
KwaZulu Natal
53.03% 34.68% 12.29%
Limpopo 49.26% 33.25% 17.49%
Mpumalanga 48.61% 38.77% 12.62%
Northern Cape
42.22% 40.86% 16.92%
North West 44.40% 42.48% 13.12%
Western Cape
30.87% 47.31% 21.82%
Total 45.12% 40.27% 14.61%
-
200,000
400,000
600,000
800,000
1,000,000
NR
OF H
OU
SE
HO
LD
S
R0 - R800 R801 - R3,200 R3,201 - R6,400
INCOME GROUP
FORMAL INFORMAL
Context - Demand• Demand for rental
rising (7% p.a. for groups earning R1600-R3200/month) = affordable market need
• Additional pressure due to:– National Credit Act– 21 – 18 as age for
contracting– Property boom – no
ceiling on rentals that can be charged
2001- 2006 2006 -2011 TYPE OF HOUSING
5 YEARS / ANNUM 5 YEARS / ANNUM
House or brick structure on a separate stand or yard
224,510 44,902 281,739 56,348
Traditional dwelling / hut / structure made of traditional materials
21,849 4,370 26,797 5,359
Flat in block of flats 81,012 16,202 103,021 20,604
Town / cluster / semi-detached house (simplex; duplex; triplex)
14,630 2,926 18,410 3,682
House / flat / room in back yard 53,613 10,723 69,425 13,885
Informal dwelling / shack in back yard
64,457 12,891 83,248 16,650
Informal dwelling / shack NOT in back yard
49,493 9,899 62,212 12,442
Room / flatlet not in back yard but on shared property
16,889 3,378 21,536 4,307
Caravan or tent 1,692 338 2,093 419
Private ship / boat 206 41 250 50
Total 528,351 105,670 668,731 133,746
Context
• Basic Rental Formula
Tenant pays Rent to occupy a
Unit
CommonDenominator
Definition: An agreement between a landlord and a tenant that gives the tenant the right to use and occupy rental property for a period of time
Intervention required
Public rental
housing market
Private rental
housing market
Access for lower & indigent income groups
Gearing to scale
Context – Rental Strategy
Public rental
housing market
Private rental
housing market
Access for lower & indigent income groups
Gearing to scale
CRUSocial
Housing
Complementary initiatives
Proposed Rental strategyCommunity Residential Units
• Correcting historical problems with public housing & hostels
• Coherent framework for public housing & hostels
• Indigent & lower income groups (R3500 – R800)
• Stabilizing market & housing environ
• Addressing slum landlords
• Affordable formal accom for informal tenants
• Object subsidy
Social housing• Private sector for-profit &
non-profit sectors mobilized
• Cross-subsidization• Mobilizing private funders• Restructuring objectives• Lower and middle income
groups (R7500 – R1500)• Object subsidy
Housing Act Social Housing Act
SHRA Regulations
SHI Regulations (accreditation & regulation)
incl. Principles of Regulation
Operational Policies & Procedures
Rules
Guidelines(in respect of funding)
Parliament
Minister of Housing
SHRA Council
ApprovalsExisting LegislationNew Legislation
Social Housing Policy
Social housing policy• SH programme involves a mixture of gov
grants, private sector funding and equity• Focus on involvement of private sector• Allowing for maximum cross subsidisation
from higher/middle income to support lower income
• Targeted & focused programme, not mass delivery
• Restructuring objectives
Definition of social housing
• A rental or co-operative housing option for to 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
Delivery agents for Social housing
• Non-profit company
• Municipal owned entity
• Housing Co-operative
• For-profit company
• Public-private partnership
Social Housing institutions
Social housing policy
• Introduces three groups of instruments:
Legislative & regulatory Instruments
Social housing Bill = framework legislation
Social Housing Regulatory Authority (SHRA)
Defined sector roles & players
Financial instruments
Restructuring capital grants for social housing
Capacity building grants
Tax incentives
Risk mitigation measures
Capacity building instrumentsFocus on capacity to run viable projects
1. Capacity to develop and implement projects 2. Effective internal functioning of SHIs3. Support to gear up staff
Resource pools like TRGs
Social Housing Bill, 29 of 1997
Social Housing Bill 29 of 1997Chapter 1
Terminology & principles
Chapter 2
Roles & Responsibilities
Chapter 3
SHRA establishment
Chapter 4
SHI functioning & Accreditation
Chapter 5
Programme & Regulations
Chapter 1
Terminology & definitions ambiguity:• Approved projects vs accredited projects• Low & medium income groups• Lease agreements• Maladministration• Social housing – not include rent-to-buy• Principles – specific to SH, rather than all
from housing act and SH policy
Chapter 2
• Roles & responsibilities not duplicate roles & responsibilities in Housing Act
• Co-ordination & alignment as part of the process
• MFMA, PFMA alignment
INSTITUTIONAL/ SECTOR ROLES
Leadership Delivery Funding Regulation Facilitation
DE
LIV
ER
Y P
RO
CE
SS
Local authorities (identifying restructuring zones) Provinces (put forward restructuring zones to SHRA for approval)
Local authority provide land, infrastructure & public environs SHIs PPP / private sector are housing delivery and management agents Compile project proposals for approved restructuring zones and submit to SHRA
Provinces administer disbursement of SHC approved grants NHFC and private sector loan funding
Province monitors local authority and SHI/private sector delivery Federations set code of good practice for members
SHRA / SHF disburses capacity building grants according to capacity building programme Service providers compete to provide capacity building services Risk mitigation / guarantees to SHIs
RE
GU
LA
TO
RY
PR
OC
ES
S
NDOH provides policy framework, sector co-ordination and programme funding SHRA manages the programme call for and approves restructuring zones
SHRA accredits SHIs and approves projects SHC accredits private sector/PPP projects
SHRA approves grants
SHRA annual performance monitoring and compliance of SHIs and sector players
SHRA annual performance monitoring of sector players SHRA sector informs capacity building programme
Chapter 3
• Council member appointment vs independence of the council
• “fit” & proper members on the council
• All delivery agents are monitored, but in different ways – SHIs (non-profits) vs For-profits
• Inspections & intervention
Chapter 3
Table 1: SHRA Institutional Options
Option 1: Department Directorate
Option 2: Regulatory Public
Entity
Option 3 Department Agency
PFMA Classification Not applicable Schedule 3A: National Public Entity
Proposed (PSA 3A) – not currently available
Legal basis / Mandate Housing Act & Code Enabling Legislation - Social Housing Act
Delegation of powers & duties in terms of an Act (legislation)
Proposed functions Regulation Investment Capacity Building
Delivery
Regulation Investment
Regulation Investment Capacity Building
Delivery
Governance Departmental structure & Minister
Governing body (Council) accountable to Minister
Minister
Chapter 3
The proposed functions of the SHRA are:– Regulation
• Accredit & Register SHI’s• Recommend Restructuring Zones• Set Principles of Compliance & Accreditation• Regulate for Compliance• Act on Non-Compliance• Report on Compliance (Individual SHI and Sector-wide SHI / project
performance)– Investment
• Assessment & support of prospective capital projects• Authorisation top-up capital funding• Compliance monitoring of project delivery• Specification & funding of Institutional Investment• Procurement of common SHI sector-wide support
Chapter 3
• Phasing in of SHRA & Phasing out of SHF– Preparation
phase – once Act is passed
– Establishment phase
– Operational phase
1.6Draft regulatory procedures &
processes
1.6Draft regulatory procedures &
processes
1.4Develop criteria & advertise
for Council
1.4Develop criteria & advertise
for Council
1.5Develop criteria & advertise
for CEO
1.5Develop criteria & advertise
for CEO
1.1Prepare
regulations
1.1Prepare
regulations
1.2Appoint interim administrator
1.2Appoint interim administrator
1.3Establish
legal entity
1.3Establish
legal entity
1.7Draft Internal operating procedures & policies
1.7Draft Internal operating procedures & policies
1.8 Social housing data collection
& analysis
1.8 Social housing data collection
& analysis
1.Preparation Phase
2.6Establish office
2.6Establish office
2.4Recruit & appoint CEO
2.4Recruit & appoint CEO
2.5Recruit & appoint Senior
Management
2.5Recruit & appoint Senior
Management
2.1Prepare
SHIP & SHoRP
2.1Prepare
SHIP & SHoRP
2.2Identify & assess prelim
Restructuring Zones
2.2Identify & assess prelim
Restructuring Zones
2.3Recruit & appoint SHRA
Council
2.3Recruit & appoint SHRA
Council
2.7Obtain MoH approval for
regulations
2.7Obtain MoH approval for
regulations
2.8 Develop job profiles &
advertise for staff
2.8 Develop job profiles &
advertise for staff
2.Establishment Phase
3.4Council approves internal
operating processes & procedures
3.4Council approves internal
operating processes & procedures
3.5Recruit & appoint staff
3.5Recruit & appoint staff
3.1Council & MoH approve SHIP
& SHoRP
3.1Council & MoH approve SHIP
& SHoRP
3.2Council & MoH approve
prelim Restructuring Zones
3.2Council & MoH approve
prelim Restructuring Zones
3.3Council approves regulatory
processes & procedures
3.3Council approves regulatory
processes & procedures
3.Operationalisation
Phase
Chapter 4
• Dealing with existing institutions – turnaround programme
• Data and information on the SHIs
Chapter 5
• Regulations to the bill– Code of conduct– Investment criteria & qualifying criteria– SHRA & other delivery agents– SHRA & provinces– SHRA & NHFC– Administrative matter
Chapter 5 - Funding SH
Sources of funding:• Share capital• Shareholders loan• Senior bank debt• NHFC debt• Other debt• SH Restructuring grant• Staff gear-up grant• Provincial top-up (inst
subsidy)
Application of funding:• Project Costs
– CAPEX– Overheads– Vat
• Financing costs– Interest during
construction– Commitment fees– Underwriting fees
Financial model for SH
Key project variables measured to ensure a viable project
• Project IRR pre-tax, post-grant (excludes residual value)
• Maximum Weighted Average Cost of Capital
• Initial yield on total capital cost
• Initial yield on capital cost less grant
• Initial yield on equity
• Return on equity (RoE)
• Minimum debt service cover ratio
• Maximum cost to income ratio
• Loan to value
Concluding comments
• Process of dealing with public comments
• Budget for social housing
• Dealing with Housing delivery process blockages (land, land release, EIA, township establishment, etc)
• Urgency of the Bill– Stability, clarity and direction in the sector– Growth in the Industry– Harness bigger and more institutions into the
sector– Entice and provide comfort for funders (local
& international