Affordable housing in South Africa

11 Oct 2012

Section 26 of Chapter 2 of the Constitution enshrines a citizen’s right to adequate housing.

According to the UN International Covenant on Economic, Social and Cultural Rights, in relation to adequate housing, the article reads: “the right to housing should not be interpreted in a narrow or restrictive sense which equates it with, for example, the shelter provided by merely having a roof over one’s head or views shelter exclusively as a commodity. Rather it should be seen as the right to live somewhere in security, peace and dignity.”

The Government in an effort to realise this right for all South Africans has built over 3 million subsidised housing units since 1994.

Not only is this a constitutional requirement, it is just simple human dignity.

However, due to the massive growing demands, on the one hand and decades of degradation of housing conditions, on the other hand, the backlog remains difficult to eradicate.

Current estimates of the backlog stand at about 2.1 to 2.5 million units.

As at September 2011, it was estimated that approximately 12 million people were still without adequate housing.

Though consistent and reliable statistics on housing are somewhat patchy, according to the 2009 General Household Survey, 12.8 percent of South African households lived in a RDP or State-subsidised dwelling and 13.5 percent of households have at least one member of the household on a demand database or waiting list for State subsidised housing.

International human rights law recognises principles on basic housing.

According to the UN International Covenant on Economic, Social and Cultural Rights, in relation to adequate housing, the article reads: “the right to housing should not be interpreted in a narrow or restrictive sense which equates it with, for example, the shelter provided by merely having a roof over one’s head or views shelter exclusively as a commodity. Rather it should be seen as the right to live somewhere in security, peace and dignity.”

The Department of Human Settlements has recognised that the backlog in South Africa is not being reduced fast enough and has committed to increasing the rate of delivery with a view to wiping out the backlog by 2030.

At current levels, over R16 billion is earmarked by Government for housing each year.

But still this is not enough and has led Minister Sexwale to say that “We need all hands on deck to sort this problem out and to create a better South Africa for all.”

This remark is both recognition and a plea that Government needs the assistance of all parties possible to eliminate informal settlements and poor housing conditions for millions of South Africans. Business, individuals, institutions, and Government all need to partner in the effort.

Government already provides various subsidies to the poor to aid the housing effort. Initiatives include individual housing subsidies, incremental housing programmes, rental housing programmes and so on.

Some, besides Government, have also already begun to tackle the problem: organisations such as the National Housing Finance Corporation, International Housing Solutions, Trust for Urban Housing Finance, the Rural Housing Loan Fund, micro-finance institutions, the Social Housing Regulatory authority, to name a few, are all part of the struggle to get the houses built and get people out of squalor and into better living conditions.

A housing backlog is not a uniquely South African problem. Most developing countries suffer some degree of backlog, often seen as a capital market, disposable income and access to banking services problem.

We all face the same challenges of eradicating informal settlements and providing people with homes.

Role of Housing

As the Constitutional Court has said, the provision of “housing as a human right constitutes more than simply providing bricks and mortar”.

The establishment of formal housing also naturally brings with it over time, better opportunities for commerce around those housing settlements, schools for children who grow up in those neighbourhoods, infrastructure in terms of electricity and water, and so on.

Proper housing is a fundamental building block not only to human decency in terms of living conditions, but also in terms of stability.

In other words, having proper housing allows stability in your life, facilitates the storage of your belongings, a foundation from which to look for a job if you are a job seeker, to build from a small house into a better one, and provides stability for your children’s education.

Its importance as fundamental bedrock to a better and improved quality of life cannot be underestimated.

The establishment of formal housing also naturally brings with it over time, better opportunities for commerce around those housing settlements, schools for children who grow up in those neighbourhoods, infrastructure in terms of electricity and water, and so on.

In other words, formal housing can act as an essential catalyst to aid development and growth.

Proper housing aids the development of better communities where all people can feel that they truly belong to society.

It can provide them with a sense of worth, achievement and belonging. In a study by University of Cape Town Professor Francois Viruly, he found that across 2 379 units constructed, the majority of respondents who took up those housing units agreed that their access to public transport, quality of their children’s lives, house, leisure, social life and health had all improved.

Interventions in the housing market of some sort have occurred many times in history, as countries have been faced with similar problems at some time in their development:

1. American public housing policy had its roots in the Great Depression of the 1930s

2. British public housing policy in line with rapid urbanisation in the 1800s was already an issue in 1870, with a special Government Board established to oversee the provision of housing to the very poor.

Following the 2nd World War, the Government produced an average of 170 000 houses per year from 1946 – 51 and by 1954, this figure had risen to 300 000. (Britain to this day has a homelessness strategy that seeks to eradicate the problem of people living in temporary or informal conditions).

Back-Log: World-wide

“UN-HABITAT estimates that, worldwide, close to three billion people will need access to housing and basic infrastructure services over the next 25 years. This will require 35.1 million housing units per year or 96 150 per day or 4000 per hour in order to meet demand…”

Back-Log: Sub-Saharan Africa

Focusing on Sub-Saharan Africa, one needs to acknowledge that profound demographic change is occurring. The rate of urbanisation is extremely high.

“African cities will have to accommodate more than 300 million new residents” by 2030.

Without investment in infrastructure, water, electricity and housing, urban centres are not ready to keep pace with the rate of urbanisation. In this lies both threat and opportunity.

The threat is clear: without proper investment and planning, increased squalor and informal settlements will result as urbanisation continues.

Development will be further retarded and countries already behind in terms of development versus peers will fall further behind.

The opportunity presents itself too: proper planning, good governance and oversight, and sound management of urban planning and the formation of proper housing conditions can provide the 300 million or so people in sub-Saharan Africa who will join urban centres, with a base from which to work, educate themselves, seek opportunity, start businesses, improve their access to health services etc, in short, provide a springboard from which they can contribute to their specific country’s development.

The PIC is currently refining its strategy on affordable housing, but already has invested in entities that provide housing solutions to the very poor and those of low-income. The amount committed by the PIC currently stands at R2.6 billion.

The South African backlog is symptomatic of the rest of Sub-Saharan Africa. Countries can learn from each other in tackling the problem.

In Kenya, 234 000 new housing units are required annually and about 20 000 – 30 000 are being produced while in Zambia 600 000 units are needed and less than 1 percent of that number are being produced.

However, it’s not all “doom and gloom”! According to the Community Survey (2007), in South Africa “today is better than yesterday”. As reported by Finmark and the Community Survey in 2007:

1. 70.5 percent of households now live in formal dwellings compared to 64.4 percent in 1996

2. The use of electricity as the main energy source for lighting increased from 57.6 percent in 1996 to 80 percent in 2007

3. The percentageof households with access to piped water increased from 84.5 percent in 2001 to 88.6 percent in 2007. 

But there is still a notable gap – one that raises social instability risk.

Where the PIC is playing a role

The number of housing units required in South Africa and the rest of Sub-Saharan Africa seems daunting, but many organisations and governments are tackling the problem.

As an investor, the Public Investment Corporation (PIC), like similar investors, can play an important role in contributing to wiping out the back-log.

It will no doubt take sustained effort over many years, but the prospect of failing is unthinkable in terms of its impact on our long-term social and development. 

The PIC is currently refining its strategy on affordable housing, but already has invested in entities that provide housing solutions to the very poor and those of low-income. The amount committed by the PIC currently stands at R2.6 billion and includes:

1. Investment in low cost housing

2. Private equity investment in housing development projects

3.Bridging finance for developers of affordable houses

4. Mortgage finance for the development and refurbishment of residential accommodation in the inner city

5. Investment into intermediary organisations dealing with affordable housing.

The PIC is also very open to dialogue - not only with government entities and international investors, but with partners in the South African and African environment.

We see space both where investor return and social return can co-exist and we believe that one cannot view the two in isolation of one another.

They are inextricably intertwined. An investor for the long term, the PIC views sustainability and societal development as crucial to continued future growth and success.

The dialogue that I refer to above is a long and painful agenda. The solutions are not at all easy. These cannot be resolved by only one party.

This agenda is formed by some of the social and economic imbalances we observe in South Africa. As we are players and financiers in this field, we still are concerned about issues of:

1. Access to decent housing for the average South African. This partly has to do with effectively matching the supply with existing demand conditions;

2. The other issues relating to access have to do with affordability. How certain are we that the unit costs of producing is consistent with means of the people we want to assist? Are we not enriching the middle man?

3. Do we have the requisite institutions to finance the target markets?

4. Investing in the right areas, namely those next to work, reversing the effects of the Group Areas Act

5. Ensure an optimal quality to the houses we construct

6. Minding the gap, to ensure that no deserving South Africans are left out

Masilela delivered this speech at the International Housing Solutions (IHS)  4th Annual HIS Developer Conference held last week at the Johannesburg Country Club in Auckland Park.

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