Rental Housing

1. Rental Housing Response to the Recommendations of the FFC on Rental Housing National Department of Housing 7 August 2009

2. FFC Recommendations: Rental Housing • Relaxation and flexibility on: • Eligibility criteria for accessing the SHRCG to allow projects falling outside the DRZ to access funding • Number of DRZs to respond to excess demand for rental housing • Minimum units size for developments of existing buildings • The process of disbursing funds for rental housing within the housing sector should be made shorter, to minimise time lags following the submission of approved project plans • The Social Housing Regulatory Authority should improve inter-sectoral co-ordination between various government departments responsible for integrated human settlements • The qualifying income bands should be reviewed to ensure that individuals are not unfairly excluded from benefiting from the subsidy (due, for example, to increases in the cost of living)

3. Relaxation & flexibility • Eligibility criteria for accessing the SHRCG to allow projects falling outside the DRZ to access funding • The Social housing programme is a targeted programme rather than a mass housing delivery programme with specific restructuring objectives, than mass provision of affordable rental housing • The restructuring aims will facilitate the further provision of private rental accommodation by the private sector in areas where no or minimal investment in rental housing is occurring, but is required • The DRZs therefore ensure that governments investment in rental housing is targeted and focussed in areas where it is required and will be sustainable

4. The CRU programme is not limited by the DRZs and can be accessed in any areas. • The institutional subsidy can still be access outside the DRZs for rental housing. • Rental housing in rural areas has been studied – indications are that for the Social housing income bands rental housing is provided as a employment perk and would not be required through a subsidy programme of this nature • Experience of social housing development prior to the introduction of SHRCG has indicated that location of rental housing stock is critical to success and sustainability of the projects and needs to be carefully selected. This further informed the DRZ approach of the programme

5. Relaxation & flexibility • Number of DRZs to respond to excess demand for rental housing • Rental housing demand and need is mostly in metros and urban area • All these areas are covered by the current DRZs • Local, province and national jointly inform and agree on the specific DRZs in relation to demand and sustainability of rental housing in the areas as well as restructuring objectives(social, economic and spatial)

6. Often developers would like to develop rental housing where an opportunity arises. The opportunities do not always meet the restructuring criteria or are not always suitable for sustainable rental housing • The DRZs ensure that governments investment is targeted and focussed and will be sustainable

7. Relaxation & flexibility • Minimum units size for developments of existing buildings • Purpose of social housing programme is to encourage new rental stock development, therefore the programme is bias towards new development • CRU deals with existing rental stock and is flexible enough to accommodate existing buildings • The minimum unit sizes defined are linked to the subsidy quantum and financial model informing the programme. • Should the units size not be defined, the programme costs will be completely open ended and the costs would not be able to be contained and managed as well as the product that is to be rented

8. The social housing programme currently does not accommodate the development and rental of rooms with shared facilities , which is the typical approach for the redevelopment of existing buildings in inner-city area in order to address lower income groups • Work is being done to look at a minimum specification and financial model for this approach without creating future “hostels” or encouraging slum landlords through the programme

9. Funding disbursement process • The proper management of rental stock is the key success factor to rental housing • The process of accelerating the delivery of rental housing considers: • Readiness of projects • Management of projects post construction • Cost of projects • Standard assessment tools for projects have been developed and agreed with the sector. These are utilised to assess each of the elements indicated above.

10. Funding disbursement process • The funding disbursement process complies with PFMA/government requirements and key controls as well as requirements for viable rental housing projects • As sector becomes familiar with the process the turnaround times are shorten through better quality project submissions • The SH programme guidelines define specific turnaround times for programme/project approvals • A capacity building approach is being implemented to improve the capacity of province to approve rental housing projects, as these projects are more complex than ownership project approvals.

11. Funding disbursement process • Alternatively, the programme could be made a national programme (from a funding perspective), with funding disbursed from a national directly or through an institution • Thjis would allow capacity for rental housing to be dedicated and focussed ensuring sustainability • Province to concentrate on other housing programmes

12. SHRA & inter sectoral co-ordination • The SHRA was established to focus on the regulation of the social housing sector in order to protect governments investment in rental housing • In terms of the SH Act and Rental housing Act, national government should ensure that all spheres of government and other government departments are aligned to enable and support the development of rental /social housing • In terms of Inter-governmental arrangements and relationships, the NDoHS is best positioned to fill this roll rather than the SHRA

13. Qualifying income bands • The institutional subsidy qualifying criteria does not apply when the SHRCG is utilised in the social housing programme • There are however requirements to ensure that governments investment does benefit the targeted income groups (below R3500 – R1500) through cross subsidisation with middle and higher income groups • Some SH developers would still like to utilise the institutional subsidy and not the SHRCG as the criteria is less onerous and they bypass regulation. This will no longer be possible when the SHRA is established • Currently the institutional subsidy allows for rent-to-buy and if the income bands are changed individuals would get access to an ownership product of higher value than in other subsidy ownership programmes.

14. Concluding statements • Rental housing programme is quite different to the ownership programme as the focus is on the sustainable management of stock post development • NDoHS acknowledges that there is great demand and need for affordable rental housing • The national rental housing strategy is focussed to respond to this through: • Scaling up the delivery of rental housing • Ensuring accessibility for low income groups • Current funding environment limits the extent of investment possible in rental housing / housing

15. Thank you…