Social rental housing benefits: research & study briefing by Social Housing Foundation

Meeting report

Social Rental Housing: benefits: Social Housing Foundation (SHF) briefing
Mr Brian Maholo, Managing Director, Social Housing Foundation, stated that within the last twelve months key research was done, in conjunction with the Department of Human Settlements (DHS), around the issue of Social Rental Housing (SRH) supply and demand, utilities and municipal charges, backyard and informal rental and evictions. He added that from this study had emerged information to enable a comparison between SRH and Reconstruction and Development Programme (RDP) housing, done according to a cost benefit analysis (CBA). Mr Maholo stated that the full report would be distributed to the Members, as well as publicly launched, during the second week of September, at which stage more in depth discussion would take place. He stated that the SHF was not just a think tank, but that its research needed to be utilised by structures such as this Committee.  Mr Maholo stated that he hoped that after the presentation the Committee would be better informed on key rental housing issues, and that they could use this data in policy formulation.

Mr Adrian Di Lollo, Research and Development Division, SHF, tabled the attached document, and stated that the report compiled was perhaps the SHF’s most important research within the last year. He said that there had always been a great deal of focus on the budgetary implications of housing programmes, and that the SHF had set out to look at the real, but hidden costs of RDP and SRH housing. Mr Di Lollo stated that the research had looked at the broader economic impacts and the ongoing costs to government and society with regards to RDP and SRH projects.

Mr Andreas Bertoldi, Consultant, SHF, stated that cost benefit analysis was an economic tool that should inform policy, but that it was not a fiscal or budgetary tool. He added that in conducting the research the researchers had used a welfare economic model, and focused on the overall benefit to society. Mr Bertoldi stated that the CBA was important as the current debate was framed around short-term benefits, whereas the CBA looked at the long-term perspective around total cost. He added that when the researchers looked at the actual cost of housing, the subsidy figure was less than the ongoing operating and service delivery costs, and that the CBA had highlighted these ’hidden’ costs. Mr Bertoldi acknowledged that a CBA could not substitute for the necessary discussion and decision making. He added that limitations of the approach included the facts tat the research necessarily simplified the reality of all areas on the ground, had used assumptions to construct the base case and draw causal relations, and could not produce one simple numerical result.

Mr Di Lollo added that the results of the study did not justify choosing one model over the other across the board, as each was effective in different circumstances. He added that in order to make that sure as many people as possible read this research, the SHF was developing four policy discussion pieces around key areas from the report.

Discussion
Mr A Steyn (DA) thanked the presenters, but stated that he had expected more in terms of results and assumed that this would be outlined in the final report document. He added that he did not agree with the broad outline presented, and that it was very broad. Mr Steyn asked whether the economic recession would not have skewed the data from the research. He stated that the hidden costs were born by municipalities and many of these related to ongoing service delivery costs, but pointed out that often maintenance was not done by municipalities. Mr Steyn asked against which policy the SHF had measured the CBA, and noted that the aim of the research to determine the best model had not produced a conclusive result. He was interested in the financial costs of SRH, as it had been stated that SRH was two and a half times more expensive than RDP housing initially, but that in the long term the costs would level out. Mr Steyn noted that when RDP housing was better located, it was offset against the advantages of SRH, and asked whether finding the right location for the RDP houses would not in fact tip the scales in favour of this type of housing instead of SRH. He was, however, aware that there was also a place for SRH.

Mr Di Lollo replied that he understood that the data was collected prior to the credit crunch. He stated that many of the ongoing costs referred to the maintenance of municipal services that should be provided, and not the actual maintenance of the houses. Mr Di Lollo replied that in the current form SRH was not an option for the very poor, as it cost approximately R1 500 per month for the occupants. For this reason, there was a need for better management for RDP housing. He agreed that if RDP houses were better located, then many of the problems with RDP housing would disappear, but said also that RDP housing did not lend itself to high density living. Because of the nature of the tenure, SRH always lent itself better to high density projects.

Mr Bertoldi stated that the study showed that the tenure factor was a ‘red herring’, but that rather the critical factor was location. He added that if the Department was to build RDP housing in better locations it would reap the benefits, but that it must be remembered that the better locations would also cause the costs to go up and so there was a trade-off between the two.  Mr Bertoldi stated that in certain locations, SRH costs were better. He replied that it was correct that municipalities did not maintain RDP houses, but that neither did the householders.

Mr M Dikgacwi (ANC) asked whether the researchers had looked at the reasons for the bad quality of RDP housing. He asked whether inspectors actually did their work properly before issuing compliance certificates. He asked what the cost of SRH was, and noted that the cost of the SRH subsidy was higher than that of RDP houses

Mr Bertoldi stated that the 20-year life of RDP houses was poor, and that the cost of SRH was higher due to the ongoing maintenance provision.

Mr Eugene Perumal, Programme Manager, SHF, replied that the study actually looked at finances and not the quality of the RDP houses. He stated that the research had therefore looked at the actual cost of the unit versus long term cost. Mr Perumal stated that the study did not look at inspections but that maybe it should have done so. He added that the RDP subsidy ranged from R55 000 to R120 000 and that the institutional subsidy for SRH housing was similar, but that a new pilot subsidy, called the restructuring capital grant, was R125 000. Mr Perumal stated that the cost of a SRH unit was between R250 000 to R300 000 and that the building institution needed to get the difference between the subsidy and the amount as a loan. He added that the higher the subsidy, the less the householder needed to service the loan, and in this case the rent would be lower.

Ms M Borman (ANC) stated that it was useful to address the unfunded mandate of municipalities because people on the ground were unaware who they should be approaching. In terms of service delivery maintenance, she stated that there was a need to bear in mind what the cost to municipalities was. Ms Borman asked whether the figure of 600 households in six municipalities as the study sample was correct, and asked over what period the study was conducted for. She asked whether the research had compared the situation to any other countries in a similar situation. Ms Borman also requested clarity on how a rental unit could be considered an asset.

Mr Perumal replied that the researchers had used three municipalities that had both RDP and SRH schemes, with a total of six schemes, and that 600 households were interviewed in total. He added that the research was conducted from June to December 2008.

Mr J McGluwa (ID) asked what the role of the SHF was in the sphere of community building. He added that the report needed to give an image on the social indicators side. Mr McGluwa asked for an understanding of the trade-offs involved in trying to build integrated communities.

Mr Bertoldi replied that the report had looked at education, healthcare and crime and that the conclusion was that people were better off in SRH units as they were living closer to these services and jobs. He noted that those who moved to SRH units increased their economic standing. Mr Bertoldi stated that in the cost benefit analysis had tried to quantify the cost of access to schools, hospitals and other services and examine the knock-on effects on societal welfare, in the long run, in terms of improving socio-economic status. He reiterated that the location issue made a huge difference.

Mr M Mdakane (ANC) stated that the research seemed almost to be making a final pronouncement that SRH was better. He agreed with the point that location was important and noted that in the situation where ownership was more predominant, people were not regarding their RDP houses as an asset. Mr Mdakane asked whether the DHS could try to integrate RDP projects into high density areas. He asked how SRH programmes compared to those of other countries who had similar programmes. Mr Mdakane stated that the number of people who were homeless was increasing, and that it seemed that RDP housing was not sustainable in the long run due to the poor quality. He asked whether the SHF could assist policy makers to make an informed decision about whether a policy shift was needed.

Mr Di Lollo replied that there was a need to emphasise that, by and large, RDP houses were not considered assets, and that the people occupying these houses should not find themselves alienated from the economy. He added that the high cost of maintenance to these houses was a burden for the householders. Mr Di Lollo stated that the DHS needed to rethink its mindset on assets. By investing in SRH it was hoped to create upwardly mobile households, as data showed that people who moved to these units did better from an economic point of view than they had in their previous accommodation, due to their proximity to services. He replied that the DHS could only densify RDP projects so much, and that when entering the sphere of sectional title buildings, the question of levies arouse. Those who needed RDP houses could not afford the levies.

Mr Bertoldi added that from an economic perspective a house could only be an asset if it was tradeable on the market. There was a legislative requirement that RDP householders could not sell their houses for a stipulated period. He stated that, without any market, there was no leverage. Mr Bertoldi added that despite this, many people were using their RDP houses to conduct economic activity and that this was therefore creating some benefit.

Mr Steyn stated that mention was made of crime levels decreasing in higher density areas, but that his information showed that the opposite was true. He asked for more information on the social benefits of SRH, stating that he had expected a more in-depth analysis of the social factor of SRH. Mr Steyn also asked about social hosing projects built 20 years ago.

Mr Bertoldi responded that crime levels did show different results. Crime in higher density areas was higher than in low-density areas, but crime in housing complexes tended to be lower.

Mr Perumal added that there was greater safety and discipline in SRH projects. He added that South Africa was unique in providing ownership units to the very poor, and that the easiest product to use was social housing. Mr Perumal stated that some countries had moved to subject subsidies. He added that public sentiment preferred ownership, due to historical reasons, and that the rest of the world seemed to lean towards the opinion that public assets were assets that the entire community derived benefit from and owned.

The Chairperson stated that she was interested in the comparison with regard to life cycles and building standards. She asked how SRH schemes attracted the best contractors. The Chairperson noted that the asset issue and how beneficiaries saw their houses were important, and she said that communities needed to be empowered. She stated that beneficiaries were having trouble accessing credit to pay for maintenance of RDP houses, and that government needed to do something about this. The Chairperson also raised the issue of sectional title schemes and asked for further clarity.

Mr Perumal stated that the DHS had minimum standards for SRH, and that there was a large degree of development oversight over contractors. He agreed that the point around community participation and education was valid. Mr Perumal replied that sectional title ownership presented many problems and that there were example of successes and failures in terms of transferring ownership of old council flats to long-term occupants.

Mr T Botha (COPE) stated that the Building New Ground project was an attempt to create an asset for people in the low income brackets, and that it advocated a policy of integrated human settlements. He asked what the research indicated, and whether it drew any comparisons between urban areas projects as against the building of integrated communities. Mr Botha challenged the notion that RDP houses could not be used as assets, citing the resale market for houses in townships and his own experiences when renovating his mother’s house. He stated that there should be further discussion on the issue of location, as he was not convinced by what had been said, although he did agree on the quality issue.

Mr Perumal suggested that the SHF respond in writing to questions that it could not deal with now. He added that he was aware of the market around old apartheid-era housing in townships, but that this did not necessarily also apply to RDP housing. Mr Perumal fully accepted that there was a need to broaden the research to take into account all the issue raised.

Mr Mziwonke Dlabantu, Deputy Director General and Chief Financial Officer, Department of Human Settlements, acknowledged that housing in general had a good and bad side, and that he was not attempting to defend the bad. He stated that this research had made a profound statement about the hidden costs associated with housing. Mr Dlabantu noted that the findings of the research indicated that one model was not superior to the other, but that the proper decision needed to be made at each location. He stated that the DHS did not just look at housing, but that it would instead examine the entire package. Mr Dlabantu stated that political considerations had to be made and that empowerment of the poor seemed to be better addressed through ownership via RDP housing. He added that the research was asking the DHS to look at the choices that they had to be made in building communities and to determine what the real investments were that should be made.

Mr Dlabantu stated that the DHS needed to look at reaching proper agreements with municipalities in order to co-ordinate a better outcome. He stated that other researchers had stated that, due to the disjuncture between supply and demand for housing, the DHS needed to forge ahead with models even if they were not adequate, because this was better than leaving people in their current unsatisfactory circumstances. Mr Dlabantu stated that SRH projects were generally well located, and that he suspected that this was due to the fact that the tools being used to make decisions for SRH were better than the ones used for RDP projects. However, the number of SRH units was considerably less than the number of RDP houses that had been delivered.

He stated that the long term plan for the country would advise the DHS where the real benefits were. He added that the rate at which cities were spreading was not sustainable, as it increased the cost of connectivity.  He stated that SRH lent itself to densification very well, but that due to the fact that there were people without any income, the DHS could not do away with RDP housing, despite its poor quality. Mr Dlabantu stated that poor quality of RDP housing was not due to policy, but to poor implementation and lack of sufficient mechanisms, and that resources needed to be used to ensure proper inspections. He concluded that the research provided the DHS and Government with the space to start thinking about where it wanted to go.

Mr Di Lollo advised that the SHF would let the Committee know of the date of launching the report and the documentation to a wider audience. He added that there was a need to start a broader dialogue on human settlement in order to find the best possible solution.

The meeting was adjourned.