Co-operative Housing Policy: Department of Human Settlements briefing

Human Settlements, Water and Sanitation

24 August 2010
Chairperson: Ms B Dambuza (ANC)
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Meeting Summary

The Department of Human Settlements briefed the Committee on Co-operative Housing, which was one of the options provided under the Department's Social Housing Programme. The State of the Nation Address had identified the need for financial and institutional support for co-operatives and micro-enterprises. A Housing Co-operative was defined as a legal entity whose members worked co-operatively towards their goal of acquiring more affordable housing, shared the ownership, were allocated specific units and shared ownership and responsibility in that housing’s management. The specific terms, including what happened to the share of members who might wish to withdraw, would be specified in the agreement. Typical clauses in a co-operative agreement were outlined.  A major advantage was the possibility that individuals could pool their individual State assistance subsidies, thereby saving costs. Further funding was available from the National Housing Subsidy Programme, the National Housing Finance Corporation and international donors, who had made a considerable contribution to this sector thus far. A co-operative provided the legal structure for the establishment of economic activities which would increase the sustainability of the co-operative and contribute to the livelihood of members. It also engendered a spirit of Ubuntu. Support structures were available for co-operatives such as the Co-operatives Act, the Social Housing Foundation, the South African Housing Co-operative Association and Technical Advisory Services. Possible disadvantages were linked to people still not being receptive to the idea of co-ownership, focusing on individual ownership and being suspicious of other options. The viability of the co-operative could be compromised if members defaulted on their monthly payments and did not fulfill their other obligations towards the upkeep of the co-operative. At present co-operatives could only be located in the Restructuring Zones identified by municipalities.

Members commented that many people were likely to be reluctant to enter into co-operative arrangements because of lack of information in an easily-accessible and multi-lingual format, and criticised the Department for apparently promoting Social Rental Housing at the expense of co-operatives. They asked where co-operatives were operating successfully, noting that the Department did not seem to be aware of some that the Committee had itself identified during oversight visits. Members enquired about the difference between the current social housing and housing co-operatives, and the different subsidies, and the difference between Sectional Titles and Co-operatives. They were concerned what would happen if members defaulted, and what mechanisms were in place to address difficulties. Members asked how a person could get a co-operative off the ground, and why resources had not been made available. A report from the Department on the issues was still awaited. Members noted that co-operative housing might be useful to address the issue of students being charged exorbitant rentals and illegal landlords. Members stressed that co-operatives also provided an ideal opportunity to create economic opportunities and skills. They felt that greater interaction was needed with the South African Housing Co-operative Association, and proposed that the Committee write a letter to the Minister listing its concerns and identifying critical areas that should be addressed over the next two years.

Meeting report

Co-operative Housing Policy: Department of Human Settlements (DHS) briefing
Mr Martin Maphisa, Deputy Director General, Department of Human Settlements, introduced Mr Louis van der Walt, Director: Human Settlement Policy Development, Department of Human Settlements, noting that he would brief the Committee on the Co-operative Housing Policy of the Department of Human Settlements (DHS or the Department).

Mr van der Walt tabled a document on “Opportunities for Co-operatives to access State assistance to provide low cost housing to their members” which would provide some supplementary information and could be used as a ready reference by Members.

Mr van der Walt commenced with a definition of a co-operative as a group of people who came together voluntarily and collaborated to meet common economic, social and cultural needs, pooling their resources to form a legal entity that was jointly owned and democratically controlled by its members. A Housing Co-operative would thus involve a group of people with a housing need, who formed a legal entity in order to work co-operatively towards their goal of better and more affordable housing.

Co-operative principles were in accordance with the concept of 'Ubuntu ' in South African culture. The advantages of the co-operative route were that it was possible for a collective to achieve more than an individual, as individual State assistance subsidies could be pooled, and costs saved. Co-operative housing met the needs of people wishing to build a community, have a say over how their housing was managed, and promoted the culture of participative democracy. A housing co-operative differed from other forms of tenure, in that its residents shared responsibility and ownership in their housing development.

In South Africa there were support structures available for co-operative housing. The Co-operatives Act was designed to assist this sector and it was possible to apply to register a co-operative through the Registrar, to make the co-operative into a legal entity. The Social Housing Foundation (SHF) was established to assist this sector in capacity building. The South African Housing Co-operatives Association (SAHCA) was an apex body which was aimed at uniting, representing and providing leadership to housing co-operatives throughout South Africa.

The National Department of Human Settlements had worked with donor funders such as the Norwegian government to fund a co-operative housing programme called COHP, to further the principle of co-operative housing in the country. The provincial Departments of Housing managed the housing funding, provided housing subsidies and played a fundamental role in providing an enabling environment for housing co-operatives. The Department of Trade and Industry (dti) dealt with the registration processes of housing co-operatives through the Co-operatives Act.

Municipalities provided land and infrastructure services, prioritised development and were the first interface with a co-operative to find out what opportunities existed and where land could be accessed. International agencies such as the Norwegian government, Rooftops Canada, the Co-operative Housing Foundation, the National Co-operative Housing Union and the Swedish Co-operative Centre gave funds and technical assistance.

Mr van der Walt listed the critical success factors and what a co-operative required to survive. Firstly, he said that there must be recognition at a provincial level that  co-operative housing was a viable undertaking. Secondly, the legislation for the formation, regulation and operation of co-operatives had to exist. Thirdly, there should be a co-operative regulatory agency, usually a public sector body, or combination of public and private sector partnership, to authorise the formation of new co-operatives and to regulate their activities.

Housing finance was vital to the success of co-operatives, who had to have a bank to receive their deposits, which were pre-occupancy savings needed before embarking on the enterprise. The loan requirement was currently provided by the National Housing Finance Corporation (NHFC), as the housing subsidy only paid for a percentage of the capital costs, and qualifying beneficiaries must receive the individual subsidies, with those who did not qualify for subsidies having to obtain credit from other agencies.

Technical advisory services were also critical. Co-operatives were a relatively new undertaking in the country and there was a knowledge gap. Co-operative housing Technical Services Organisations (TSOs) provided assistance such as project design, supervision of construction, education and training of the members.

Mr van der Walt then outlined the principles on which co-operatives were based. These included democratic control by members, where each member had one vote, with open and voluntary membership, so that members were free to participate, or to leave. There must be security of tenure, so that members were guaranteed the right to permanent residency as long as they respected the obligations of membership and shared ownership, which meant that although they had the right to occupy a unit, the ownership of the entire scheme remained in the name of the co-operative entity. There must be member economic participation, and members must contribute to and share fairly in the economic activities of the co-operative. There should be autonomy and independence, with the co-operative was free from outside interference in its internal affairs. Education and training was another component as a co-operative aimed at building the skills base and knowledge of its members. There would also be cooperation between groups of co-operatives who might work together to further their objectives. The co-operative principles implied  concern for community and future generations, including the well being and quality of life of non-members in the community, and the environment.

Co-operative tenure entailed the right of inheritance, so that dependents of the members could acquire the right to inherit the members' share in the co-operative, with the approval of the co-operative's Board of Directors.

Mr van der Walt reiterated that a co-operative was a legal entity, jointly owned and controlled by its members. Each member had a share in the co-operative which owned the property, and had the right to occupy a unit in accordance with the Right of Occupancy agreements signed by the member and the co-operative. If a member left the co-operative there was normally some form of compensation, such as a percentage of the money contributed to the co-operative, provided that this was stipulated in the initial agreement. Some schemes, however, stipulated that a person leaving would take nothing, and others allowed an exiting partner to take the full market value. This all depended on what the agreement stated.

As shareholders of a co-operative, members were partners and shared in the decision making process through Special Meetings and the Annual General Meeting. Members contributed equally to the maintenance and operations of the co-operative through monthly user charges.

Mr van der Walt summarised that the advantages of co-operative housing included creation of  opportunities for permanent tenure to members, regardless of their income, thereby stabilising their lives and the community. Community spirit would be built as members worked together collectively for their common good. Members’ skills would also be built, and they would be offered opportunities to participate in the management, maintenance, gardening or other aspects, which might open opportunities for job creation outside of the co-operative. Because the members contributed towards the maintenance and the upkeep of the units, costs were saved. People also took better care of their units because of their collective ownership. Co-operatives contributed to a positive community environment as members were educated to be pro-active in solving community problems such as crime and vandalism, and in working together to create a better living environment. A housing co-operative also provided a legal and organisational structure for expanding into other co-operative activities, such as income generating economic activity and businesses.

The disadvantages of co-operative housing included lack of information on this type of structure. Many people were not receptive to the idea of co-ownership, and were still focussed on individual ownership, being suspicious of other options. Members might not contribute at the level they were supposed to, which could compromise the viability of the co-operative. It was necessary to make people aware of the benefits as well as the obligations.

Mr van der Walt said that Housing Management Co-operatives were another type of entity, being appointed to manage independent housing co-operatives which may not themselves have the required management capacity. Some independent housing co-operatives simply attended to one task, such as housing delivery but called on other agencies to assist them with other aspects.  

Mr van der Walt said that the Government’s Social Housing Programme (SHP) required that a housing co-operative should be accredited by the Social Housing Regulating Authority (SHRA) which was recently created by the Social Housing Act (the Act). SHRA had been established, so  co-operatives had to apply for accreditation in order to access the start-up capital funding and the quite substantial additional funding for capacity building. The subsidy in the Social Housing Programme only applied to people earning below R7 000 per month. The cost of the subsidy was calculated at 60% of the development cost per unit, with the rest of the funds coming from the NHFC or donor funds. Most of the social housing in Johannesburg thus far had relied on donor funds.

The Social Housing Programme only applied in Restructuring Zones proclaimed by municipalities. Housing Co-operatives had to apply within the restructuring zones, as they were focussed on restructuring dilapidated areas, and were based on integrated development principles. Where co-operatives wished to develop outside of Restructuring Zones, they would have to apply for Institutional Housing Subsidies, which were lower than those available under the SHP, being limited to around R84 000.  However, in the rural context these could generate a viable co-operative.

Mr Martin Maphisa added that co-operatives, as part of the Rental and Social Housing Programmes of the DHS, were a priority area, as indicated in the State of the Nation Address. The SHRA had a critical role to perform.

Discussion
Mr M Mdakane (ANC) said that there was lack of information around co-operatives generally. He asked Mr van der Walt where co-operatives were successful. He believed that in fact people would be interested if they had the information. He noted that co-operative housing was a feature of many countries internationally.

Mr Mdakane thought that female headed households, in particular, would probably be amenable to the idea of co-operatives, as women were better at working together to improve their quality of life. He commented that although the idea of co-operatives had not yet taken hold, it should be encouraged, as not every South African could afford his or her own property, and factors such as the migration to urban areas meant greater demand for housing. He felt that government should encourage the spirit of ubuntu and push the idea of co-operatives. He also recommended that the committee make it a focus of their term of office to promote the establishment of co-operatives.

Mr A Steyn (DA) stated that Mr Mdakane had covered some of the issues he wanted to raise. He was also very curious to know where co-operatives were functioning successfully.

Mr Steyn questioned the difference between the social housing that already existed and housing co-operatives, and how they linked to the two types of subsidies of Social Housing Subsidy and the Institutional Subsidy.

Mr Steyn said that Mr van der Walt had described the ideal situation. However, he would like to know what happened if members defaulted, and what mechanisms could be put in place when members in co-operatives ran into difficulties.

Mr Steyn also urged that information on co-operatives should be made accessible by the Department, in an easy user-friendly format. In particular, the information relating to the necessity to locate co-operatives within Restructuring Zones must be publicised and made readily available.

Mr K Sithole (ANC) stated that municipalities had been mentioned, but not provinces. He questioned why there was no implementation, despite the fact that housing had been prioritised by the President and at the 2009 Polokwane Conference.

Mr T Botha (COPE) wanted to know how a person could start a co-operative with a group of individuals and how poor communities could raise the necessary money. He noted that the land issue was very pertinent and although the Department had mentioned co-operatives before, it had been ignored. He enquired what the challenges were, and why resources had not been made available to encourage the establishment of co-operatives.

The Chairperson stated that Mr Botha had raised a critical issue. The policy of the DHS seemed to reflect a deliberate shift from co-operatives to social housing. In the Social Housing Act and elsewhere, there had been little reference to co-operatives. She stated that social housing was designed to generate profit, even if it was couched as “affordable rental”. She noted the tendency in the Department to reduce the focus on co-operatives, and to promote social housing at the expense of co-operatives. She alluded to a report that was still expected from the Department and asked Mr Maphisa to take that matter up. She added that co-operatives also had the potential to address the housing needs of students, who were being charged exorbitant rentals.

Mr Maphisa said he noted the Chairperson's comments.

Mr van der Walt said all the comments were valid and the Department would come back with more information about where co-operatives were being developed. He stated that the Department did see co-operatives as part of social housing, that they fell under the SHP programme, and were covered by the same policies, and that the subsidy instrument was also available to co-operatives.

Mr van der Walt explained that the institutional subsidy was developed in the early 1990s as a rental provision, and the principle of equity was fundamental at that stage. When it was identified that a social housing subsidy was needed, the institutional subsidy was not brought to an end, since it was felt that it still served some purpose. The social housing subsidy was focussed in Restructuring Zones, and he agreed that these areas should be easier to identify. He agreed that municipalities and provinces should provide more assistance in creating opportunities for land development by co-operatives and that capacity building and a communication strategy to build momentum were critical success factors.

Mr van der Walt agreed that the potential for failure in a co-operative was also a serious issue and if members did not meet their obligations, failure was a real possibility. It would be critical to work out a business model, to look at cross subsidisation with non qualifiers and qualifiers to achieve a balance to ensure viability and a strategy to deal with defaulters had to be adopted. The NHFC should also have a survival plan or life line for co-operatives in trouble.

The Chairperson reiterated that this was the Human Settlement portfolio and Mr Botha was on the right track about co-operatives. She also thought that sectional title matters were an issue.

Mr Mdakane said Members were responsible to their constituents and must inform and communicate with their communities, in order to improve their quality of life. Homelessness was a major problem in South Africa. The Department should be working towards eradicating this. It must also give the necessary information to Members as to what Departmental programmes existed to address the issues.

Mr van der Walt said that the sustainability model depended on the mix of qualifiers and non-qualifiers. If a person wanted to start a co-operative it would be necessary to generate interest at a community level, and get technical advice from the bodies mentioned. Mr van der Walt suggested that the Department could put together an information pack for the Members of the Committee.

Mr Botha raised the issue of illegal landlords who allocated sites and collected rents, saying that people could rather use that rent money to invest it into a co-operative scheme, to their greater benefit. He also mentioned sectional title ownership which operated in the higher income brackets, with some body corporates being quite wealthy. He noted that there were, however, difficulties under sectional title, which similarly could apply to lower income earners in co-operatives. There must be careful management to ensure sustainability and to prevent both schemes from failing.

Mr van der Walt said that it was important to differentiate between sectional title and co-operatives. Under sectional title, individuals owned their own properties, with right of use over common land. A co-operative implied joint ownership. The revision of the Sectional Titles Act ensured that individual owners were now liable for their own rates and taxes, and the municipality could attach an individual’s unit if the owner defaulted.

Mr Maphisa noted that he would notify the Director General about the report still expected by this Committee. The Department was undertaking a turnaround strategy under the new Director General and would prioritise co-operatives. At the moment there was not a model of a successful co-operative, but the Department would come back to the committee on that. The Department would develop a guidebook or working manual in accessible languages on co-operatives and the information could also be made available on the Department’s website. Their Departmental researchers would also assist in providing the Committee with the information they needed. DHS intended to build capacity in the Department to be more responsive to the country's human settlement needs. He acknowledged the presence of the organisation Informal Settlements in Struggle (ISIS) and said their visit was not in vain.

Mr Mdakane urged the Department to take the request for more information and statistics on co-operatives seriously. He was especially concerned about the needs of young people. A recent international conference on young people had indicated that this group, globally, suffered from high unemployment. Co-operatives were not just about accommodation but had the potential for creating economic opportunities for unemployed young people. He requested examples, based on practical experience from inside the country and from successes from countries such as Canada and China. There were some instances of co-operative housing where people were very passionate about their housing development and this could surely be promoted if the Department would promote the co-operatives. He urged the Department not to be complacent, and to take the five critical areas identified by it seriously, in order to make a real impact.

The Chairperson thanked the Department and reiterated that the Committee needed more information. She also requested full information on the international donor funding with which the Department was involved, saying that there was a collective responsibility to ensure accountability, and that countries could reverse their support if projects were mismanaged. The Committee Researchers would also look into the issue of co-operatives.

The Chairperson was concerned about the Department's relationship with the South African Housing Co-operative Association, and felt that there should be constant interaction between the two, so that DHS was kept fully informed. The Committee, during its oversight visits to various parts of the country, had encountered co-operatives, and DHS should be more knowledgeable about them. She proposed that the Committee should write a letter to the Minister listing its concerns and identifying critical areas that the Committee wanted to have addressed over the next two years.

The meeting was adjourned.

 
  


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