Social Housing Act regulations: briefing by Department of Human Settlements & Social Housing Regulatory Authority

Meeting report

Regulations to the Social Housing Act
The Chairperson said the Committee had requested public comments in response to the publication of the draft Regulations by the National Department of Human Settlements (NDHS) by 6 September 2011, and these would be distributed to Members and considered the following week. The Committee would give the NDHS the opportunity to read them clause by clause.

The NDHS delegation was lead by Mr Neville Chainee, Deputy Director General: Operations, and the Social Housing Regulatory Authority (SHRA) delegation by Mr Brian Moholo, CEO.

Mr Kwezi Ngwenya, Legal Advisor, NDHS, presented. He said that it was important to distinguish between the Act which was the primary legislation and the Regulations, which was the secondary/subordinate legislation. Whatever the Regulations were going to allow or prescribe had to be expressly authorised by the Act itself. The Regulations could not introduce any aspects of social housing that the Act did not provide for. In other words they had to be intra vires: within the framework of the primary legislation. He read Section 19 of the Act which dealt with the Regulations, to support and substantiate what he had said.

He proceeded to read starting on page one. It said ‘I, Tokyo Mosima Gabriel Sexwale, Minister of Human Settlements hereby under section 19 of the Social Housing Act, 2008 (Act No.16 of 2008) and “after consultation with Parliament”, make the regulations in the Schedule.’ Mr Ngwenya emphasized the ‘after consultation with Parliament’ part and said that the regulations were presented to the Committee, as part of this consultation process with Parliament.
Pages Two and Three contained the index and layout of the Regulations as follows:
Chapter One: Interpretation and Definitions
Chapter Two: Applications, Qualifying Criteria and Accreditation
Chapter Three: Regulatory Functions
Chapter Four: Approvals
Chapter Five: The Code of Conduct
Chapter Six: Investment Criteria
Chapter Seven: Entry, Enquiry and Seizure of Documents
Chapter Eight: Agreements
Chapter Nine: General Issues.

Chapter One
Mr Ngwenya said that when a term or word had been defined in the primary legislation, it was not necessary to define it again in the regulations. This was a rule that governed the drafting of secondary legislation.

Chapter Two
The Chairperson asked why only the Promotion of Administrative Justice Act, 2000 had been included. This Act included cooperatives and cooperatives resolved their disputes through the Ombudsperson.

Mr Ngwenya replied that the Promotion of Administrative Justice Act required fair and just decisions. Reasons had to be advanced why the application of an institution had been rejected, within a prescribed period, in terms of the Act. This Act enforced the culture of providing reasons for decisions across all organs of state.

Mr A Steyn (DA) said that Parliament was going through a process where a lot of past legislation was being amended. The regulations were fixed to the Social Housing Act 2008. Should the Regulations not make provision for possible changes to this Act?

Mr Ngwenya replied that there were provisions to align the Regulations with amendments to the current legislation, but it could only happen after the fact. Amending regulations has a simple process, and did not involve the obligatory intense process involved in amending primary legislation.

The Chairperson said that, what she understood from Mr Steyn’s point of view, was that the Regulations must not supersede the Act.

Mr Ngwenya replied that he took the Act as it stood. The NDHS would follow up with amendments to the Regulations, if the primary legislation was amended. He could not refer to possible future amendments to the current Act. He then read Clause 3: Qualifying criterion for accreditation of social housing institutions.

The Chairperson said that this process would encounter, many contradictions, because there were contradictions in the Act. This process was contesting the Act itself. When questions were asked about the Regulations, it was because these Regulations had implications. It was no longer the Committee’s concern; it was Parliament’s concern. Various structures in Parliament had serious concerns regarding the development of cooperatives. Two days ago there was a Millennium Development Goals (MDG) seminar. One of the resolutions coming out of that was that government was not doing enough to advance the development of cooperatives. These Regulations might have implications for the development of cooperatives. When one talked about efficient service delivery, one agreed that affordable rental housing provided by developers were one legitimate option, but there was the cooperative option as well and the two models differed from each other. It was a concern and it brought a challenge in terms of the Regulations. The Regulations focused on social housing and not on the primary interest of cooperatives. Social Housing cooperatives were a reality of the modern social housing sector in South Africa and this process was highlighting the parts of the Regulations which would affect them.

Mr Ngwenya agreed with the comments of the Chairperson who raised the important issue of cooperatives. He acknowledged the need to re-look at the Act in order to see how to make provision for cooperatives within the Act, so that when the NDHS had to regulate, it could regulate with the authority to do that. Under the current conditions, formulating regulations was a serious challenge.

He continued reading Chapter Two, Clause 3(2) on page 7: “In order to comply with the criteria of appropriate legal form ….” He came to Clause 3(2)(c) which stated, “ a cooperative registered as a primary housing cooperative under the Cooperatives Act, 2005 (Act No. 14 of 2005).

Ms N Mnisi (ANC) said that accreditation of SHIs must not be reduced to primary coop, but elevated to either a secondary or management coop.

The Chairperson asked, “What are we saying? Are we going to rework it?”

Mr Moholo replied that if one equated a SHI with a cooperative, the SHI would be equated to a secondary cooperative in terms of form and structure.

Mr Ngwenya resumed with Clause 3(2)(d)(p7)’ A share block company…’

Mr M Mdakane (ANC) said that he was trying to understand two areas. The Regulations had to facilitate the implementation of the Act. To him it felt as if this process was almost dealing with the primary Act. The Regulations should not be made the primary Act. The Executive had to make the primary law as detailed as possible, so that the Regulations did not have to go into so much detail. Regulations had to be brief.

The Chairperson said it was a critical point that the Committee would consider the following week when discussing this process and its content.

Mr Ngwenya replied to Mr Mdakane’s comment and said that that when primary legislation was drafted, no details were given. The primary legislation provided a framework and the details were left to the regulations. The Regulations had to prescribe the detail on how the legislation had to be implemented.

Mr Mdakane made the point that Regulations were technical in nature. Primary law was a translation of a government policy. Regulations by their nature should never replace the primary Act. There was contestation between parliaments and their executives all over the world. Executives tried to reduce the information as much as possible, because it was easier than to use regulations. Regulations could by default become primary law. As a Member of Parliament, he would not like to pass an Act which was going to be elaborated on by regulations. Regulations could by default become the primary law. Parliament was squeezed for information to provide a skeleton, which was the primary law. It was passed, and then the regulations were added, but the people adding the regulations were not responsible and accountable for the primary law. It was a contestation that could be discussed forever and it was an international problem.

The Chairperson noted that it was an important point, which Parliament would have to deal with in the long run, but for the moment the Committee had to focus on processing these regulations. The Regulations could in some cases make it difficult to implement the primary legislation on the ground. In terms of the legislation and regulations, it was a mistake to put cooperatives in the Act.

Mr Ngwenya said that Mr Mdakane had raised a very important legal question which would need academic and legal debate with legislative drafters, in order to change the rules in terms of how legislation was drafted and how the Minister was empowered by primary and secondary legislation. He continued reading at Clause 3(3)(a) in Chapter Two.

Mr Steyn referred to Clause 3(4)(b) (page 9) where the Regulations stated that ‘the applicant had to be independent from other entities, except to the extent that it may be controlled as a subsidiary by another social housing institution.’ In the case of some SHIs, the main shareholders were municipalities. Did this regulation imply that such an institution could not receive accreditation from SHRA?

Ms Vengadajellum Gaffe, Regulations Manager, SHRA, said that it was a challenge for municipal owned entities. SHIs had to be non-profit organisations. Municipal SHIs were Pty Ltd companies in terms of the Municipal Finance Management Act (MFMA), and not independent from municipalities. A distinction had to be made between three entities: cooperatives, municipal SHIs and private SHIs. The challenge with municipal-owned SHIs could be circumvented by stating in the founding documents that profits had to be ploughed back into social housing development, not distributed to individuals. She was going to ask at the end of this session whether those changes could be incorporated during the current process. If the Act as it stood did not allow for it (if it was ultra vires), one would have had to wait for the Act to be amended before changes could be made to the Regulations.

Mr Chainee said one contradiction was that NDHS wanted to develop a developmental process particularly in relation to tenure options. It wanted to take up the problem with Treasury, particularly on the MFMA and the restriction on municipalities concerning the Pty Ltd. It did not end there. It covered several issues that impacted on the development of the cooperative model. In the cooperative model development, one of the constraints was a municipality’s inability to deal with a communal process in relation to registration. A municipality could not do it outside of a Pty Ltd. It was going to require some creativity, because there was the contradiction between strict enforcement of the MFMA and Public Finance Management Act (PFMA) and what the NDHS wanted to achieve with the social rental tenure option as well as cooperatives. There was no easy answer. It could not be dealt with in the Regulations. It had to be dealt with through amendments to the Act, but because the financial Acts took precedence, it still left the NDHS in a Catch 22 situation. There was no immediate answer. The parties would have to come back to the Committee to present some options. It was not limited to this Committee. It was a Government Catch 22 situation which had to be addressed at that level to decide how to reconcile the developmental approach and PFMA compliance in this particular case.

The Chairperson agreed that there was a contradiction because if one applied a developmental approach, one had to start somewhere. She asked what did SHRA and the NDHS suggest.

Mr Nwegya said that there was a need to go back to the Act. The Act had to be amended and then the Regulations had to be adjusted to align them with the Act.

The Chairperson said that currently the objective was to fast-track SHRA. It had to be able to operate. The NDHS and SHRA had to sit together to discuss possible solutions to these obstacles.

Mr Ngwenya said that the parties had discussed the challenges and contradictions.

Mr Steyn said that if these Regulations were approved as they stood, it would mean that municipal SHIs would not get accreditation.

Mr R Bhoola (MF) agreed with Mr Steyn. If one looked at the Promotion of Administrative Justice Act, and Mr Ngwenya talked about alignment with the legislation, the Committee had the information there that was going to stagnate as it could not do what it wanted to achieve. The Committee was discussing regulations which had no connection with the Principal Act. Municipalities were one of the fundamental areas where problems were experienced. It was well and good to have three categories, but one category was not included in the Act.

The Chairperson said that cooperatives could not be separated, because they were included in the Act. The main problem was the exclusion of municipal SHIs.

Mr Steyn agreed, but he thought that it was taking on a different slant. Did government not want to encourage SHIs outside the municipal sphere as well? Municipalities had proven not to be the most efficient SHIs and it was not their core mandate. The question needed to be asked: Do we want municipalities to be SHIs? If the answer was ‘no’, the Act had to stay like it was. Did Government not want to create effective SHIs outside of municipalities? Thus far municipalities had developed housing with a profit motive, for example Ekhuruleni.

Mr Morris Mngomezulu, Acting Chief Director, NDHS, asked whether government money had to be invested in a profit making institution. Government money did not support profit making institutions. Due to the desire to cover all cooperatives, government might be trapped into financing profit-making institutions. It was something the Committee had to be aware of.

The Chairperson said that for-profit or non-profit, the principle was that SHIs were about providing affordable rental housing.

Mr Mngomezulu said that in order to effect these changes, it meant one had to go back to the primary Act. Amending the primary Act, would stall the processing of the Regulations, as well as the operations of SHRA, because without Regulations, it would operate ultra vires. The Committee and parties would have to decide whether it was going to take that route, or pass the Regulations, imperfect as they were, in order to allow the SHRA to operate, while adjusting the Regulations as was possible over time.

The Chairperson said that the NDHS and SHRA were supposed to have come up with a solution to this problem already and had to explain the solution to the Committee. The parties had to come up with a middle route. They had to fast-track the needed amendments to the Act. The entities had a right, in terms of the Constitution to amend the Act. The Committee would not like that, because it would mean that the Committee was fighting with the NDHS. The intention was not to fight or compete with the Department or entities. It was a problem if the NDHS and entities were lagging behind. It was reflecting negatively on the image of the Department and Minister. She told them to bring the Act before the Committee in order to amend it. The matter could be resolved.

Mr Chainee said that there was no easy answer to the challenges regarding municipalities. There were various municipal SHIs operating in many municipalities. Excluding them from registration, would cause tremendous problems. There was no answer. Municipal entities had an important role to play in some of the tenure forms. People relied on municipal entities as a first point to develop social housing. There was no answer. All parties had to come back and apply their minds to find solutions.

Ms Gaffee said that SHRA and the Department had discussed the middle road and were still working together on it. SHRA had developed 11 think pieces around proposed amendments to the Act. SHRA was working with the NDHS on tabling the think pieces and stimulating the discussion about it. SHRA communicated to the NDHS that it had to get the current set of regulations gazetted, because it could potentially have a problem in the sense that it granted accreditation to some applicants and declined others. SHRA could face contestation, and would not have a leg to stand on, because the Regulations had no official standing. Out of six municipal SHIs, five had been declined. The one that had been approved had to have in its articles of association an indication that profits would not be distributed to individuals, but would be invested in further housing developments.

The Regulations had to be gazetted so that SHRA could take action against the SHIs that were non-compliant. SHRA had initiated a process and engaged the NDHS in a process to address the problems that was anticipated in applying the Regulations.

The Chairperson said that the intention was not to stall SHRA’s progress, but at the same time, government did not want to be unfair towards other institutions.

Mr Steyn noted that SHRA had accredited a municipal institution in terms of the draft Regulations. How could it legally accredit a municipal institution? The Regulations, separate from the Act, prohibited municipal SHIs from being a SHI.

Mr Moholo agreed with Mr Steyn, and said that there was an opportunity for institutions to object and SHRA listened to them, and responded accordingly. It was a pragmatic situation where the Act said the NDHS and the Minister had to do certain things within a specified period. SHRA came into operation and had to start accrediting institutions. It was a Catch 22 situation. It was not the best solution but it was something that made the process move forward. Only Johannesburg Soscial Housing Company (Joshco) had received accreditation. The rest failed. They had appealed and were still declined.

The Chairperson asked where the other municipal institutions appealed.

Mr Moholo said that in terms of the Regulations, SHRA had to establish a review committee. In SHRA there was a Regulations Committee which considered applications for accreditation, and then there was a separate Review Committee to look at appeals by institutions that had been declined by the Regulations Committee. If they were unhappy about the appeals, the process moved to court.

Mr Moholo said that the cases of the institutions that had been declined were weak. They did not have a leg to stand on. Some thought had gone into this process and the parties took a route that said NDHS and SHRA accepted that the Regulations were not perfect, but they were workable. Failing this, it had to go to a public process, which would take another year.

Mr Bhoola commented that it was clear that one could not move forward with old legislation to address new innovative ideas.

Mr Ngwenya resumed reading Clause 3(6): ‘In order to comply with the criteria for efficient service delivery…..’

The Chairperson asked whether cooperatives had lease policies.

Ms Gaffee replied that cooperatives did not have lease agreements; they had user agreements for communal ownership.

Mr Ngwenya resumed reading from Clause 4(1) to the end of Clause 6.

The Chairperson referred to Clause 6(h) where it said, ‘SARS tax certificate of good standing (to be valid for at least six months from the date of submission)’. She asked what would happen after six months when the tax certificate was not valid anymore.

Ms Gaffee replied that SHRA had taken a decision that there were some criteria where institutions would have leeway to get their house in order, and there were others where, if they did not meet the criterion, they would lose their accreditation

The Chairperson asked whether there were timeframes.

Ms Gaffee said that the maximum period was six months within the year of accreditation. The accreditation lasted for one year. SHRA did not allow the compliance condition to supersede that accreditation period.

Mr Steyn asked whether the annual reporting in terms of the requirements, was the re-application.

Ms Gaffee explained that SHRA envisioned two types of applications, which would be proposed as an amendment to the Regulations at a later stage. Firstly, a first time application and secondly, re-applications by accredited SHIs, that would at the same time be their annual report to SHRA.

The Chairperson asked where cooperatives were covered in Clause 6. It referred to rental portfolios and rental stock. She wanted to see that provision was made for cooperatives in Clause 6.

Ms Gaffee replied that SHRA’s proposed amendment to the Regulations would propose three categories: municipal SHIs, cooperatives and SHIs, and the criteria would be structured according to how each entity operated. The amendments were ready, but needed to be phrased legally, and the NDHS would have to look at it soon. Also, cooperatives had three phases. It had a savings, an ownership and a management phase. These also had to be provided for in the Regulations.

Mr Steyn was concerned that there were already amendments to the current regulations that were in the process of being approved.

The Chairperson said that the Committee was not approving the regulations yet. It was getting the facts. The two entities were working at the process, raising the issues. Next week the Committee would debate and consider as a Committee. It was good to discuss the issues with SHRA and the NDHS. They had to come up with recommendations to address these issues. It was good that they had already picked up on some of the issues raised by the Committee. The Committee would use a day during constituency week to discuss. This was a process of identifying the issues. When it came to the final product, the parts of the Act that would need urgent attention would already be identified. The process was still on track.

Mr Moholo asked for help in trying to understand the process. If the Committee identified certain things that needed to be changed, could SHRA change it, or did it have to be a public process.

The Chairperson explained to Mr Moholo that as the Committee, NDHS and SHRA was discussing, it was trying to resolve issues applicable on the ground. It was not necessary to go back to the public. The Committee would read through the public comments. If more issues came up, it had to be brought back to the Committee. There would not be another public process although any stakeholder could be called by the Committee to present its views. No advertisement would be placed to call for comments.

Mr Moholo said that in that case, it did accommodate concerns by all parties.

Mr Ngwenya resumed reading Clause 7 Withdrawal of Accreditation.

Mr Steyn said that projects normally ran over several years/financial years. What happened if an institution lost its accreditation, while in the middle of a project?

Ms Gaffee said that the administration of the SHI would be taken over by an institution selected by SHRA and the grant could be withdrawn. These punitive measures were referred to later in the Regulations.

The Chairperson asked Ms Gaffee to point it out later when Mr Ngwenya reached that point.

Mr Ngwenya read from Clause 8 Accredited Service Providers.

Ms Mnisi said that cooperatives were instruments that offered employment to its members. She hoped that the Regulations could elaborate on how registration would tackle this? The exception was when a person was a director, when there would be a conflict of interest.

Ms Gaffee said that the way SHRA called for service providers to be registered on the register was by placing an advertisement in the newspapers and it went to the Social Housing Foundation‘s old database of service providers. The SA Coop Association was invited to register, but SHRA noted that it did not register. The register was in place. It just had not been gazetted yet – this still had to happen.

Mr Moholo said that there were two federations involved in social housing: One for cooperatives, the South African Cooperative Association (SACA) and one for rental SHIs, the National Social Housing Organisation (NSHO). The latter was better organised, but SACA needed more development. More recently, SHRA had discussions with the cooperative federation, to make them aware of the opportunities that there were in social housing. SACA had taken responsibility for cooperative houses in mid-Johannesburg. The individual cooperatives had taken responsibility. There were primary cooperatives and secondary cooperatives. SHRA had to find out whether SACA want to register as a management cooperative. Management cooperatives had to be accredited as service providers.

The Chairperson said that one could not apply a blanket approach to cooperatives. One had to have a progressive approach where the nuances of different kinds of cooperatives had to be fully understood, so that it could be catered for in the legislation, primary or secondary.

Mr Ngwenya resumed reading from Clause 9 Compliance Declaration.

Ms Gaffee said that Clause 12(1) explained what happened to the housing stock, referring to the question Mr Steyn had asked earlier about what happened when a SHI lost its accreditation.

Mr Steyn said that 12(9)(c) referred to where a High Court had given an order. He asked about withdrawn accreditation.

Ms Gaffee said that the withdrawal of accreditation may end in the High Court which would allow for the transfer of the stock. In the case where the SHI did not contest the accreditation status, SHRA would have the authority to take the stock and transfer it to another organization.

The Chairperson asked why the Ombudsman was not used to resolve conflicts instead of the courts, which were expensive.

Mr Moholo replied that there was a case in the Eastern Cape, where the party refused to comply with the arbitration order. SHRA had to get an order from the High Court.

The Chairperson referred to the Rental Tribunal as another option for conflict resolution.

Mr Figlan said that the city as well as the province had Ombudspersons. Why did the matter have to go to court?

The Chairperson said that there was no standard practice across provinces. It had to be addressed. Matters had to be resolved before going to court.

Mr Steyn said that while he accepted that Clause 12(9)(c) may imply that when accreditation was withdrawn, the case could end up in the High Court, it was not stated directly. He assumed that the SHI would get the opportunity to fix whatever caused it to lose its accreditation, and when it failed, only then would further steps be taken.

Mr Bhoola agreed that the drafters should go back and rework the Regulations, because there was a contradiction about where the courts came in. If SHRA withdrew the accreditation of a SHI and it contested the withdrawal in court, and the court ordered SHRA to reinstate the accreditation, would the court ruling supersede the power of SHRA as Regulator?

Mr Ngwenya resumed reading from Clause 13.

Ms Mnisi said that the Cooperative Act made provision for the winding down of an entity by its members.

Mr Bhoola asked whether there was any time limitation for the transfer of social stock.

Ms Gaffee replied that the municipal SHIs could only transfer stock to the social housing sector. SHIs in the private sector had to keep stock for 15 years. After 15 years there was still a formula that applied.

Mr Mngomezulu said that he did not think that the fact that social housing stock was bought with government money would prevent the voluntary winding down of a cooperative. SHRA just had to be informed about developments.

Mr Ngwenya resumed reading from Clause 14.

Mr Steyn referred to the reporting requirements in Clause 6 and asked if in Chapter 4 Clause 16(2), whether all criteria could not be aligned to one annual report.

Ms Gaffee replied the SHRA proposed in the amendments to the Regulations that the criteria be aligned for reporting, for accreditation and for the code of conduct as well as the management of the investment plan. Monitoring for compliance and accreditation had to happen against the same criteria. It would make the regulatory task of SHRA simpler and easier.

Mr Ngwenya resumed reading from Clause 17 Code of Conduct.

The Chairperson asked how student cooperatives worked. Were they rentals? How did the status of rentals fit into Clause 20(h)?

Ms Gaffee replied that if the question was what cooperatives paid for and what SHI levied as rental, it was the same formula in that there was a loan that had to be serviced and there were direct property costs to be met. The rental generally covered those two areas.

The Chairperson said that the Regulations were not made for parliamentarians, but for ordinary people. It had to be user-friendly.

Ms Gaffee said that some issues will be clarified at the level of a rule, and it would be detailed.

The Chairperson said that the terms were problematic in some places. The terms across all levels of the legislation needed to be simplified.

Mr Figlan asked if Mr Ngwenya and SHRA could pay attention to Clause 20(e). People with special needs had to be provided for within these projects, especially the blind and the deaf.

Mr Bhoola referred to Clause 20(d) which stipulated that a SHI had to have policies in place to terminate leases. He asked whether it would include the intervention of courts as well.

Ms Gaffee replied that policies stipulated the whole process until the tenant has left property.

Mr Ngwenya resumed reading Clause 20.

Ms Mnisi said that properties had to be properly insured. There had to be generic contract agreements for social institutions to utilise. A maintenance plan needed to be part of it.

Ms Gaffee replied that SHRA had asked for a fully costed maintenance plan, and via a building condition audits, it monitored whether those plans were being implemented as well. The reporting tool requested a list of 42 documents, one of which was a maintenance plan. It looked at active daily maintenance and long term maintenance and SHRA monitored its implementation.

Mr Figlan referred to Clause 20(p) which read ‘….work with spheres of government and other stakeholders to develop new homes that meet the economic and social needs of the communities ……..’. He asked if consultation happened wide enough before a housing development was built to make sure that the houses that were going to be built, met the economic and social needs of the communities. There were houses in Khayelitsha built in 2006, which were still empty and guarded by security guards, because they were too expensive and people could not afford them.

Ms Gaffee replied that generally, the SHIs engaged the communities, they sourced their tenancy profile, and they had their screening systems in place and they would then enter into lease agreements with tenants. There was also a provincial steering committee (PSC) and a local one. It came about because MinMEC asked for the structure to be put in place. It was a structure where local, municipal, and provincial housing structures came together. It did not work in all provinces but where social housing was happening, it worked well.

It had three main functions. The first was the Inter Governmental Relations (IGR) function. The second was to create a pipeline for Social Housing Projects and to make sure that the funds were rolled over and supported by all the spheres of government. The third was beneficiary work. It was set up by MinMEC in response to the National Housing strategy.

Mr Figlan asked whether there was a beneficiary list for people who wanted to rent.

Mr Mngomezulu said that he did not have it.

Mr Figlan asked the NDHS whether somebody was working on the national list.

Mr Chainee replied that there was a team of service providers which had been appointed, who started work the previous week on the national beneficiary list. It was difficult because the provinces were not responsive. The NDHS wanted to get to a point where the reliable information would be available at the touch of a button.

Mr Figlan asked him to put it in writing.

The Chairperson said that it was important for the NDHS to bring the decisions taken at MinMEC to the Committee. It did not matter whether she as the Chairperson of the Committee attended the MinMEC meetings, It was important because it was a structure which also had an oversight function over the SHRA. It would assist the Committee in its oversight work.

Mr Bhoola said that legislation needed to produce houses. In the Ethekwini Municipality, the Valley View project in Durban, there were currently people being evicted by court order. He wanted to understand the relationship between the beneficiary, the subsidy, and the eviction by court order.

Mr Moholo said that the problem related to an SHI in Ethekwini which owned and was managing the project. It was a rental boycott initiated by some members of the community. It led to a situation where the building was being hijacked by certain members of the community. There was an ongoing battle by the SHI and groupings. The Rental Tribunal ruled in favour of the SHI. People were resisting evictions. The case went to the High Court. The SHI had the right to evict those tenants. Mr Moholo was with the managing director of the SHI, where she was briefing SHRA on further problems. SHRA requested her to write a full report. Even social housing buildings could be hijacked. This SHI could collect almost 98% of rentals in Cape Town, but it could not in Durban. It could not be accredited in Durban, It was in arrears on its loans. The issues were crucial.

The Chairperson said that the questions were crucial. The issue was on the Minister’s desk. There had to be an urgent response that reflected that this was being attended to. He himself had to listen to his constituency. He had to take the story from constituency level. There had been no response for six months. Senior personnel had to assist in answering the question.

Mr Figlan asked regarding security against invaders. Did SHRA have a plan? People come overnight and said that they were shareholders.

Ms Gaffee said in SHIs, the managements were strong. Hijacking was unlikely to happen. Tenant rent boycotts were possible and a bigger threat. Overseas in the UK and Australia, there was more stringent tenancy management. They made it stronger in terms of criteria and regulations.

Mr Figlan asked how tenants were screened to ensure of their legitimacy and authenticity.

The Chairperson pointed to the screening of tenants as a risk area that was being overlooked. Sometimes people renting flats were problematic. Buildings were hijacked. One could not hijack a building without internal information. The screening process had to be more stringent.

Mr Bhoola said that this was a sensitive matter. He did not want to disparage any individual. In the Valley View case the rent went from R800 to R2500. This case was with the Constitutional Court. Would these pieces of legislation deliver houses on the ground?

The Chairperson told SHRA and the NDHS to re-look at matters, discuss them and come and report again.

Mr Ngwenya resumed reading from Clause 21.

Mr Steyn asked the delegation to define long term in Clause 22(1)(a).

Ms Mnisi commented that the beneficiary cooperative project had to be part of the inception of this project. Experience had taught the movement that there was a serious backlash being felt by its members. It was further complicated by the provisions of the Cooperatives Act. As a result of the manner in which cooperatives were organized, it would not favour this proposal.

Mr Ngwenya resumed reading Clause 22 Land and Service Criteria.

Ms Gaffee replied that a long-term lease had been defined as a lease where a notarised deed had been registered against that lease, for five years and longer. With the N2 Gateway Project it was found that this period was too short. They could not evict rent defaulters, because the land still belonged to the city, and the city had to go through a long process before it could evict them. This was a valid issue and in her opinion it had to be 30 years and longer.

The Chairperson asked what SHRA’s arrangement was with its stakeholders.

Ms Gaffee replied that that SHIs and service providers needed to engage with beneficiaries in terms of the application process. Clause 24 dealt with this, but she was not sure whether it was thorough enough in terms of the question.

The Chairperson said that it dealt with land. Regarding leases, she did not know how a user agreement worked until it was brought before the Committee. How did this proposal affect them?

Mr Steyn agreed that a period of 30 years was more realistic, but would it be added anywhere.

Ms Gaffee agreed that it had to be added.

Mr Bhoola asked whether the duration of 30 years was not in conflict with the institutional subsidy which stipulated that houses built with an institutional subsidy had to be disposed of within 30 years.

Ms Gaffee said that this program used the institutional subsidy as a top-up subsidy. This programme did not comply with the prescripts of that program. SHRA had to make sure that the institutional subsidy was a top-up subsidy and that the criteria were aligned to the criteria for the capital restructuring grant. The institutional subsidy on its own should not form part of this program then, because it allowed for a period of four years after which ownership happened. This was primarily a rental programme. It was also the reason why the cooperative program did not quite fit. Although deferred, it was an ownership programme. This was part of the reason for the tensions that had been picked up.

The Chairperson quoted Clause 22(2). It did not say anything about cooperatives.

Mr Moholo said that according to the Act and the definitions, SHIs included cooperatives.

The Chairperson noted that there were contradictions in many instances.

Mr Chainee said that the issue had to be made clear that when dealing with social housing stock, it referred to rental social housing stock. All parties were confusing the issue of social housing with the different tenure options. This had to stop. The parties had to go back and clean up the regulations, keeping this in mind. Then there was the point that Ms Gaffee made about ownership. NDHS and SHRA needed to go and make the distinction in the various clauses and be very specific in every case.

Mr Ngwenya resumed reading from Clause 23.

Mr Steyn said that for many years, social housing worked with upper limits. Things were not static. Was it not time to change? There were many households outside of the R7 500 margin. Could another band not be added, like R7 500 – R12 000? If this group was included, the project could be subsidized by the higher income people. It became unaffordable because the cost was increasing because of inflation and continued maintenance.

The Chairperson said that the subsidy was for people who belonged to the low and medium income groups. What was the medium income? How was it calculated? When did you come to middle income?

Mr Figlan said that a project had built double storeys in Khayelitsha which nobody could afford. It had been standing empty since 2006 and was guarded by security guards. This project catered for middle and higher income people, and forgot about lower income people. He thought that these projects had to cater to people earning from R2 000 to R3 500 and then R7 000.

The Chairperson said that the group from 0 - R3 500 was covered by the subsidy. Practically lots of people were being exploited. The discussion took the meeting back to the Rental Act. The country was not able to provide accommodation to poor people. There were people who were not working who were using grants to pay rent. The country had challenges and it was good to raise in this forum.

Mr Figlan referred to people who already had a subsidized house in another province who came to Cape Town or JHB. They earned R2 500 and could afford to pay rent.

Mr Bhoola noted that a person was only entitled to access one subsidy.

Ms Mnisi said that in cooperatives the monthly expenses were covered and a surplus of 5% was left. The income group R1 500 – R7 000 did not guarantee that there would not be default payments.

Mr Chainee said that as it stood, in the affordable housing category, people who earned too much to qualify for a subsidy, but too little to qualify for a bond (R3 501 – R12 800) formed the “gap market”. One policy issue was to provide them with temporary relief, provide for them with a rental subsidy. What NDHS had done in last MinMEC, was for it last up to R15 000. In SA at the moment, nobody catered for the R3 500 – R7 500 group. The Johannesburg Housing Company did not cater for people earning less than R7 500.

The Chairperson said that that this was why specifications had to be stipulated and regulated.

Mr Mngomezulu said that one had to work within the current prescripts of policy. The current policy prescribed these bands. Currently the policy was being reviewed.

Mr Figlan reiterated his fictional person, who had a subsidy house in the Eastern Cape, but was living and working in Cape Town. This person could afford R300 for rental, instead of building a shack. During the Apartheid years, people paid R30. Now, it was not less than R300. Did South Africa cater for people like that?

Ms Gaffee said that there was a programme called Community Residential Units (CRU). It allowed a person to benefit from a subsidy house and it allowed the same person to live in temporary subsidised housing when working in the city. It was under implementation at the moment.

Mr Bhoola said that during apartheid, very poor people had subsidised rental which cost R21.

Mr Chainee said that regulations were before the parties, and then there was the overhaul of the social and rental legislation. There were a number of anomalies and inconsistencies. The Regulations needed to be formulated and finalised and SHRA needed to operate within the framework of the law. The parties had highlighted the inconsistencies. While progress was needed with the Regulations, all was aware that there were tensions and conflicts within the situation as it stood.

The Chairperson said that this discussion had lead to another discovery, the Rental Act. It had to be flagged and discussed, without stalling the process.

Mr Ngwenya resumed reading from Clause 27 Financial Viability.

Mr Chainee said that in relation to cooperatives there was not sufficient attention paid to cooperatives. There was no funding framework for cooperatives at a national level. The parties were dealing with specific choices for the development of social housing. The framework did not exist for cooperatives.

Mr Ngwenya resumed reading Clause 30, Financial Administration.

The Chairperson asked what Clause 3(g)(ii)(bb) meant.

Ms Gaffee replied that 3(g)(ii)(bb) referred to if the project was part sectional title and part rental, it had to be possible to recover the social housing portion.

Mr Steyn said 34(c) specified that the Provincial Government would approve the grant. Was the power to approve grants taken away from SHRA?

Ms Gaffee said that there were two grants. The top-up grant was administered by the province and the capital investment grant was administered by SHRA.

Mr Steyn asked whether it should it not be made clearer.

Mr Steyn asked if Clause 35 referred to the National Housing Finance Corporation (NHFC). This was an error and it was corrected.

Mr Steyn referred to the penalties in Clause 36, if a SHI continued to breach the Regulations. It had to add that the accreditation would be withdrawn.

Mr Ngwenya said the Regulations also made provision for withdrawal of accreditation.

The Chairperson said she understood Mr Steyn to mean that if the SHI was a repeat offender, the accreditation would be withdrawn.

Mr Bhoola said that a number of SHIs in KZN had been blacklisted, and he now understood the context.

Mr Ngwenya said that Section 12 of the Act stated the powers of intervention, providing a number of options.

Ms Gaffee said that Section 12 of Act had to be unpacked in the regulations.

The Chairperson asked Mr Ngwenya to read through the Application Form as well.

Ms Gaffee said that cooperatives did not have staff. It normally outsourced the management to a management cooperative. SHRA wanted to make sure that the capacity was available.

The Chairperson said that SHRA would have to be flexible. There would be lots of disputes as a result of this form. The form was not user friendly.

Ms Gaffee said that there was a manual to support and explain the form as well as a 30-day period of interaction for SHRA to address any unclear issues and assist the applicant to apply. SHRA also gave technical support to assist applicants to get the required information.

Mr Steyn said that the form was a covering letter. He suggested that the supporting documentation had to be added to the document in a prescribed structured way with annexures.

Mr Steyn said some people like to stick to the letter. It should rather be more general as in “The number of directors who are public representatives…” Also the cell number had to be of a specific person like the secretary, CEO, CFO or administrator.

Mr Bhoola said that the issue of education about the Regulations and accreditation had been mentioned. What was the relationship between the Promotion of Administrative Justice Act and the Disclosure of Information Act? Did it run concurrently or were they two separate pieces of information.

Ms Gaffee looked at the Application Form which SHRA inherited and how information was collected. SHRA was aware of the shortcomings of the Application Form and was in the process of amending it. The electronic Application Form was an Excel document with which the SHI populated with its information. Supporting documentation was scanned and uploaded with the Excel document. The documents were then accessible through active links from the main document. It was a sophisticated tool, intimidating, but required at this level. This was why training was needed.

Mr Ngwenya said that there was a direct link between the Promotion off Administrative Justice Act (PAJA) and the Promotion of Access to Information Act (PAIA). PAJA promoted fair and just administrative decisions throughout all the organs of state and PAIA ensured access to information.

The Chairperson said the entities would go back and refine the Regulations and Application Form. It was an opportunity to iron out issues. They would be invited back soon. The process would depend on the NDHS.

The meeting was adjourned.