Department of Housing Budget: briefing

Meeting report

PUBLIC SERVICES SELECT COMMITTEE
18 May 2005
DEPARTMENT OF HOUSING BUDGET: BRIEFING

Acting Chairperson: Reverend P Moatshe (ANC)

Documents handed out:
PowerPoint presentation on Department of Housing Budget 2005/06-2007/08

SUMMARY
The Department of Housing briefed the Committee on their budget 2005/06 to 2007/08. Officials outlined housing legislation and regulations, the policy framework and recent shifts. Currently the demand for government-assisted housing was greater than the Department’s ability to deliver. The household formation demand had increased by 30%.

The Committee asked questions around the farmworker housing projects and the National Home Builders Registration Council (NHBRC) warranty cover. Members were concerned about rollovers, underspending and backlogs in provinces, particularly in the Western Cape.

The Acting Chairperson expressed his dissatisfaction about the interaction between the Committee and the Department, and said the latter should submit reports to the Committee more regularly. He reiterated that dumping and roll-overs could not be accepted, and more information was urgently needed on these issues.

MINUTES
The regular Chairperson of the Committee, Mr R Tau, was absent because he was part of the National Council of Provinces (NCOP) delegation that had left for Algeria the previous day. The Committee unanimously elected Reverend P Moatshe as Acting Chairperson for this meeting.

Department briefing
Mr A Vawda, Department Director-General, presented an introductory overview to the Department’s budget. The Department had delivered 1.6 million housing opportunities over the last ten years, bringing stability to the urban economy and the property market. However, the household structure had shifted from 4.2% to 3.8% over the last decade. Furthermore, the population growth had increased by 10%, while household formation demand had increased by 30%. Hence the demand for government-assisted housing was greater than their ability to deliver. This had resulted in growing informal settlements, social dysfunctionality, and unbalanced property markets. The number of households living in informal settlements had increased by 26%. Moreover, up to 60% of the property market did not operate within a functional property market. This had led to a secondary property market and an adverse impact on the rates base, preventing the creation of sustainable human settlements. The new housing vision focused on accelerated delivery for poverty alleviation, job creation, asset creation, promoting social cohesion, a single property market, and sustainable development.

Mr M Dlabantu, Deputy Director-General, then briefed the Committee on the Department’s budget 2005/06 to 2007/08. He outlined their aims, values and mandates of the Department, and described the legislative and policy framework within which the housing development programmes operated. The strategic overview highlighted the Comprehensive Plan for Housing Development (CPHD) that had been adopted by Cabinet in September 2004. Strategic policy shifts were described, as well as linkages to government policy and cluster priorities. Finally, he outlined the budget overview and the key activities per programme, including a summary of housing delivery targets and funding allocations for the provincial housing departments.

The budget overview presented the following six programmes: Administration, Policy Planning and Research, Programme Management, Housing Sector Performance, Housing Equity, and Housing Development Funding. Their total budgets increased from R5 191 712 in 2005/06 to R6 053 463 in 2006/07, and to R7 367 575 in 2007/08.

With regard to legislation, the Medium-term Expenditure Framework (MTEF) was embedded in the Social Housing Act, regulations to the Social Housing Act, Housing Development Act, and the review of national, provincial and local legislation impacting on the Comprehensive Plan. Amendments to various Acts had been administrated by the Department. This included the Housing Act, Prevention of Illegal Eviction (PIE) Act, Housing Consumers Protection Measures Act, and Rental Housing Act.

Discussion
The Chairperson asked whether the Department was coping with the challenges, and whether the problem of backlogs had been addressed. Mr Vawda gave a short presentation on the Department’s key housing projects in the different provinces, demonstrating the completed work and the projects still in progress.

Mr L Van Rooyen (ANC, Free State) asked for clarity about the farmworker housing guidelines outlined in the Management Programme, which had been completed in March 2005. He questioned what discussions had taken place since. With regard to the Housing Development Funding Programme, he queried which funds had been allocated to the farmworkers housing project. Furthermore, he asked for information on the task team that had been set up for the rural housing programme. He wondered when they would complete their work.

Mr Von Broembsen, Chief Director of Policy Planning, replied that the new rural housing task team consisted of the province representatives, the SA Local Government Association (SALGA), non-govenmental organisations (NGOs), representatives of organised agriculture, and the farmworker’s unions. Thus far, a draft had been prepared regarding the farmworkers’ housing policy document. Bilateral engagements had been completed with organised agriculture, the farmworker’s union, and other keystakeholders. Currently, there was a fair amount of consent around the first draft. The Department would meet with the task team for the first time in June 2005. Subsequently the task team would finalise the draft. The meeting had originally been intended for March, but there were delays because they had had to send the draft back to the consultants. He further commented that the current rural housing instrument that pertained to communal land, would be revisited in terms of the new stipulations around the Communal Land Rights Act.

Mr G Krumbock (DA, KwaZulu-Natal) was unsure whether the NHBRC warranty cover from October 2005 in the Management Programme had been phased out. He asked what precisely had been phased out, and if that referred to the 1.3% warranty that had to be paid. Furthermore, for several years there had been discussion around the NHBRC levy of 1.3%. He wondered whether any progress had been made in the implementation of the new system that took into account the track record of builders, and thus reduced charges for costumers in terms of the statutory levy.

Mr J Wallis, Chief Director of Programme Management, answered that the NHBRC had not been phased out. The majority of subsidised houses had been built through the project-linked subsidy mechanism. They only provided NHBRC warranty cover on project-linked subsidised houses to date. However, they were in the process of extending the warranty scheme to all other subsidy mechanisms. Thus all houses built with government aid would have a specific warranty cover in the near future. They had also investigated how the People’s Housing Process (PHP) and the NHBRC could ensure higher quality houses. A warranty cover might not necessarily be involved. The Department and the NHBRC would ensure that at least the core elements of a house would be of an acceptable standard.

Mr Wallis further explained that the 1.3% related to privately built houses and not to subsidised houses. The ‘subsidised market’ had been costed at 1.75%. That was the amount government paid to the NHBRC in order to provide warranty cover on subsidised project-linked houses. The NHBRC was currently investigating the accreditation of builders, so that they might develop a good track record. Presently, the builder paid 1.3% of the cost of a house to the NHBRC in order to ensure the warranty cover. However, the NHBRC was considering a higher percentage. The Department had not yet received a proposal in this regard.

Mr Krumbock (DA, KwaZulu-Natal) asked whether some people would qualify for lower rates on the grounds that they had a good track record. He queried whether any progress had been made regarding a gradated system of lower rates. Mr Wallis answered that currently there was no such system.

The Chairperson commented that there were many roll-overs from different provinces, while masses of people were still homeless. He asked whether the reason for this daunting situation was lack of capacity. Furthermore, he queried whether the Department would be satisfied with their budget, and how the budget would affect the status quo.

Mr N Mack (ANC, Western Cape) expressed his concern about the 34% roll-over in last year’s budget in the Western Cape. He wondered how this situation could have arisen when the Department had monitored the province. The Western Cape and Gauteng particularly faced the difficult challenge of immigration from rural areas and other provinces. He queried when the Department would start helping to tackle these problems. He further asked whether the Department assisted the provinces in the acquisition of land. Many buildings were currently not occupied, for instance in Beaufort West. He suggested using these buildings for low-ost housing projects, and asked whether the Department co-operated with the Department of Transport in this regard.

Mr Dlabantu commented that the Department would look into the lack of capacity in municipalities. Studies had shown that there were serious discrepancies between local governments, and that there was a problem of underspending The BNG Housing plan would help addressing these challenges. Nevertheless, studies had revealed that the problem of underspending had been reduced. He ensured that the Department would monitor and discourage provinces from fiscal dumping. In the current financial year, there was an average of 7% underspending, and six provinces had less than 5% underspending. The Western Cape and North West were among those with the greatest underspending. The Eastern Cape province had performed exceptionally well due to provincial and national department interventions in previous years. Generally there had been significant improvements. However, the Department was aware of continual underspending and assured they would continue to address this problem.

Mr Vawda explained the financial cycles of housing delivery, highlighting that the average lead-in time was two years, and the expenditure was always ‘broken’ at the end of the year. In the Western Cape, they were currently trying to double delivery to remove the backlog. The Memorandum of Understanding (MOU) had brought stability to the three spheres of government and thus helped tackle the lack of delivery in the province. He explained that delivery would be affected by the 70% of subsidies that went to one Metropole. The distinctive problem in the Western Cape derived partly from the incongruence between province and local government, even though there had been improvements in this regard. The N2 Gateway Project was an example of successful intergovernmental arrangements and constructive negotiations with the private sector. Significant amounts of land had been released for this project. However, he agreed that broader availability of land was a difficult issue.

The Chairperson commented that the interaction between the Committee and the Department was unsatisfactory. The Department should submit reports to the Committee on a regular basis. He reiterated that dumping and roll-overs in provinces could not be accepted. More information was urgently needed on these issues. The content of this meeting would be reported to Mr Tau, the regular Chairperson of the Select Committee.

The meeting was adjourned.