Household "Rightsizing": briefing by Thubelisha Homes

Meeting report

HOUSING PORTFOLIO COMMITTEE
12 September 2001
HOUSEHOLD 'RIGHTSIZING': BRIEFING BY THUBELISHA HOMES

Chairperson: Ms N Hangana

Relevant Documents:
Presentation by Thubelisha Homes (See Appendix)

SUMMARY
Thubelisha Homes explained its obligation for providing affordable houses to households who can no longer afford to pay back their housing loan. About 1400 'rightsizing' houses have been built from a target of 17000 since 1999. It has operational problems such as clients who do not co-operate and this causes delays in the program and it becoming less effective. The Committee was concerned about the R2 400 required to be paid by affected households before 'rightsizing' can occur.

MINUTES
The CEO of Thubelisha Houses, Mr Kevin Duncan, briefed the committee on the progress of the company since its inception in July 1999 (see document). Thubelisha Homes has an obligation to provide affordable houses to households who can no longer afford to pay back their housing loan. This is done through the process of 'rightsizing' which relocates households to smaller, less expensive homes. These households need to contribute a repayment of R2 400 to their debts in order to qualify for the relocation. The previous debt of the relocated client is written off. The company has a target of building 17 000 houses nationally.

The problems associated with building the replacement houses are:
- to find appropriate land as near as where clients used to live
- to obtain subsidies because there are several requirement that need to be met first such as the debt contribution
- to arrange the construction of houses that ensures using constructors from the community itself as there was a lack of such skills in the community
- to arrange physical allocation of the households to their new houses as sometimes the households and even the community fight back and refuse to be evicted.

Thubelisha builds houses which are almost similar to RDP house, and it feels that the clients should appreciate what the Department is doing and not complain about moving to smaller houses.

The following stakeholders benefit from the rightsizing:
Households: This is a second opportunity to own a house, and the debts are written off.
Councils: There is an increase in housing development, and more space is opened for development.
Community: Job opportunities are developed, and levels of crime reduced
Government: There is an addition to the housing stock.
Banks: Resale of houses to the market.

Problems associated with Rightsizing
- The clients are resistant to eviction from the original premises and once they are removed, they re-enter their houses, and no charges are laid against them. This means that if eviction does not work, then there is no rightsizing.
- The clients have to make the R2400 contribution that rightsizing requires for re-location.

In closing, the CEO of Thubelisha said he would not mind if Thubelisha Homes were to close down because the program is not successful and the clients do not show any support.

Discussion
Mr Durand (NNP) asked who pays for the rates and the debt written off from the relocated communities. He also asked why the capital subsidy of R16 000 is used for right-sizing instead of being given for RDP housing.

Mr Duncan (Thubelisha) replied that the writing off takes place after the bank takes back the property. The new owner will only be responsible for the new rates. He said that the motive for not giving the money to the RDP housing is to encourage the banks to provide people with financial assistance.

Mr Douglas (IFP) asked about the demographics of the rightsizing program, that is, how many Whites, Africans, Coloureds and Indians benefit.

Mr Ducan replied that there are no racial profiles for the program, but the national geographic scales of properties built covers: 65% from Gauteng; 11% from Western Cape; 6% from Eastern Cape.

Ms Coetzee-Kasper (ANC) asked how Thubelisha clients are able to contribute R2 400 as they are the poorest of the poor. She questioned whether this would not violate the right to housing of communities.

Ms Hangana (Chairperson) intervened and said that the issue of the R2 400 contribution would need to be discussed by the Committee some time later.

Ms Maine (ANC) asked what strategies Thubelisha has to encourage its clients to avoid relocation by saving money in group saving schemes in order to pay off the debt. To what extent does the client pay the total amount of debt?

Mr Duncan replied that Thubelisha does not write off debts, but the banks do. He said that relocated clients do not carry the previously unpaid rates or loan debt with them.

Ms Southgate (ACDP) asked about the delays of the rightsizing program as only about 1 400 houses have been built of a target of 17000, since the program's inception in 1999.

Mr Duncan replied that the process is delayed by the process of granting the capital subsidies. The policy of granting the subsidy requires the bank to prove that the client is unable to pay the debt for reasons such as a spouse has left the household and the remaining spouse cannot afford it. He mentioned that in Khayelitsha about 1 in 42 families has this particular problem.

Mr Schneemann (ANC) asked whether Thubelisha involves the households affected in the building of new houses, so that they can put to use their own labour and save some money. He also asked how successful the job creation process is.

Mr. Duncan replied that they are chased away by the affected households because they are reluctant to relocate. He said that the job creation process is in its initial stages, but there are projects which are initiated by Servcon, such as gardening in Soweto. He mentioned that there is a constructor development plan that Thubelisha has together with the Minister of Housing, which is aimed at producing business constructors not bricklayers.

Mr Scheeman proposed that Thubelisha should invite the Committee to the relocation areas so that it can acquaint itself with the rightsizing process and the beneficiaries.

Mr Duncan welcomed the proposal and suggested a visit to Khayelitsha on 18 October 2001.

In closing, the Chairperson asked Mr Duncan to return for another meeting when Servcon representatives will also be present. Mr Duncan welcomed the invitation.

Appendix:
PRESENTATION BY THE THUBELISHA HOMES TO THE PORTFOLIO COMMITTEE: HOUSING

AN OVERVIEW OF THUBELISHA HOMES AND THE CONCEPT OF 'RIGHTSIZING'

WHO IS THUBELISHA?
1. A Section 21 company (not for gain)
2. Established jointly by Government (Department of Housing) and Servcon Housing Solutions (Pty) Ltd
3. Originates from the 'Record of Understanding' signed between Government and (then) Association of Mortgage Lenders in 1994
4. Governed by an independent Board of Directors
5. Funding provided by:
· An establishment grant from Government
· Relocation assistance from Provincial Housing Departments
6. Commenced with operations in July 1999

WHAT DOES THUBELISHA DO?
The primary responsibility is to provide alternative, affordable accommodation to households on the Servcon portfolio who have signed 'rightsizing' agreements with Servcon, and complied with their interim payment arrangements.

To achieve this, Thubelisha must:
· Determine the number of households requiring relocation assistance and the geographical spread across the country.
· Identify and acquire appropriately located land, serviced erven or existing projects.
· Arrange for the construction of housing units suitable for rightsizing purposes.
· Secure capital subsidies from the Provincial Housing Departments for conversion into Relocation Subsidies.
· Conclude appropriate Sales Agreements with the clients.
· Communicate effectively with all stakeholders and obtain their support for the programme.
· Arrange for the physical relocation of the households to their new house.

WHAT IS RIGHTSIZING?
A process whereby:
· Households that purchased a home with the assistance of a loan from a bank and could not afford the repayments and had their home repossessed by the banks.
· These households are permitted to occupy their existing homes temporarily whilst paying a predetermined affordable rental to Servcon.
· If their repayment record is satisfactory, they are passed on to Thubelisha who will arrange for and assist them to relocate to a more affordable home.
· Relocation Assistance equivalent to the capital subsidy, (currently R16 000) is obtained by Thubelisha to finance the new home.
· Households who have regular income or can provide own equity, may under certain conditions qualify for a larger home than the capital subsidy provides.

WHAT TYPE OF HOUSE DOES THUBELISHA PROVIDE?
· The standard housing product provided to more than 95% of the rightsizing households is very similar to the typical 'RDP' house being delivered in that Province.
· The National Department of Housing's "National Norms and Standards" for capital subsidy projects is used as the guideline for minimum standards.
· This is for the basic product where the household has no affordability and unable to increase the size of the house through credit or own capital.

WHAT ARE THE BENEFITS OF RIGHTSIZING?
To the Households:
· A second opportunity to own property
· Debt from the bank loan written off
· An asset that increases in value over time
· Receiving a Title Deed to the property
· No more fear of being evicted
· Financial assistance equivalent to the capital subsidy
· Qualify to benefit from Servcon's job creation projects

To the Council:
· Increased housing development
· Payment of rates and service charges by new occupants of bank houses
· Development of open spaces

To the Community:
· Job opportunities during construction
· Capacity building through skills transference
· Safety and reduced levels of crime

To the Government:
· Add to the national housing stock
· Normalise the housing environment

To the Banks:
· Free up existing stock for re-sale back into the market
· Restore and maintain home ownership