the right to shelter, in the context of BRICS A case study and model - - PowerPoint PPT Presentation

Provision of Affordable Social Housing to address the right to shelter, in the context of BRICS

A case study and model of 3 South African Metropolitan cities Jaya Josie, Nozibele Gcora, Krish Chetty BRICS Seminar Series– 4 July 2017

South Africa - Informal Slum Settlement in Cape Town

• Households from this Joe Slovo informal

settlement near the City of Cape Town were resettled in Delft further away from the City and work.

Aim

1. Review and assess efforts to provide sustainable shelter to meet the increased demand in urban slums in Metros 2. Review public housing provision for disadvantaged and vulnerable communities 3. Review the provision of sustainable housing in South Africa for those caught between inaccessibility to mortgages because they don't earn enough, and inaccessibility to subsidized housing because they earn too much. 4. Discuss the housing challenges in BRICS 5. Provide modeling options identifying the opportunities to invest in Affordable Housing initiatives.

Human Settlement Project Perspective on Development

• Make cities and human

settlements inclusive, safe, resilient and sustainable

• Availability and Management
• f Water and Sanitation
• Access to Energy
• S 26: Right to Adequate

Housing and shelter

• S 27: Right to Health

Care, food, water and Social Security

• S 29: Right to Education
• Chapter 8 – Transforming Human

Settlements

• Chapter 5 – Environmental

Sustainability and Resilience

• Chapter 6 - Inclusive rural

economy

• Chapter 9 – Improving Education,

Training and Innovation

• Chapter 10 – Health Care for All
• Access to Drinking Water
• Improved Sanitation
• Living in Slums

MDGs

National Developmen t Plan

SDGs

Bill of Rights

The Bill of rights

• Constitutionally mandated basic services (CMBS)
• Access to basic services is a fundamental right to which

everyone is entitled

• The right to housing (S 26) must be subject to progressive

realization, as governments must operate within available resource

• Have the right to shelter, not a house

South Africa’s Constitutional Guidelines for Financing Housing & Related Basic Services

The current state of housing provision 20 Years Later

• Segment demand for housing

finance includes:

• Households that are served

and able to access mortgage finance

• Households supported by the

subsidy market (RDP Subsidies)

• By comparison households

falling in the income segment

• f R3,200 to R15000 per

month have note been served – limited government

• r private financing available

Mind the Gap Market

• In the Census (2011) the income band that came

closest to the gap market were households earning between R3200 to R12800 pm.

• 22% of all households in the gap market.
• 25% of all households are rented not owned
• 13% nationally live in an informal dwelling.

Housing Backlog

• The housing backlog has remained constant at around

2.1million for a number of years Housing Delivery

• On average, the housing department provides 200,000

housing units each year. Little Impact.

• For social housing, the Housing Development Agency

(HDA) has provided 10,251 public sector housing units for rental over 5 years from 2007/08 to 2011/12

• The Social Housing Regulatory Authority (SHRA)

provided 7400 housing units in 2012/13 and 2013/14

• Not addressing the needs of the Gap Market

63% 22% 15% 0%

Households per Monthly Income

Below R3 200 Housing Gap (R3 200 - R12 800) Above R12800 Unspecificied 78% 8% 13% 1%

% Household Per Type of Dwelling

Formal Brick/Concrete Structure Traditional Dwelling Informal Dwelling Caravan/ Tent or Other 25% 12% 19% 41% 3%

% Household per Tenure Status

Rented Owned but not yet paid off Occupied rent-free Owned and fully paid off

Falling in the edges of home ownership and housing provision (Rust 2014)

• Public & private provision supply of affordable housing to the gap

market is inadequate

• households earning between R3500 to R10 000 pm
• support only 28.8%
• No new housing construction, limited rental stock, limited resale

value

• The FLISP grant for subsidizing the private supply of new

homes has failed

• Households earning less than R3500 pm – support only 49.6%
• Virtually no resale value
• At current prices there is no market-based affordable housing available

in South Africa

• Current public housing policy focuses on financing of ownership of

housing assets above the provision of housing and shelter

CASE STUDY

From backyard Private rental to Subsidized Rental

From here in Langa… …to here in Rondebosch

Langa

Community Health Centre Schools Population = 52 401 Households = 17400 40% Completed School 40% Unemployed 42% Live in Informal Settlements 33% No Piped Water 28% No Flushing Toilets Transport Options

• Train
• Taxi’s
• Bus

Closest Employment Opportunities

• Epping Industrial
• CBD

10KM 25KM

Rondebosch

Population = 19554 Households = 6990 92% Completed School 5% Unemployed 1% Live in Informal Housing 1% No Piped Water 1% No Flushing Toilets

Clinics Schools Transport Options

• Train
• Bus
• Cars

Closest Employment Opportunities

• Mall
• Shops
• Stadium
• CBD
• Various

From outside to Inside Toilets

In Langa… …to Rondebosch

Two views of Table Mountain

From Langa..

To Social rental in Rondebosch

HOUSING SITUATION AMONGST OUR BRICS PARTNERS

Brazil’s Favelas: Dilapidated apartments in Russia

INDIA’S HOUSELESS

Social housing in China

Brazil’s Housing Shortage

Housing Characteristics

• 74% of Brazil’s households are Owner Occupied, 17% Renter

Occupied, 7% Occupied Rent Free Backlog

• Varied estimates of Brazil’s Housing Shortage, due to inconsistencies in

Favela data collection

• In 2009 - Joao Pinheiro Foundation
• estimated a deficit of 7.2million units if the favela’s are excluded.
• Estimated a deficit of 30 million units if favela’s are included
• In 2009 – Caixa Econonimca Federal Study
• Estimated a deficit of 9 million units
• In 2011, Sao Paulo State Construction Industry Union using IGBE data
• Estimated a deficit of 5.46million units
• It is estimated 90% of the Housing Deficit (Excluding Favelas) lie in the

low income space

• IGBE Study indicates that 50% of Households in Favela’s lie in Middle

Class, 4.5% live in Upper Class

• 85% of the Deficit are in Urban Areas
• 42% of the Deficit live in congested households, 35% experience

excessive expenditure + rent, 18% live in precarious housing

Brazil’s Housing Policy

• 2009 -Minha Casa, Minha Vida 2009 (My Home, My Life)
• Stimulate Production and acquisition of new housing units for low

income population

• Mobilizes the private sector to contribute
• Allocates subsidy finance
• Guided by data on the housing deficit when building new housing units
• Aims to promote economic growth in low-income households – creating

jobs in the construction sector

• Supports wide range of incomes
• Prioritises low income households – receive a substantial increase in the subsidy

amount

• Also offers housing alternatives to Middle Income Households
• Program includes Social Oriented Housing options
• Offers a special credit line for organisations involved in social housing (i.e. Housing

cooperatives & community based organisations)

• Are lessons to be learnt for SA in Brazil

Minha Casa, Minha Vida – The Vision

Russian Housing Shortage

• From 2000 – 2012
• Private ownership increased from 65% to 87% of all dwellings
• Housing provision and backlog is measured in square

meterage per person

• In 2006
• 93 million square meters (3% of total housing) were in dilapidated houses
• 11.2million sq m below safety standards
• Challenge of maintenance
• Residential Mortgage market now worth USD1.8 billion+

(1% of GDP)

Russian Housing Policy

• Soviet Era
• The State owned up to 90% of the Housing Stock in Urban Areas
• Rent and housing costs were nominal and heavily subsidised
• Housing was allocated according to “sanitary norms” that regulated the living space per

person

• No concept of mortgages
• Post Soviet Era
• State owned properties were transferred to the residents of the property
• Privatisation lead to development of large condominiums
• Introduced mortgage financing, mortgage agencies, securitisation
• Launched the ‘Affordable Housing’ Project devolved to the municipalities
• 2006 Housing Code - Government no longer managed maintenance and repairs of Social

Housing Projects

• Faced with burden of 40-50 years worth of repairs
• Question of who is responsible for maintenance
• Side Effects
• 50% of homes require maintenance – population living in aging homes
• Only 10 – 15 % of Russians can afford the mortgages
• Experiencing low level of debt securitisation
• New households are struggling to find accommodation

Russian Goal – Well maintained, adequate housing

Indian Housing Shortage

• 69% of Urban Housing is owned, 94% of Rural Housing is Owned in 2011
• Indian Standards of Acceptable Housing differ to rest of BRICS
• 91% of Urban Households live in an Acceptable building
• Urban Housing shortage (2001) – calculated at 10.5 mill households
• 1.9mill Houseless People in 2001
• 1.1 mill in Urban areas
• 0.8 mill in Rural areas

Housing Shortage in China

• Deficit of 40 million units out of 361 million households
• Rural percentage have decreased consistently from 1990
• 1990 – 74%
• 2001 – 64%
• 2008 – 46
• In 2010 - Out of 700 million urban residents, 260 million are

rural immigrants

• Internal Migration is a driver of the housing backlog
• 8 million new families enter the market each year
• 28 million people in shanty towns
• 2010 – 17% of urban households lived with ‘housing difficulty’
• Have less than 13square metres living space per person
• General lack of data for housing estimation needs
• Is a need for low rent housing programmes

MODELLING

.

Cost Benefit Analysis(CBA) methodology

 This research employs a CBA called Internal Rate of Return (IRR) model which provides an economic decision making tool to assess whether affordable rental housing contribute to the increased and improved return on investments or not  Adopted from the Australian Housing and Urban research model  Three big cities of South Africa such as Johannesburg, Cape Town and Durban are used as focus cases of cost benefit analysis of the research  Internal Rate of Return:  Internal Rate of Return Taxation:

Estimating the Housing Backlog Per Metro

• Identify the target population
• Income Gap (R3200 – R12800)
• Informal Housing (as per the Stats SA)
• Define the cost of Affordable Social Housing to meet the

need

• Housing Backlog = Cost X Target Population

Target Population Per Metro

• Income Categories
• Annual HH Income ÷ 12
• R 38 201 - R 153800 ~

R3183 – R12816 per month

• Type of Dwelling
• Informal dwelling (shack;

in backyard)

• Informal dwelling (shack;

not in backyard; e.g. in an informal/squatter settlement or on a farm)

• Caravan/tent

10000 20000 30000 40000 50000 60000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Progression and Growth of the Housing Gap Market

Johannesburg Cape Town Durban 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

• 10,000.00

20,000.00 30,000.00 40,000.00 50,000.00 Gap Gap Gap Cape Town eThekwini Johannesburg

Population of Housing Gap Market

Amount Percent

Size of the Backlog

• Backlog based on Population

figures from Census + Mid Year Estimates to calculate the gaps

• Backlog = Cost X Target

Population

• Costs of Housing based on SHRA

Budget and number of units delivered

• Value of Backlog at 2011
• DBN = R2 204 594 409
• CPT = R 4 868 405 160
• JHB = R5 752 853 160

50000 100000 150000 200000 250000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Costs per Unit

Johannesburg Cape Town Durban 2,000,000,000 4,000,000,000 6,000,000,000 8,000,000,000 10,000,000,000 12,000,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Value of the Backlog over time

Johannesburg Cape Town Durban

Calculate the Rate of Return Per Metro

• Given the size of the Target Population and Housing

Backlog

• Calculate the time frame for Affordable Social Housing

Project to generate profitable returns given a particular size of investment

• IRR Model’s Relevant Variables are:
• R1, R2…Rn = Future stream of rent Income
• C1, C2…Cn = operating costs
• r = Discount rate
• Y=The marginal income tax rate
• Inflation (factored into pricing of rent and Cost)

Model Scenarios 1: Rate of Return

) 1 ( ) (

1

   





• N

t t t t

V r C R

Input Values

• Rent CPT= (R3 250*12)= R39 000
• Cost CPT= 12 175
• Discount Rate=0.001
• Inflation Rate=0.05
• 5 Years to Produce Profits

(2,000,000,000)

• 2,000,000,000

4,000,000,000 6,000,000,000 8,000,000,000 10,000,000,000 12,000,000,000 14,000,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Cape Town - Rate of Return - Scenario 1 Gross Return Return - Investment Net Profit

Internal Rate of Return: Johannesburg

• Rent JHB= (R2 500*12)= R30 000
• Cost JHB= 12 175
• Discount Rate=0.001
• Inflation Rate=0.05
• 6 Years to Produce Profits

) 1 ( ) (

1

   





• N

t t t t

V r C R

(2,000,000,000)

• 2,000,000,000

4,000,000,000 6,000,000,000 8,000,000,000 10,000,000,000 12,000,000,000 14,000,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Johannesburg Rate of Return - Scenario 1

Gross Return Return - Investment Net Profit

Scenario 1: Internal Rate of Return: Durban

• Rent DBN= (R=1 900*12)=R22 800
• Cost DBN=12 175
• Discount Rate=0.001
• Inflation Rate=0.05
• 3 Years to Produce Profits

) 1 ( ) (

1

   





• N

t t t t

V r C R

(1,000,000,000)

• 1,000,000,000

2,000,000,000 3,000,000,000 4,000,000,000 5,000,000,000 6,000,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Durban Rate of Return (Scenario 1) Gross Return Return - Investment Net Profit

Model Scenarios 2: Internal Rate of Return Taxation

Scenario 1 including marginal rate of taxation (Y= 0.28), then:

) 1 ( ) 1 )( (

1

    





V r C R

N t t t t



• 2,000,000,000.00

4,000,000,000.00 6,000,000,000.00 8,000,000,000.00 10,000,000,000.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Cape Town - Rate of Return (Including Marginal

Tax) - Scenario 2

Gross Return Return - Investment Net Profit (500,000,000)

• 500,000,000

1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 3,000,000,000 3,500,000,000 4,000,000,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Durban Rate of Return (include Marginal Tax) - Scenario 2

Gross Return Return - Investment Net Profit (2,000,000,000)

• 2,000,000,000

4,000,000,000 6,000,000,000 8,000,000,000 10,000,000,000

Johannesburg Rate of Return (Including Marginal Tax) - Scenario 2

Gross Return Return - Investment Net Profit

Conclusions and future assessments

 The Gap Market is wholly underserved in South Africa  Provision of Housing and access to services is too slow

• Backlog remains consistent
• Need alternate means of Housing Provision (with Private Sector)

 The profitability of an investment in affordable rental housing can be calculated with the use of Cost benefit analysis techniques such as IRR  we believe it is possible for the private investors to join and provide indication of different ways in which additional resources that can be levered into affordable rental housing to work with the private sector subsidies for affordable housing  Various revisions to Rates of Returns possible with greater data

From backyard Private rental to Subsidized Rental

From here in Langa… …to here in Rondebosch

Thank You

Jaya Josie – jjosie@hsrc.ac.za Krish Chetty – kchetty@hsrc.ac.za Nozibele Gcora – ngcora@hsrc.ac.za