DEVELOPERS PERSPECTIVE5th Annual Banking Summit

Banking Association South Africa

31 October 2014, Empire Hotel, Sandton

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Making Sustainable Communities

Picture: Cosmo City

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Creating Jobs

Picture: Malibongwe Ridge

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Mega-Scale Housing Delivery: Economic ImpactIntegrated sustainable human settlements

Project No. Units Impact during construction (R)

Employment during construction

Post construction(R)

Post Construction employment

Example: Savanna

City>18 000 R28,4 bn 54 900 R12,7 bn 12 700

No referencing and usage without permission from Basil Read (Pty) Ltd Source: Basil Read Developments

Notes: Direct, indirect and induced impact of a typical housing project in South Africa

Major Benefits• Stimulate economic growth

• Build social cohesion• Deliver a quality and equitable built environment

• Long term revenue stream for municipalities

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“ SAARDA is dedicated to provide affordable housing to the people of South Africa and to improve and to assist in the delivery of affordable housing in the residential sector for all its members and to promote the common interest of affordable residential developers in South Africa”

South African Affordable Residential Developers Association

SAARDA represents nearly 80% of

all affordable housing developers

(Charter Housing)

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SAARDA can:

• Support government to achieve housing delivery targets

• Link government with affordable housing developer issues

• Be a platform for municipalities to engage with the sector

• Promote common agenda to keep housing accessible (contain costs)

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SAARDA has pledged:

• To support Minister Lindiwe Sisulu by contributing to the 2nd Human Settlements Social Contract as a partnership that will deliver 1,5 million housing opportunities (subsidized and affordable housing below R600 000 value) over the next 5 years (2014-2019) primarily through the design and implementation of mega-scale projects.

• To assist in meeting the housing needs of South Africans in a sustainable way. 

 

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SAARDA has committed to: 1. An immediate contribution of at least 100 000

housing opportunities in the GAP and Below R600 000-00 market.

This is made up projects that are being implemented by its members and that are at current advanced planning stage or early implementation.

2. Making available human resources and expertise to assist in improving policy, funding, implementation and monitoring in the human settlements sector.

 

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SAARDA further commits to: 3. Work with the Department of Human Settlements and HDA to establish a project tracking system and undertake quarterly progress review with Minister to unblock challenges and fast-track delivery.

4. Being an industry level platform for the Minister to engage with affordable housing developers,

amongst others, in respect of:• Improving public-private collaboration• Policy and delivery matters• Challenges facing developers• Promoting enterprise development (emerging

developers, contractors especially women,youth)• Technology and Innovation

 

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Key Issues related to Achieving the 1,5 million Target

• Affordable housing delivery is a key economic and job creation driver

• Housing contributes to sustainable communities and neighbourhoods

• Affordability is the big challenge and therefore focus has to be on containing delivery costs

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CONTAIN COSTS

What can people afford?

R350 000 house

R100 000 house

Need R6 667 income p/m

Need R11 667 income p/m

R200 000 house

NeedR3 334 income p/m

Reduce regulatory approval & preparation time

Apply Standards consistently

Plan better for bulk & lower contributions

Achieve economies of scale

Innovation (technology & policy)

Public-Private Investment Mix

Housing Market Households (%) by Household Income Category

2006

4.84%

7.40%

8.54%

11.32%

11.64%

8.96%

7.04%

7.17%

6.82%

6.74%

6.27%

5.66%

7.58%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00%

0-200

201-500

501-1000

1001 - 1500

1501 - 2500

2501 - 3500

3501 - 4500

4501 - 6000

6001 - 8000

8001 - 11000

11001 - 16000

16001 - 30000

30 001+

Number of Households (as %)

Source: Adapted from Global Insight

Inc

om

e C

ate

go

ry (

Mo

nth

ly)

Subsidy market (52.7%)

Outstanding demand – 1,8 million units

Open market (19.5%)

Gap market (27.8%)Outstanding demand

- 600 000 units

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Bulk Contributions• Planning challenge: Lack of certainty regarding the availability

of bulk

• Policy challenge: Uncertain bulk service contribution framework

• Cost challenge: High and rising bulk service contribution costs

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Bulk Contributions ImpactSelling Price

VAT Top Structure

Internal LPFM Available for Bulk

R400 000 R56 000 R175 000 R60 000 R60 000 R49 000

R400 000 R56 000 R200 000 R60 000 R60 000 R24 000

R350 000 R49 000 R175 000 R60 000 R60 000 R6 000

R350 000 R49 000 R200 000 R60 000 R60 000 -R19 000

Illustration: • 50m2 house• Building rate: (1) R3500/m2; (2) R4000/m2• LPFM: Land, Pre-development costs, Finance cost,

Marketing costs

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Bulk Contributions: Usage Standards• Lower contributions should apply to affordable housing

developments compared with up-market housing

High Income Household Affordable Housing

9 Kl/day 0,8 Kl/day

Water Usage Comparison

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Service Standards• Implementation of standard of services and design

criteria not based on engineering principal or national framework

• Status of Guidelines for Human Settlement Planning and Design, Volume 1 & 2 (THE RED BOOK - CSIR): planning guidelines, storm water management, roads, water supply, sanitation, solid waste management and electrical supply

• Engineering service agreements with municipalities require guidelines

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Development Applications• Consistency and enforceability of Municipal IDPs and

Spatial Development Frameworks: Engagement with affordable housing developers

up front in the planning processes

• Service standards regarding applications: Information requirements Procedures Turnaround times Appeal processes

Implementation of SPLUMA…..

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Key Proposals: Regulatory Framework

• Special fast-track approval system that integrates all sector requirements for affordable housing priority projects

• Consider regulations to give effect to Priority Housing Development Areas (PHDA) – HDA Act

• Specify in SPLUMA regulations

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Key Proposals: Bulk Infrastructure

• Integrated bulk funding approval – single pot

• Link to special fast-track approval system – sector integration

• Link to mechanism for developers to install infrastructure on behalf of state/municipalities and recover costs

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Key Proposals: Innovation

• Integrate “Green” funding, subsidies and incentives to promote new building technologies, renewable energy, recycling

• Enable renewable energy generation at project level and special grid feed-in tariff for affordable housing developments

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Conclusion: Address Cost Containment

• Time factor wrt regulatory approvals

• Bulk availability and cost

• Consistent standards

• Economies of scale

• Innovative technology, process and policy

• Public-Private investment mix

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Thank You