Promoting the construction of houses for middle income South African families with NHFC
Background
The South African constitution guarantees each of its citizens the right to an adequate home within satisfactory legal conditions of occupation. The government has thus defined as priority objective the complete eradication or the formalisation of informal settlements. This approach is expected to promote a non-racial and integrated society through sustainable territorial management and quality construction. Thus, since the end of apartheid in 1994 and with the assistance of the South African government, nearly 2.6 million housing units have been built under the RDP (Reconstruction and Development Programme) and BNG (Breaking New Ground) programmes, which provide access to decent social housing for free.
However, the housing deficit is still estimated at 2.4 million and despite the production rate of assisted housing, the natural population growth (at least 200 000 new households per year) has not allowed sufficient reduction in the number of applicants. In particular, a divide between the assisted sector, aimed at households earning less than ZAR 3 500 per month, and families from the private sector has been highlighted.
To help remove these deficits, the AFD implemented financial agreements between 2005 and 2009 with the three main commercial banks in South Africa, in order to develop a sustainable supply of credit for housing intended for low-income families. In a sectoral context that is marked by a lack of financial products suitable to middle-income households, the purpose of these funds was to make previously excluded poor households eligible for home loans, while supporting the deployment of the banks' credit activity, financing training programmes and supporting these borrowers.
In addition to this stimulation of household demand, the AFD henceforth wishes to be active in the area of supply by supporting the construction of housing accessible to lower income groups.
Objectives
The project aims to contribute to the creation of a supply of assisted rental housing in an environment conducive to social and economic integration for low income families.
In support of the South African housing policy, it aims to:
- support the National Housing Finance Corporation Ltd (NHFC), a Development Finance Institution (DFI) established in 1996 and owned 100% by the government, whose mission it is to contribute, within the framework of public policy for urban development and social housing in South Africa, to the supply of housing for low and middle income families for whom it is difficult or impossible to get access to decent housing through a private sector intermediary;
- help develop a public policy targeted at the supply of assisted rental housing;
- promote the financing of real estate projects that make a valuable urban and social contribution: supply social rental housing in urban areas close to employment areas and (or) transport, with a social and functional mix.
Project description
The project aims to partly or fully finance pre-identified activities by the NHFC in social housing that meet the criteria of social mix, functional mix (comprising housing, shops, services) and high urban density. Assisted rental housing must make up more than 50% of programmes financed.
The AFD project must notably include supporting the regeneration of inner cities in South Africa such as rehabilitation of central Johannesburg (Central Business District or "CBD") for example, funding inner city landlords and Social Housing institutions whose objective for the Gauteng province is the creation of approximately 5,500 social housing units by 2011. Major South African cities have until recent years, experienced a period of disinvestment and deterioration. The implementation of renovation policies will attract residents, tourists, businesses and investors to revitalise this urban area. A tax break incentive is in place to support such initiatives.
Impact
Because of their urban nature, the selected projects promote social and economic integration of the families that have been housed; families will be able to settle close to employment areas and access a local transport network.
Financing should enable the construction of over 2,500 rehabilitated or newly constructed housing units.
The targeted rental programmes will have a high urban density with a view to reducing the demand for urban mobility and combating urban sprawl, which would allow the cost of infrastructure to be minimised, for the investments as well as for the use of their tools. The choice of density also allows the overall energy balance of operations to be optimised and as well as restoring the urban quality of the disaster-stricken inner cities and the living conditions of the residents.
Date and amounts
Amount: loan of € 20 million (about ZAR 225 million).
Date: loan granted on October 1st, 2008.