ADD NAME/TITLE HERE NATIONAL UPDATE HOUSING CO-OPERATIVES

Purpose Social Housing Act 16 of 2008 Role of Co-ops Plan of Action Engagement up to now Way forward Contents 5/10/20152SHRA/Co-ops

To update the Portfolio Committee on the Department’s support towards implementation of a sustainable co-operatives model.

Co-ops are explicitly mentioned in the Social Housing Act as follows:- Chapter 1 : definitions "social housing" means a rental or co-operative housing option for low to medium income households at a level of scale and built form which requires institutionalised management and which is provided by social housing institutions or other delivery agents in approved projects in designated restructuring zones with the benefit of public funding as contemplated in this Act; (5) Subject to any conditions prescribed by the Minister, a social housing institution must be a company registered under the Companies Act (Act No. 61 of 1973), or a co-operative registered under the Co-operatives Act, 2005 (Act No. 14 of 2005)or any other form of institution acceptable to the Regulatory Authority. Social Housing Act 16 of /10/20154SHRA/Co-ops

Role of Co-ops 5/10/20155SHRA/Co-ops Regarded as a valid delivery agent for social housing. Must subscribe to the same requirements as that of Social Housing Institutions. Must be accredited Must acquire, develop and manage social housing stock Must fulfil all reporting requirements Will be subject to regulations Must reinvest operational surpluses into new social housing projects

Plan of Action 5/10/20156SHRA/Co-ops Extract from SHRA Business Plan 2011/12:-

5/10/2015SHRA/Co-ops7 Engagement up to now Met with SAHCA (South African Housing Co-op Association) on 9 th June It was acknowledged that the traditional European model of housing co-ops did not work well in SA. We need an African housing co-op model. Advised of the formation of the Gauteng Housing Secondary Co-operative (GHSC). This entity will own the property and provide support to primary co-ops who will develop and manage the stock. This will be used as a pilot. It is proposed that SHRA and SAHCA will sign an agreement that sets out the parameters of the partnership. GHSC will submit its Business Plan to SHRA for consideration. They have also applied for establishment grant to set up the organisation. SHRA was also advised of the Housing Co-op Seminar in Istanbul scheduled for the end of June 2011.

5/10/2015SHRA/Co-ops8 Engagement up to now A brief overview of the model is as follows:- Gauteng Housing Secondary Co-op Developer Primary Co-op Develop the property – technical professionals + contractors Maintenance Programme Property Manager Primary Co-op Property Management systems and Tenant Engagement

5/10/2015SHRA/Co-ops9 Way Forward Draft and conclude agreement between SHRA/SAHCA Give consideration to GHSC request for establishment grant. Give consideration to GHSC Business Plan and proposed projects. Collaborate with Gauteng Dept of LG and Human Settlements to facilitate the establishment, development, growth and graduation of GHSC. Establish a working model for the country.

5/10/2015SHRA/Co-ops10 SHRA SHRA High-level Process

5/10/2015SHRA/Co-ops11 Definitions Social Housing:- A rental 1 or co-operative housing option for low income 2 households at a level of scale and built form which requires institutionalised 3 management and which is provided by accredited social housing institutions 4 or other delivery agents 5 delivering approved projects 6 in designated restructuring zones 7 with the benefit of public funds 8

5/10/2015SHRA/Co-ops12 Definitions 1: Rent in perpetuity (not rent-to-buy/own). Public Asset. Large state investment. 2: Income levels: R1500 – R7500. Rentals = 30% of income = R450 – R2250 (in practise = R2500/R800) 3: No individual ownership 4: SHI’s = Section 21NPO’s. No distribution of dividend of profit after tax. 5: Other delivery agents = private sector, PPP’s Co-ops, developers, mining houses 6: approved/accredited projects separate from accredited SHI’s 7: Restructuring Zones (economic, spatial and social integration) – PRZ’s pre-determined 8: State subsidisation = 60-65%. 35% gearing

5/10/2015SHRA/Co-ops13 Traditional Roles Social Housing OwnerDeveloper Property Manager Private Sector : 10% equity contribution Accreditation of projects Looking at PPP opportunities Large-scale developers Other funders Alternate building material and methodology Green buildings + energy efficiency

5/10/2015SHRA/Co-ops14 Funding Restructuring Capital Grant For projects in Restructuring Zones only Sourced from NDHS Provincial Top-Up Variable Component Projects in restructuring zones get this as well Capacitation Grants Project Acquisition and Feasibility Pre- Accreditation Grant/Gear up General Capacity Building SH Funding Restructuring Capital Grant Provincial Top-Up Senior DebtJunior DebtGAP fundingEquity Mezzanine Debt Bridging Finance Funding for Social Housing is a mix of government subsidies and debt.

5/10/2015SHRA/Co-ops15 Funding Finance ElementValueNotes% Cost of Unit300,00040m2 2 bed100 RCG120, Institutional60, Sub Total180,000Full state subsidy60 Difference120,000Required as loan

5/10/2015SHRA/Co-ops16 Regulations As long as state subsidy is used, subject to regulation. Must submit annual business plans, lease documents, reports. Must be open to inspection, conducting of socio- economic surveys SHRA can intervene if project is mismanaged (liquidation, curatorship, scrapping of board etc.) Must remain rental stock, even if sold Must always cater for the relevant income groups.

5/10/2015SHRA/Co-ops17 Exit Cannot be sold for 15 yrs. Any sale before 15 yrs will result in penalty payments (pro-rata repayment of state portion). Any sale must be cleared with SHRA first. Condition of sale will be that it remains rental catering for the relevant income group. Will be subject to regulation in perpetuity unless confirmed otherwise. Meaningful tenant participation is necessary.

THANK YOU!