Briefing by Ms SD Mthembi-Mahanyele, Minister of Housing

Briefing by Ms SD Mthembi-Mahanyele, Minister of Housing

12 February 1999

The President in his opening of parliament speech announced that the target of a million houses in 1999 could not be reached. This is a result of the following reasons:

We inherited a bloated, fragmented system consisting of 13 statutory housing funds, seven ministries and housing departments, more than 20 subsidy system which did not yield any substantial housing development and more than 60 national and regional parastatals. The fact that the system operated along colour lines compounded the problem leading to people adopting desperate measures which left us with a mushrooming of informal settlements.

We now have a single housing policy and a subsidy system that is targeted towards low income earners regardless of race. Having achieved this we needed an instrument which would address the anomaly caused by the ravages of apartheid and the White Paper on Housing provided us with seven key strategies which underpinned our vision of housing the nation in proper and affordable homes. For the housing development to take off the ground there was a need to

stabilise the housing environment
establish institutional arrangements
Mobilise savings (by individuals or directly by collectively) and housing credit at scale ensuring the protection of consumers;
Provide assistance to disadvantaged individuals to assist them to gain access to housing;
Rationalise institutional capacities in the housing sector within a sustainable long term institutional framework;
Facilitate the speedy release and servicing of land;
Co-ordinating and integrating public sector investment and intervention on a multi-functional basis.

PROGRESS

How have we fared so far?

As part of implementing our policy we had to put the building blocks in place and

lay a solid foundation to help steer and narrow the crevices prevalent in the processes around the delivery of homes to the poor. We had to operate within an environment where our primary beneficiaries were not bank credit worthy and those who were, could not be granted loans because of the location of their prospective houses. We had to operate within an unwieldy and hostile environment. In addition, we continued to mop up the vestiges of apartheid, where people bought houses they could not afford because they did not qualify for a grant that could help them coupled with the bond boycotts which had gripped the country. It is against this background, that we can safely say that our housing institutions have made remarkable achievements in unclogging the process of allocating houses to our beneficiaries.

MORTGAGE INDEMNITY FUND

The Mortgage Indemnity Fund established to encourage financial institutions to resume lending in areas that were previously redlined. According to the Memorandum of Understanding signed between the department and the Association of Mortgage Lenders on October 1994, the MIF was supposed to facilitate a total of 50 000 loans in the government's subsidised market annually. The proviso underpinning the agreement was that the government indemnifies accredited financial institutions against loss where they are unable to repossess due to a breakdown in the due process of the law.

After three years of operation, the MIF covered 543 areas throughout the country where 17 financial institutions granted a total of 139 985 loans valued at R10 billion. This represented

78 000 loans which were granted to the government's subsided market. Quite clearly way off the mark of the initial target agreed upon. Since the AML did not honour the agreement the Record of Understanding has thus fallen away.

SERVCON HOUSING SOLUTIONS

Servcon was established in June 1995 to deal with issues around non payment of mortgages in the banking sector. Initially, it was involved in the properties that had been repossessed by the banks but in March 1997, it also dealt with cases where borrowers were in default but where the properties had not been repossessed by the banks.

Servcon has notched the following successes to date:

Number of properties sold	4 200 (760 has subsequently defaulted again)
Number of loans scheduled	600
Number of rightsizing leases	5 400
Total	10 200

NATIONAL HOME BUILDERS REGISTRATION COUNCIL

The NHBRC was established with the primary aim of offering the South African home builder and the consumer a national system of comprehensive new home warranty protection comparable with the best in the world at an affordable price. It is through the department's initiative that all home owners are now protected against fly-by-night developers. Most banks insist on an NHBRC registered and guaranteed home builders. The council has received a total of 1614 complaints from home owners of which 872 complaints have been finalised through its claims and conciliation process. The fund created to pay for structural defects is currently standing at R30 million. A further 134 cases of structural defects are being investigated and could soon also be rectified through intervention and funding. About 4 250 home builders are registered with the council and 45 000 homes are enrolled under the Defect Warranty Scheme.

NATIONAL HOUSING FINANCE CORPORATION

The NHFC operates as a financier by taking investments from contractual savings institutions and directing finance and other assistance to intermediate servicing the low income housing market. It funds mainly specialised lenders who provide innovative housing finance to clients not deemed credit worthy by conventional banks. It also funds housing institutions which are in the business of acquiring or developing residential accommodation and managing accommodation under the different forms of rental. Like for instance straight rental, rental with the option to won or instalment sale or other tenure arrangements.

NATIONAL URBAN RECONSTRUCTION AND HOUSING AGENCY (NURCHA)

NURCHA was established to provide bridging finance for low income housing development. It has also facilitated housing development within our sector by guaranteeing loans made by the banks. It has led to the emergence of new contractors who have contributed 54% of our delivery figures, 5% percent of them are women.

PROBLEMS

It might look all perfect and hunky dory, let me hasten to add that it has not been easy, we experienced problems such as:

Incidences of corruption - some of our conveyencors and officials have been siphoning monies earmarked for housing development and this has in some instances, stalled some of our programmes. Some of the culprits are currently serving jail sentences while others have been charged with various offences. There are cases which have been referred to the relevant authorities and the due process of law will take course. There have been instances in KwaZulu-Natal, Mpumalanga and the Western Cape. We have identified loopholes in the system and are in the process of closing them.

Poorly constructed houses - some developers have taken advantage of the what we thought was initially a gentlemen's agreement, that of producing well constructed houses. We have had numerous complaints and have addressed the problem by passing through the parliamentary process last year the Housing Consumer Protection Measures Act of 1998 which protects all home owners against fly-by-night developers. It also seeks to foster an ethical culture in the industry backed by a Defect Warranty scheme We are sending a clear message that the houses we are building today, will have to be there in many more years to come.

Size - Ladies and gentlemen, size counts! With an average of 4,5 persons in a family, and backed by CSIR research we decided to announce a minimum size of 30 square metres for all houses built with the government's subsidy grant. This figure, unlike what some arm chair critics would have you believe is a reasonable one and 30% of the houses produced up to now falling within this category. We are in the business of building homes and not bus shelters. We will be abrogating our primary responsibility if we did otherwise.

SPIN OFFS

While our primary objective is to house the nation in safe and affordable homes backed by security of tenure and ownership of property, we have in the process contributed substantially by way of:

job creation- it is estimated that for every house built, one permanent and three temporary jobs are created. Since the beginning of our programme we have created 681 203 permanent jobs and 2 million temporary ones.

involvement of women in housing - our programme has supported the involvement of women in an industry known for its lack of flexibility. NURCHA has helped support people like Irene Mahlanguof Mpumalanga who with basic schooling and no academic qualifications has managed to produce R2 million worth of projects and has repaid her loan. People like Dawn Malotana and Patricia Matolongwe just down the road, Francis Alberts and Thuli Mallela in Gauteng, Pam Mpongela-Mhlongo in KwaZulu-Natal have all handled multimillion rands worth of contracts and are developers of note.

Partnerships - we built fruitful partnerships along the way. Mr Adendorf in Soekmekaar who donated land and has freely and voluntarily engaged in the building of houses for farmworkers in the area, the farmers in Bothaville in the Free State who in a joint initiative with their workers also donated land and have supported the development of houses in the area.

Transfer of skills - we have managed to transfer skills and make a substantial number of people marketable. Mr Victor Mathebula, a former a brick layer turned developer has produced a total to 800 houses in Bushbuck Ridge, Northern Province and has recently donated building material left over from one of his projects to build a school in his neighbourhood.

Rebuilding communities - In strife-torn areas, we have managed to combine people to act in unison around a housing project. Phola Park in Gauteng is a remarkable example, where the project acted as balm healing long standing rifts in the community dramatically changing their lives from squalor to healthy living spaces. Through this project we also moved people from shacks to proper houses.

MILESTONES

merging the two subsidy bands to provide good for money for our beneficiaries;
announcement of rural subsidies;
noting the ravages of inflation with the ever rising prices of building materials, we announced the R1 000 increase as from April 1;
the National Pilot Project on housing is scheduled to create even more jobs;
we announced subsidies for the disabled;
the innovative and environmentally friendly energy saving housing has substantially decreased the incidence of carbon monoxide poisoning among for low income earners;
emerging contractors with the support of NURCHA who have contributed 54% of the houses delivered.

LEGISLATIVE FRAMEWORK

POLICY AND LEGISLATION

The Bill of Rights as enshrined in the Constitution states that:

"everyone has a right to have access to adequate housing."

To this end, the department put in place the White Paper on Housing which reflects the spirit of the constitution by creating an enabling environment for the poor and homeless, particularly women, to access housing opportunities.

The Housing Act, no. 107 of 1997 promotes the active participation of women in housing. It further creates opportunities through the establishment of the housing institutions like the National Urban Reconstruction and Housing Agency (NURCHA) that women participate in the industry by granting them bridging finance.

The Prevention of illegal occupation of Land Act, of 1998 lays mechanisms for the resolution of conflict between the illegal occupier and the land owner. This law promotes a human rights culture by promoting negotiation as a tool for the resolution of disputes over illegal occupation.

Housing Consumer Protection Measures Act, of 1998 protects housing consumers against fly-by-night contractors who build poorly constructed housing and ripping off poor people. The law provides a five year warranty against structural defects and mandates all home builders to be registered with the National Homebuilders Registration Council. This law protect all home owners irrespective of social standing or income.

The following legislation will be put through the parliamentary process this year:

The Rent Bill, seeks to promote a healthy relationship between the tenants and the landlords. It also promotes the resolution of disputes through a Rent Tribunal.
The Housing Matters Amendment Bill promotes the gradual phasing out of the housing subsidies granted in the old dispensation. The alternative would have rendered beneficiaries destitute.
The Housing Consumer Protection Amendment Bill, closes loop holes which were apparent and would have rendered the consumer vulnerable to shady characters in the building industry.

We have substantially reduced the current backlog estimated at between 2.6 to 3 million by providing shelter to 3 million households. We can confidently assert that we have indeed provided roofs over the heads of many South Africans who would otherwise have had not had a chance to acquire a home with security of tenure based on ownership of property. However, we a quick to acknowledge more still be done.

Ladies and gentlemen, I am sure you will all agree that our policy framework is one of the best, but is it as good as the paper it is written on? You be the judge! Our programme is not just about building houses, we have touched the soul of the homeless, the hostel dwellers, the people in rural areas, the disabled as well and women by making good the promise of a better life for all.