8 Summary of Modelling Results 8.1 Supply interventions Informal settlements Table 8 : Informal settlements: National Interventions Arena Unit Cost (R) Total cost of intervention (all HH assisted) (R billion) Total funding contribution Evaluation State (%) Private (%) HH (%) Overall Impact on Households % Contribution towards integrated, inclusive & equitable cities Market Distortions Contribution to effective housing market Insitu upgrading of informal settlements with formal top structure Informal settlement 129,707 156,0 100 0 0 100% (Good) (Significant) 0 Site and service with formal top structure Periphery 132,805 159,7 100 0 0 100% (Poor) (Significant) 0 In situ upgrading of informal settlements with incremental top structure Informal 139,367 46,9 23 0 77 R0 to 3,499 All other HH – 54% (Good) (Average) 3,4 Site and service with incremental top structure Periphery 142,465 47,8 23 0 77 R0 to 3,499 All other HH – (Poor) (Average) 3,3 19% 19%
54% Administrative incorporation of informal settlements with no top structure Informal settlement 24,295 29,2 100 0 0 100% (Partial) (Average) 0 Subsidised (RDP) housing Periphery 134,200 161,4 100 0 0 R0 to R3,499 - 100% All other HH – 0% (Poor) (Significant) 0 Table 9: Informal settlements - Metropolitan Interventions Arena Unit Cost (R) Total cost of intervention (all assisted HH) R bil Total funding contribution Evaluation State (%) Private (%) HH (%) Overall Impact on Households % Contribution towards integrated, inclusive & equitable cities Market Distortions to effective housing market Insitu upgrading of informal settlements with formal top structure Infill or township 131,772 90,6 100 0 0 100% (Good) (Significant) 0 Site and service with formal top structure Periphery 137,967 94,9 100 0 0 100% (Poor) (Significant) 0 In situ upgrading of informal settlements with incremental top structure Infill or township 141,432 27,7 24 0 76 R0 to 3,499 -19% All other HH – 54% (Good) (Average) 3,2
Site and service with incremental top structure Periphery 147,627 28,9 27 0 73 R0 to 3,499 -19% All other HH – 54% (Poor) (Average) 2,7 Administrative incorporation of informal settlements with no top structure Infill or township 26,360 18,1 100 0 0 100% (Partial) (Average) 0 Subsidised (RDP) housing Periphery 141,575 92,3 100 0 0 100% (Poor) (Significant) 0
Backyard dwellings Table 10: Backyard rental: National Interventions Arena Unit Cost (R) Total cost of intervention (all HH assisted) R bil Total funding contribution Evaluation State (%) Private (%) HH (%) Overall Impact on Households % Contribution towards integrated, inclusive & equitable cities Market Distortions Contribution to effective housing market Subsidised (RDP) housing Periphery 134,200 126,8 100 0 0 100% (Poor) (Significant) 0 Upgrade of backyard rental (with incentive) Existing suburbs R0 to R9,999- R68,912 >R10,000 - R79,412 66 R0 to 9,999 – 81% > R10,000 – 70% 0 R0 to 9,999 - 63% > R10,000 – 68% 100% (Good) (Average) R0 to 9,999 – 0.8 > R10,000 – 1 Table 11: Modeling results: Backyard rental: Metropolitan Interventions Arena Unit Cost (R) Total cost of intervention (all HH assisted) R bil Total funding contribution Evaluation State (%) Private (%) HH (%) Overall Impact on Households % Contribution towards integrated, inclusive & equitable cities Market Distortions Contribution to effective housing market Subsidised (RDP) housing Periphery 141,575 74,7 100 0 0 100% (Poor) (Significant) 0
Upgrade of backyard rental (with incentive) Existing suburbs R0 to R9,999 – R68,912 >R10,000 – R79,412 39 R0 to 9,999 – 81% > R10,000 – 70% 0 R0 to 9,999 - 63% > R10,000 – 68% 100% (Good) (Average) R0 to 9,999 – 0.8 > R10,000 – 1 National figures have been revised to accommodate for Metropolitan circumstances as follows: Land prices have been adjusted and backlog connections have been moved from basic to medium. All other costs are the same. The total number of households living in backyard rental nationally is approximately 945,000, of which 557,000 are living in metropolitan municipalities with the majority earning between R0 and R3, 499. Subsidised (RDP) housing and upgrade of backyard rental (with supply side incentive). Both interventions impact on all households. The subsidised (RDP) housing intervention has a substantially higher cost to the state than the upgrade of backyard rental intervention. Only the upgrade of backyard rental intervention results in a level of gearing from households. The upgrade of backyard rental intervention shows better developmental outcomes than does the subsidised (RDP) housing. There are no significant differences between national and metropolitan municipalities with the exception that the unit cost is slightly higher in metropolitan municipalities. New family formation Table 12: New family formation and housing ladder: National Interventions Arena Unit Cost (R) Total cost of (all assisted HH) R bil Total funding contribution Evaluation State (%) Private (%) HH (%) Overall Impact on Households % Contribution towards integrated, inclusive & equitable cities Market Distortions Contribution to effective housing market Subsidised (RDP) housing Periphery 134,200 270 100 0 0 R0 to 3,499 -100% All other – 0% (Poor) (Significant) 0
Table 13: Model results: New family formation and housing ladder: Metropolitan Interventions Arena Unit Cost (R) Total cost of intervention (all assisted HH) R bil Total funding contribution Evaluation State (%) Private (%) HH (%) Overall Impact on Households % towards integrated, inclusive & equitable cities Market Distortions Contribution to effective housing market Subsidised (RDP) housing Periphery 141,575 131 100% 0 0 R0 to 3,499 -100% All other – 0% (poor) (Significant) 0 Site and service with incremental top structure Periphery 147,627 136,7 27 0 73 R0 to 3,499 -19% All other HH – 54% (Poor) (Average) 2,7 Subsidised social rental apartment Inner city/infill R0 to 3,499 – R249,800 R3,500 to R6,999 – R269,800 R7,000 to R9,999 – R309,800 R10,000 to R14,999 – R354,800 R15,000 + - R429,800 73,6 Ranges from 75% to 14% 0 Ranges from 25% to 86% R0 to 3,499 -35% All other – 54% (good) (Average) Ranges from 0,35 to full Privately Developed Residential Rental Inner city/infill 47,8 Only applies to R0 to R6,999 and is 16% 100% 0 R0 to 3,499 -18% R3,500 to R6,999 – 29% R7,000 to R9,999 – R37% All other – 54% (Good) (None) Full Social housing or privately developed rental apartment with incentive Inner city/infill 44,5 Only applies to R0 to R6,999 and ranges from 25 – 50% 100% 0 R0 to 3,499 -19% R3,500 to R6,999 – 33% R7,000 to R9,999 – R37% All other – 54% Good) (Average) Ranges from 1 to Full
or 1% -increased incentive) per year for 5 years. Subsidy reducing by 1 % of each income bracket and support is reduced by 1 year for each income bracket. e) R15,000 - R19,999 f) R20,000 - + FLISP a) R0 - R3,499 R - 12% R 75,000 R 50,000 16% 14% 12% Overall impact of this intervention improves HH affordability due to the reduction in amount of borrowings of the HH by the FLISP amount paid to the mortgage bank. The impact would be enhanced significantly if linked to a debt rehabilitation programme (see above) b) R3,500 - R6,999 R 75,525 47% R 50,250 R 33,500 41% 38% 33% c) R7,000 - R9,999 R 53,588 54% R 37,500 R 25,000 51% 49% 45% Med Low Med d) R10,000 - R14,999 R 26,588 54% e) R15,000 - R19,999 f) R20,000 - + Mortgage Deposit Guarantee a) R0 - R3,499 R - 12% R 6,120 R 4,080 15% 13% 12% Assume impact improves by 10% (20% of Increased incentive) due to improved access by HHs to mortgage loans. Assuming that some HHs with affordability, but who have no savings use unsecured credit to fund a deposit for a mortgage loan. Benefit is equal to an annual saving of the extra interest payable on the unsecured credit assuming the state pays the premium cost. (unverified impact improvement as no current data) b) R3,500 - R6,999 R 75,525 47% R 12,240 R 8,160 40% 37% 33% c) R7,000 - R9,999 R 53,588 54% R 17,490 R 11,660 54% 50% 45% Med Med Med d) R10,000 - R14,999 R 26,588 54% e) R15,000 - R19,999 f) R20,000 - +
Capital payment to Mortgage Bank - Admin Subsidy a) R0 - R3,499 R - 12% R 37,500 R 25,000 13% 12% 12% Admin fee for 5 Years paid annually in advance paid to the mortgage bank originating qualifying loans. Qualifying loans receive a 1% reduction in normal interest rate on their home loan. Increased incentive is a 1.5% reduction for R7, 500 Admin fee for 5 Years. b) R3,500 - R6,999 R 75,525 47% R 37,500 R 25,000 38% 36% 33% c) R7,000 - R9,999 R 53,588 54% R 37,500 R 25,000 52% 48% 45% Low Med Low d) R10,000 - R14,999 R 26,588 54% e) R15,000 - R19,999 f) R20,000 - + Rental Voucher a) R0 - R3,499 R 180,000 R 120,000 29% 23% 12% Rental voucher disbursed on a card that is redeemable with accredited rental stock providers for up to 20 years. The value of the monthly rental voucher is R500 & R250 for the income brackets R0-R3, 5000 & R3, 501, R7, 000 respectively. b) R3,500 - R6,999 R 90,000 R 60,000 39% 36% 31% c) R7,000 - R9,999 High Med Med d) R10,000 - R14,999 e) R15,000 - R19,999 f) R20,000 - +
HHs) %age HH Assisted in Periphery 49% 63% 50% 0% 0% 0% Hectare of additional land required 123,999 25,483 35,384 40,811 45,653 52,048 Arena where Land is Required (ha) Existing township 12,028 3,362 4,872 Table 17: Alternative scenarios Scenario Arena Scenario : Historic practice Scenario : Lowest Cost to the State Scenario : Formalisation of Informality Scenario : National Development Plan (Absorption and sustainability) Scenario: NDP (enhanced demand side vouchers increased by 50%) Scenario: NDP (enhanced demand side vouchers increased by 100%) Total Costs (R'm) 878,263 484,247 573,742 643,616 689,375 689,375 Total State Contribution (R'm) 641,812 127,049 223,925 212,928 270,356 299,730 Total State Housing Subsidy (R'm) 236,889 - 13,289 3,929 3,929 11,636 Total State Additional Subsidy (R'm) 269,898 85,642 66,708 97,001 97,001 108,141 Total State Funding Gap (R'm) 124,874 - - - - - Total State Demand Side 10,151 - 58,962 31,272 88,122 141,429
References ABSA 2012. Available online Industry Insight (2011). The State of the South African Construction Industry. Industry Insight. 2012. The State of the South African Construction Industry – 2nd Quarter 2012. Available online Khan, F. & Thurman, S. (2001) Setting the Stage: Current Housing Policy and Debate in South Africa. Isandla Institute, Johannesburg. National Treasury (2009). Provincial Budgets and Expenditure Review 2005/06 – 2011/12 National Department of Human Settlements (2012): Annual Report FOR 2012. Rust, K (2006) “Analysis of South Africa’s Housing Sector Performance” Rust, K (2008) “Investigation into the Perceived Impact of Market Distortions Ostensibly Created Within the Residential Housing Market as a Result of Government Subsidies.” 30 June 2008. Prepared for National Department of Housing and Banking Association of South Africa. Shisaka Development Management Services. (2011): Housing subsidy assets - Exploring the Performance of Government Subsidised Housing in South Africa. Tissington, K. (2010): A review of Housing Policy and Development in South Africa since 1994 Tissington, K. (2011): A Resource Guide to Housing in South Africa 1994-2010 – Legislation, Policy, Programmes and Practice. Available online Annexure A