Remarks by the Minister of Human Settlements, Mmamoloko Kubayi, SA-Kenya Affordable Housing Forum Launch, Houghton Hotel, Johannesburg, 14 December 2023
Her Excellency Honourable Alice Wahome, Kenya’s Cabinet Secretary for Lands,
Public Works, Housing and Urban Development;
Ms Pam Tshwete, Deputy Minister of Human Settlements in South Africa;
Ms Ngaka Dumalisile, Acting Director General in the Department of Human Settlements;
Mr Charles Hanga Mwaura, Principal Secretary for Lands, Public Works, Housing and Urban Development;
Chairpersons of the Boards and CEO’s on Human Settlements Entities;
Business Leaders from Kenya and South Africa;
Property Developers;
Distinguished Guests;
Ladies and Gentlemen;
Good Afternoon
Our generation has to put extraordinary effort in the human settlements sector to overcome two interrelated man-made challenges. They are interrelated because they were both started and intensified by capital and market expansion. The first challenge is that of climate change, which is a global problem that was caused by carbon emissions from fossil fuel that powered the first industrial revolution and continues to be the major source of energy. The second, is the colonization which impoverished the native
populations in a manner that resulted in the high levels of poverty and the wealth inequalities that continue to characterize our two countries.
For our populations to escape the devastations of climate change disasters and high levels of poverty, underpinned by lack of economic opportunities, they move to cities. This has resulted in rapidly rising urbanization. In our case in South Africa, urbanization is happening in cities that were designed for a minority population and were never intended to provide a livelihood for the multitudes of people. It for this reason that the number of informal settlements is on a rapid increase and the urban slums have become a home for many families in our cities.
Our analysis of the families that find themselves in urban slums and informal settlements is that they earn a living and as result, they do not qualify for subsidized free houses. Contrary to popular belief, these citizens find themselves in informal settlements and
urban slums because they want to avoid the user pay principle, they use their income to pay rent, sometimes even higher than formal apartments or houses. However, their income is not high enough to qualify for bonded houses from financial institutions. As a
result, they find themselves in limbo, which we refer to as the gap market or the missing middle. The only logical solution to the housing needs of the missing middle or the gap market is affordable housing.
Even within the gap market, there are differentiated market segments determined by different levels of affordability. Accordingly, as we design and provide solutions to this market, we need a broader understanding of what constitutes affordability and the factors
that affect it, which include the range of tenure models for different demographics, and provisioning appropriate access to credit. One of the challenges that we are currently facing is the determination of the eligibility for affordable housing. Currently, the income
levels that we have set as legible for one of schemes, First-Home-Finance, is household income from R3 501 up to R22 000 per month. We have received feedback from various stakeholders that this bracket still leaves people who earn close to R29 000 and below outside affordability. This means that we have created another gap market in the income bracket between R22 000 and R29 000.
The inevitable conclusion is that our response which is guided by our affordable housing policy has to be responsive to the dynamics of this housing market on both the supply and demand side of the market. In many ways, our affordable housing market does not
have a demand side challenge, it is the supply side of the market that has been a challenge. Provision of affordable housing remains constrained in South Africa and in Kenya due to the rapid increase in the urban population, high cost of construction, finance
costs and escalating prices of urban land.
Affordable housing must be located closer social amenities, economic activities and affordable transport facilities, which means that they have to be developed in well-located land. We have to be mindful that, it is not only about being able to afford to buy or rent a
house, but also being able to afford to live in it. Furthermore, if a house is affordable enough to buy or rent and run but located far from economic opportunities or amenities such as schools and health facilities, it cannot be understood to be affordable.
A study published by one of our research institutions, Human Science Research Council (HSRC), has showed that our affordable housing projects have been experiencing urban drift. This means that they are not in well-located land pieces. In response to this, we have declared 136 Priority Human Settlements and Housing Development Areas (PHSHDAs) across the entire country. The intention of this declaration was to ensure redress regarding the pre-1994 spatial plan, revitalising towns and cities and
strengthening the livelihoods of households. At the centre of these PHSHDAs is to enable residents to live closer to areas with economic activities and social amenities such as schools, health facilities and job opportunities as well as access to adequate
accommodation.
We have devised a number of solutions to try to respond to the various segments of the gap market. The immediate response to rapid urbanization and the growing number of informal settlements is Informal Settlements Upgrading Programme. The programme
facilitates the structured upgrading of informal settlements. It applies to in situ upgrading of informal settlements as well as where communities are to be relocated for reasons that include, implausibility of developing in situ and unsuitability of the land for human
settlements. The programme entails extensive community consultation and participation, emergency basic services provision, permanent services provision and security of tenure.
What we have found is that the planning process for upgrading an informal settlement takes time because of all the planning steps that the process has to undergo. During this period, these communities find themselves lacking in basic human rights services such
as water and sanitation and vulnerable to natural disasters such as floods and fires. Through this upgrading programme, we have a grant that we utilize to ensure that these basic services are provided. In addition, we are also funding the implementation of
mechanisms such as re-blocking of informal settlements so that fire spread can be limited and ensure that providers of services such as health are able to enter and navigate the settlement.
Our second intervention is the First-Home-Finance which I have already referred to. A key aspect of this programme is the ability of households to access the programme within a set of non-mortgage finance instruments. In addition, the programme allows
government to fund households who hold “Permission-To-Occupy” certificates. This is particularly important in relation to the extension of credit and funding to households in rural areas. The ability of households to improve and upgrade homes and properties promotes development and asset accumulation and equality.
As part of the enhancement of the First Home Finance programme, we are in the process of aligning it with the Government Employees Housing Scheme (GEHS). This scheme was established to promote home ownership for low to middle income earners in public service. One of our entities, the National Housing Finance Cooperation (NHFC), is working closely with the Department of Public Service and Administration and other stakeholders to refine the operating model for greater alignment and the creation of an
automated process to enable easy access to affordable housing initiatives at a touch of a button in one delivery point.
The central business districts of our cities have fallen into disrepair and face varying degrees of urban decay, with significant challenges such as derelict buildings, crime and grime, unregulated street trading, homelessness and a lack of infrastructure development and maintenance. Our third intervention is investing in the effort to accelerate urban renewal through the Urban Settlement Development Grant and the Social Housing Regulatory Authority (SHRA), we are investing in the creating of social housing by repurposing and refurbishing old buildings. These investments will lead to the creation of rental stock, rent to own units and bonded housing units.
The SHRA is mandated to invest in, regulate and transform the Social Housing Sector, which is our fourth intervention. With regards to investment, the SHRA together with the National Housing Finance Corporation (NHFC), is leading the effort of putting together
the social housing projects pipeline that will help in crowding-in private sector investment into the sector. We recognise that for our country to meet the growing demand for social housing rental stock, we need to work closely with the private sector. We are in the
process of converting the NHFC into a Human Settlements Bank. This entity will assist in mobilising funding for projects in the human settlements sector.
The NHFC will continue to pursue an off-balance sheet multi-investor fund, to serve as a platform to mobilize private sector investors into equity investments and debt financing of Integrated Residential Development Programme (IRDP) and meet requirements of the
future pipeline.
In the final analysis, all these interventions are aimed at helping us to create enough housing stock to meet the housing demand for the missing middle, especially in the urban areas. However, we are cognisant that government does not have enough financial
resources to cater for all the needs of the gap market. It is for this reason that our approach is centred on crowding-in private sector and Development Finance Institutions investments.
I am quite certain that the challenges that we face as South Africa are no different from those of Kenya. I am pleased that the panel discussion will focus on Affordable Housing’s Project Packaging, Implementation and Opportunities in the Value Chain. The diversity
of the panel will enable us to gain insights on how best we can package affordable housing projects, so that we can increase the scale and expedite delivery.
I look forward to today’s panel discussion.
I thank you
