Affordable housing from inner city buildings

Affordable housing from inner city buildings
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Affordable housing from inner city buildings
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
Real Estate
Business Model Description

Repurpose abandoned or underutilised office buildings for low cost housing.

Expected Impact

Enhance access to good quality and affordable housing especially for the urban workforce.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
10% - 15% (in IRR)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Long Term (10+ years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
Nationally, the housing deficit is estimated at 2.3 million units.
Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
< USD 500,000
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
No Poverty (SDG 1) Sustainable Cities and Communities (SDG 11)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
Industry, Innovation and Infrastructure (SDG 9) Reduced Inequalities (SDG 10)
Country
Regions
  • South Africa: Countrywide
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
IF

Development need: South South Africa faces significant challenges in achieving SDG 9 - Industry, Innovation and Infrastructure, with a score of 45.0. Scores for other goals include 48.7 for SDG 3 - Good Health and Wellbeing, 67.0 for SDG 6 - Clean Water and Sanitation, 79.0 for SDG 7 - Affordable and Clean Energy, and 77.9 for SDG 11 - Sustainable Cities and Communities.(1)

Policy priority: The National Planning Committee identified 9 primary challenges, 4 of which have infrastructure development needs and implications: the public health system cannot meet demand or sustain quality, the economy is unsustainably resource intensive, spatial divides hobble inclusive development, and infrastructure is poorly located, inadequate and undermaintained.(2)

Gender inequalities and marginalization issues: Poor infrastructure can exacerbate the gender gap. In low income countries, women collect over 70% of water and fuelwood. Women spend 200 million hours on water collection every day. Unsafe and low security transport also disadvantage women who are more affected by violence, which affects their wellbeing and workforce participation.(8)

Investment opportunities: President Ramaphosa has an investment drive to mobilise $100 billion for priority sectors, including the energy, water, transport and logistics, and data and ICT sectors.(4) The Sustainable Infrastructure Development Symposium South Africa organised by the Investment and Infrastructure Office within the Presidency seeks to create a $20.5 billion infrastructure fund.(5)

Key bottlenecks: High fixed costs, high levels of debt and low cash reserves may cause a liquidity crisis.(6) Construction was restricted during lockdown and sharp contractions of fixed investment can be expected as firms reconsider or postpone implementation.(7) Projects exposed to foreign currency risk foreign exchange fluctuations and further uncertainty if not previously hedged.(6)

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Real Estate
IF.3

Development need: Nearly 1.5 million families live in informal settlements, half of which are in the 8 metropolitan cities.(3) Based on Statistics South Africa data, over 300,000 households are estimated to live in informal dwellings in the Western Cape alone. Of these households, approximately 40% are living in backyard informal dwellings and 60% in informal settlements.(2)

Policy priority: It is now a national priority to respond systematically to the increasing rate of urbanisation. The National Development Plan (NDP) aims to eliminate poverty and reduce inequality by 2030. To reduce the effects of poverty in the short term, the NDP promotes mixed housing strategies and more compact urban development.(6)

Gender inequalities and marginalization issues: The Constitution provides equal rights to women and men to own, manage and use land. But government reports show these rights have not been realised for many South African women, particularly in rural areas. The disjuncture between Constitutional and customary rights often creates practical barriers for women to secure access to land and assets.(9)

Investment opportunities introduction: The National Development Plan relates strongly with SDG 11 - Sustainable Cities and Communities, with specific references to closing supply gaps in the housing market.(6) The goal is to improve standards of living by delivering low income housing in good urban locations.

Key bottlenecks introduction: High fixed costs, high levels of debt and low cash reserves may cause a liquidity crisis.(6) Construction was restricted during lockdown and sharp contractions of fixed investment can be expected as firms reconsider or postpone implementation.(7)

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Real Estate
IF-RE
Investment Opportunity Area

Affordable housing from inner city buildings

Business Model

Repurpose abandoned or underutilised office buildings for low cost housing.

Critical IOA UnitDescribes a complementary market sizing measure exemplifying the opportunities with the IOA.
Nationally, the housing deficit is estimated at 2.3 million units.

In South Africa, nearly 1.5 million families live in informal settlements, half of which are in the eight metropolitan cities.(11) The Western Cape Government (2016) estimates there are 55,000 inadequately housed households in the Western Cape.

In 2019, the cheapest, newly built house was estimated at R436,200, which suggests the total investment opportunity is potentially worth billions of Rand. Investing in and stimulating the gap housing market for people earning between R3,500 and R22,000 holds great potential.(12)

The demand for housing by lower income households is substantial, suggesting critical opportunities for growth in the affordable housing market. Over the past year, the number of flats and townhouses completed and building plans approved in larger municipalities have grown significantly.(11),(12)

IRRDescribes an expected annual rate of growth of the IOA investment.
10% - 15%

The Trust for Urban Housing Finance (TUHF) had a return on investment (ROI) of 15% in 2018.(13)

The Centre for Affordable Housing Finance (CAHF) estimates the gross rental yield in city centers is 10.29%, and 11.28% outside of city centers.(15)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Long Term (10+ years)

The Trust for Urban Housing Financing funds entrepreneurs with 15-year loans. The total length of investment is 10 to 15 years.(18)

Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
< USD 500,000
Market - Highly Regulated
An overarching enabling policy framework is needed to guide the intervention of public and private sectors in both the affordable housing rental and ownership markets. This framework should reflect consensus on parameters that define affordable housing physical and financial products.(19)
Sustainable Development Need

In South Africa, nearly 1.5 million families live in informal settlements, half of which are in the eight metropolitan cities.(11)

Over 70% of South Africa's population is expected to be living in urban areas by 2030 (20), demonstrating a clear need for housing in urban areas.

Nearly 40% of households in inner Johannesburg live in slum conditions. Affordable low income housing is neglected in the urban regeneration of South African cities.(21)

Gender & Marginalisation

Women in South Africa account for 34 % of individual land ownership and 13 % of total farmland.(16)

Under certain customary systems, women are regularly excluded from obtaining rights to land in their own capacity. Traditional authorities favour requests from adult, married men to land allotments.(17)

Expected Development Outcome

Leverage existing resources and latent assets (property)(13) to decrease housing shortages and informality; increase new entrants into the rental property market and provide more affordable housing opportunities; promote urban land reform; increase job creation opportunities and enterprise development

Gender & Marginalisation

Empower female entrepreneurs through asset ownership.(14) In particular, women can realise entrepreneurial opportunities through their housing, including using their homes as a business premises (such as running a shop on site).

Homeownership also allows access to collateral, increasing access to finance.

Primary SDGs addressed
1 - No Poverty
No Poverty (SDG 1)

1.4.1 Proportion of population living in households with access to basic services

Current Level

Proportion of population living in households with access to: (i) improved sanitation facilities: 82.0%; (ii) improved electricity: 89.6%; (iii) improved water facilities: 86.4% in 2017.(19)

Target Level

South Africa’s key poverty reduction program (2000) provides assistance to 17 million South Africans. In 2015 social grants covered 71.9% of all elderly persons and 92.2% of those classified as poor, one-third of households with children and 61.3% of poor households with children. Expenditures on social grants are expected to rise by 26% between 2016/17 and 2019/20.(16)

11 - Sustainable Cities and Communities
Sustainable Cities and Communities (SDG 11)

11.1.1 Proportion of urban population living in informal, informal settlements or inadequate housing

11.3.1 Ratio of land consumption rate to population growth rate

Current Level

Percentage of urban population living in informal dwellings: 12.2% (2017) (17)

0.359 (2001–2011) (17)

Target Level

N/A

Secondary SDGs addressed
9 - Industry, Innovation and Infrastructure
Industry, Innovation and Infrastructure (SDG 9)
10 - Reduced Inequalities
Reduced Inequalities (SDG 10)
Directly impacted stakeholders
People
South Africans (and foreign nationals) who need access to affordable housing such as builders and contractors, property entrepreneurs/owners, property managers, architects and engineers
Indirectly impacted stakeholders
Public sector
According to the Housing Act (RSA 1997), local municipalities are required to take ‘reasonable steps’ to ensure residents have access to adequate housing. Providing affordable housing helps alleviate the immense pressure on local municipalities.
Outcome Risks

Many of the existing abandoned buildings are occupied by squatters. Relocating them to alternative accommodation before beginning renovations can be challenging because many people may be reluctant to move.(22)

Impact Risks

Execution risk due to the reluctance of people using the abandoned buildings to move

What

The outcome is likely to be positive, by providing access to affordable housing in urban areas.

Who

South African citizens in need of affordable housing closer to their places of work in metropolitan areas

Risk

Medium risk (associated with relocating abandoned building dwellers)

Impact Thesis

Enhance access to good quality and affordable housing especially for the urban workforce.

Policy Environment

Breaking New Ground (BNG) 2004: This policy to deliver housing recognises the need to build houses and sustainable communities in areas with access to employment opportunities.(12)

National Development Plan (NDP): Outcome 8 of the NDP relates to human settlements and household life, and requires an all-inclusive national plan for housing development and delivery. Strategies include revising housing finance schemes, and addressing social, spatial and economic inequalities.

Constitution: Section 26 of the Constitution states everyone has the right to access to adequate housing and that, “The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right.” (23),(10)

Financial Environment

Financial incentives: The Social Housing Regulatory Authority (SHRA) invests in delivering affordable rental homes and renewing communities.

Other incentives: The Trust for Urban Housing Finance (TUHF) issues 15-year loans to entrepreneurs to refurbish or rehabilitate inner city decayed buildings to create good quality, affordable housing rental units. TUHF also provides equity funding and bridging finance to entrepreneurs.

Regulatory Environment

2009 Housing Code: This code describes the technical guidelines for implementing the various national housing programs.

The Social Housing Regulatory Authority (SHRA) was set up in 2010 to regulate social rental housing as provided through the Social Housing Programme.

Urban Development Framework; Rental Housing Act 50 of 1999; Housing Act (No. 107 of 1997); Home Loan and Mortgage Disclosure Act 2000

Private Sector

Human Settlements Development Bank, South Africa Siyasebenza, The New Housing Company, Trust for Urban Housing Finance, uMaStandi, Chartwell Group, Home Finance Guarantors Africa Reinsurance, Kuyasa Housing Finance Company, Ooba, SA Home Loans

Government

Social Housing Regulatory Authority (SHRA), National Home Builders Registration Council (NHBRC), Housing Development Agency (HDA)

Non-Profit

GreenCape, Habitat for Humanity International, Banking Association of South Africa

country static map
urban
South Africa: Countrywide
There are opportunities to invest in the refurbishment (repurposing) of inner city decayed buildings to create affordable housing in all major metropolitan areas (Pretoria, Johannesburg, Cape Town and Durban).
Sector Sources
  • 1) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. https://dashboards.sdgindex.org/#/ZAF 2) National Science and Technology Forum (2019). The National Development Plan. http://www.nstf.org.za/wp-content/uploads/2019/04/All-The-NDP-1.pdf 3) Le Roux, A., Arnold, K., Makhanya, S. and Mans, G. (2019). South Africa’s urban future: Growth projections for 2050. Green Book. https://pta-gis-2-web1.csir.co.za/portal2/apps/GBCascade/index.html?appid=3c4901e8681244d1a7989e8ed2ace1f9 4) Industrial Development Corporation (2019). The Case For Investing in South Africa. https://sainvestmentconference.co.za/wp-content/uploads/2019/11/The-case-for-investing-in-South-Africa-2019-Executive-summary-31-October-2019.pdf 5) Sustainable Infrastructure Development Symposium (2020). Sustainable Infrastructure Development Symposium South Africa. https://sidssa.org.za/
  • 6) Deloitte (2020). The Impact of COVID-19 on infrastructure projects and assets. https://www2.deloitte.com/content/dam/Deloitte/ng/Documents/finance/ng-the-Impact-of-COVID-19-on-Infrastructure-project-and-assets_27052020.pdf 7) Arndt, C., Davies, R., Gabriel, S., Harris, L., Makrelov, K., Modise, B., Robinson, S., Simbanegavi, W., van Seventer, D. and Anderson, L. (2020). Impact of Covid-19 on the South African economy. https://sa-tied.wider.unu.edu/sites/default/files/pdf/SA-TIED-WP-111.pdf 8) Organization for Economic Cooperation and Development (2019). Gender Equality and Sustainable Infrastructure. http://www.oecd.org/governance/gender-equality-and-sustainable-infrastructure-paris-march-2019.htm 9) Organization for Economic Cooperation and Development (2019). Social Institutions and Gender Index 2019. https://www.genderindex.org
IOA Sources
  • 10) Centre for Affordable Housing Finance (2019). Yearbook - South Africa 2019. http://housingfinanceafrica.org/app/uploads/V21-SOUTH-AFRICA.pdf 11) Centre for Affordable Housing Finance (2019). Case Study: TUHF Holdings Pty Ltd. 12) South African Human Rights Commission (2020). The Right to Adequate Housing Factsheet. https://www.sahrc.org.za/home/21/files/Fact%20Sheet%20on%20the%20right%20to%20adequate%20housing.pdf 13) Centre for Affordable Housing Finance (2019). Building the investment case for mid-lower end housing. http://housingfinanceafrica.org/documents/building-the-investment-case-for-mid-lower-end-housing/ 14) Email correspondence with Katherine Cox from TUHF on 24/7/2020.
  • 15) Centre for Affordable Housing Finance (2019). Housing Finance in South Africa. http://housingfinanceafrica.org/countries/south-africa/ 16) South African Government (2019). South Africa Voluntary National Review: Empowering people and ensuring inclusiveness and equality. https://sustainabledevelopment.un.org/content/documents/23402RSA_Voluntary_National_Review_Report___The_Final_24_July_2019.pdf 17) Statistics South Africa (2017). Sustainable Development Goals: Baseline Report 2017. www.statssa.gov.za 18) Centre for Affordable Housing Finance (2018). Investment and Economic Empowerment Opportunities in South Africa's Affordable Housing Sector. http://housingfinanceafrica.org/documents/investment-economic-empowerment-opportunities-in-south-africas-affordable-housing-sector/ 19) Statistics South Africa (2019). Sustainable Development Goals: Country Report 2019 - South Africa. http://www.statssa.gov.za/MDG/SDGs_Country_Report_2019_South_Africa.pdf
  • 20) Interview with Monique Mathys from IMP on 15/04/2020. 21) Ngwenya, M. (2017). Johannesburg Inner City's Appropriated Buildings: Residents' responses to vulnerability and precarious living conditions. http://wiredspace.wits.ac.za/jspui/bitstream/10539/24101/2/Signed_Final_PRINT_Aug_Research%20Report_2017_Report_Makale%20Ngwenya.pdf 22) APNews (2019). Life In Johannesburg's Hijacked Buildings. https://apnews.com/62358c526fa84411a9d7ce32f0621e2c/ 23) South African Government. Constitution of the Republic of South Africa1996: Section 26(2).