The N2 project shows that government has still not cracked housing policy
Government's flagship housing project - the N2 Gateway in Cape Town, which piloted government-owned rental housing - has been a disaster. "Social housing", as it is known, was supposed to be a "ground-breaking" approach, introducing government-owned rental housing, but payment arrears are mounting into millions of rand and the flats are not repaired or maintained.
In addition to the 705 rental flats, the project provides for the construction of 22,000 units (mostly stand-alone houses) at seven different sites in the city. The project is behind schedule by more than three years and is still a long way from being completed. Financing for the project has not been fully secured, and big questions remain over which part of government will foot the bill or make the "top-ups" that are likely to be needed.
But human settlements minister Tokyo Sexwale says although the project was ambitiously conceived - it was supposed to be completed by June 2006 - his predecessor Lindiwe Sisulu was "brave" and "right to have a vision". He told parliament's portfolio committee on housing last week that the N2 Gateway cannot be allowed to fail.
Sexwale is going to need more money (to finish the project) and a lot of guts (to get tough with tenants who for years have got away with not paying rent).
The Gateway project was born in a politically charged environment in 2005, when both the City of Cape Town and the province were, like national government, run by the ANC. But when the ANC lost control of the city in February 2006, it ensured that the DA-run city was kicked off the project. It did not want the DA to be able to take credit for what was expected to be the biggest delivery of housing in SA.
Since housing is the city's hottest political issue - there are 300,000 families living in backyards and another 100 000 in stand-alone shacks - the delivery of housing is intricately tied to politics.
The flagship rental units, at Joe Slovo 1 (named after the original informal settlement) and situated along the N2 near Langa, were intended by Sisulu to introduce a new kind of housing. Instead of sprawling settlements of Reconstruction & Development Programme (RDP) houses, the idea was to build more attractive and densely clustered two-storey flats. Because these are more expensive, the plan was to recover part of the cost through rents. It was estimated the units would cost twice a subsided RDP house (around R80,000).
But the policy didn't fit the reality. Construction costs came out far higher - at around R140,000/unit. Although tenants were screened to ensure they could afford the rent, some never paid and the rest stopped paying early on. At present, Sexwale told parliament, only 5% of rent is being collected. Many of the original tenants have sublet their flats or moved out, and it seems government has little idea of who is actually living there. Maintenance and repairs were supposed to be done out of funds collected from rent, so little has been done.
All this was made worse by the agency that Sisulu appointed to run the project, Thubelisha Homes, which went bankrupt and is now in the final stages of being wound up.
What are the lessons from Gateway?
The first is that a "proper" housing company was not appointed to administer the flats at Joe Slovo 1. Human settlements chief director Julie Bayat told parliament that the Housing Development Agency (HDA), run by highly experienced social housing pioneer Taffy Adler, is on the brink of taking charge of the development. A "normalisation plan" is being discussed, including setting appropriate rental levels.
The second lesson is that the rental option, which Sisulu was convinced was what people wanted, might not be as attractive as government officials and politicians believed. Tenants for Joe Slovo 1 were selected according to their ability to pay. They had to be able to afford between R500 and R1,050 per month. Research also showed that many had been paying rent anyway, in backyards.
But it was soon clear the new tenants could not or would not pay rentals for government housing. Government had also promised that rentals would be kept low - an ANC MEC at the time, Richard Dyantyi, is on record as saying the charge would be R165 - and so, once in, tenants objected to rents to which they had initially agreed. In addition, poor workmanship meant that the flats soon began to leak and fall into disrepair.
Sexwale and his agent, the HDA, will have to turn this around. Sexwale seems to believe that the rentals are unrealistically high, but they are set on the basis of cost recovery. "Some tenants are people who saw the gap. Others couldn't pay. The problem is the state of the economy."
There are other problems. While there has been some construction of stand-alone houses at Delft and New Rest, the rest of the Gateway project is "being re-planned, taking into consideration the lessons learned from previous phases", says Anthony Hazell from the provincial ministry of housing.
The biggest re-planning is taking place at what remains of the Joe Slovo settlement, now called Joe Slovo 3. To upgrade Joe Slovo 3, which is densely packed with shacks, some households would have had to move away and settle in Delft, some distance from Cape Town. The Joe Slovo residents took their objection to removal to court. Though they lost, the constitutional court ordered that government would need to negotiate with them on resettlement.
WHAT IT MEANS: Flats are logical but expensive; DA is wary of a drain on the city's budget
That process has resulted in an agreement to abandon the stand-alone model originally planned for the area, in favour of two-storey flats. Given the pressure on land in Cape Town, densification is the logical solution. Cape Town has only 600,000 formal houses. Ian Neilson, deputy mayor, points out that if all 300,000 homeless families had stand-alone houses, the area covered by Cape Town would need to grow by 50%.
Sexwale has invited the city back into the N2 project, and says he looks forward to working with the DA administration and premier Helen Zille. The political rapprochement has a pragmatic function: when it comes to funding the "top-ups" the first place national government will look will be the City of Cape Town.
Neilson says while the city wants to re-enter the project, it is "treading cautiously" and is wary of its budget being sucked into the N2 project.
But building flats at Joe Slovo 3, even smaller ones, will take the city and the provincial and national departments back to the problem at Joe Slovo 1: flats are more expensive and the individual housing subsidy will not be enough.
The Gateway experience shows that government is a long way from cracking the housing problem. Sisulu's "Breaking New Ground" policy, which Sexwale has embraced and rebranded as being not about housing but about "human settlements", has not delivered answers.
Government's flagship housing project - the N2 Gateway in Cape Town, which piloted government-owned rental housing - has been a disaster. "Social housing", as it is known, was supposed to be a "ground-breaking" approach, introducing government-owned rental housing, but payment arrears are mounting into millions of rand and the flats are not repaired or maintained.
In addition to the 705 rental flats, the project provides for the construction of 22,000 units (mostly stand-alone houses) at seven different sites in the city. The project is behind schedule by more than three years and is still a long way from being completed. Financing for the project has not been fully secured, and big questions remain over which part of government will foot the bill or make the "top-ups" that are likely to be needed.
But human settlements minister Tokyo Sexwale says although the project was ambitiously conceived - it was supposed to be completed by June 2006 - his predecessor Lindiwe Sisulu was "brave" and "right to have a vision". He told parliament's portfolio committee on housing last week that the N2 Gateway cannot be allowed to fail.
Sexwale is going to need more money (to finish the project) and a lot of guts (to get tough with tenants who for years have got away with not paying rent).
The Gateway project was born in a politically charged environment in 2005, when both the City of Cape Town and the province were, like national government, run by the ANC. But when the ANC lost control of the city in February 2006, it ensured that the DA-run city was kicked off the project. It did not want the DA to be able to take credit for what was expected to be the biggest delivery of housing in SA.
Since housing is the city's hottest political issue - there are 300,000 families living in backyards and another 100 000 in stand-alone shacks - the delivery of housing is intricately tied to politics.
The flagship rental units, at Joe Slovo 1 (named after the original informal settlement) and situated along the N2 near Langa, were intended by Sisulu to introduce a new kind of housing. Instead of sprawling settlements of Reconstruction & Development Programme (RDP) houses, the idea was to build more attractive and densely clustered two-storey flats. Because these are more expensive, the plan was to recover part of the cost through rents. It was estimated the units would cost twice a subsided RDP house (around R80,000).
But the policy didn't fit the reality. Construction costs came out far higher - at around R140,000/unit. Although tenants were screened to ensure they could afford the rent, some never paid and the rest stopped paying early on. At present, Sexwale told parliament, only 5% of rent is being collected. Many of the original tenants have sublet their flats or moved out, and it seems government has little idea of who is actually living there. Maintenance and repairs were supposed to be done out of funds collected from rent, so little has been done.
All this was made worse by the agency that Sisulu appointed to run the project, Thubelisha Homes, which went bankrupt and is now in the final stages of being wound up.
What are the lessons from Gateway?
The first is that a "proper" housing company was not appointed to administer the flats at Joe Slovo 1. Human settlements chief director Julie Bayat told parliament that the Housing Development Agency (HDA), run by highly experienced social housing pioneer Taffy Adler, is on the brink of taking charge of the development. A "normalisation plan" is being discussed, including setting appropriate rental levels.
The second lesson is that the rental option, which Sisulu was convinced was what people wanted, might not be as attractive as government officials and politicians believed. Tenants for Joe Slovo 1 were selected according to their ability to pay. They had to be able to afford between R500 and R1,050 per month. Research also showed that many had been paying rent anyway, in backyards.
But it was soon clear the new tenants could not or would not pay rentals for government housing. Government had also promised that rentals would be kept low - an ANC MEC at the time, Richard Dyantyi, is on record as saying the charge would be R165 - and so, once in, tenants objected to rents to which they had initially agreed. In addition, poor workmanship meant that the flats soon began to leak and fall into disrepair.
Sexwale and his agent, the HDA, will have to turn this around. Sexwale seems to believe that the rentals are unrealistically high, but they are set on the basis of cost recovery. "Some tenants are people who saw the gap. Others couldn't pay. The problem is the state of the economy."
There are other problems. While there has been some construction of stand-alone houses at Delft and New Rest, the rest of the Gateway project is "being re-planned, taking into consideration the lessons learned from previous phases", says Anthony Hazell from the provincial ministry of housing.
The biggest re-planning is taking place at what remains of the Joe Slovo settlement, now called Joe Slovo 3. To upgrade Joe Slovo 3, which is densely packed with shacks, some households would have had to move away and settle in Delft, some distance from Cape Town. The Joe Slovo residents took their objection to removal to court. Though they lost, the constitutional court ordered that government would need to negotiate with them on resettlement.
WHAT IT MEANS: Flats are logical but expensive; DA is wary of a drain on the city's budget
That process has resulted in an agreement to abandon the stand-alone model originally planned for the area, in favour of two-storey flats. Given the pressure on land in Cape Town, densification is the logical solution. Cape Town has only 600,000 formal houses. Ian Neilson, deputy mayor, points out that if all 300,000 homeless families had stand-alone houses, the area covered by Cape Town would need to grow by 50%.
Sexwale has invited the city back into the N2 project, and says he looks forward to working with the DA administration and premier Helen Zille. The political rapprochement has a pragmatic function: when it comes to funding the "top-ups" the first place national government will look will be the City of Cape Town.
Neilson says while the city wants to re-enter the project, it is "treading cautiously" and is wary of its budget being sucked into the N2 project.
But building flats at Joe Slovo 3, even smaller ones, will take the city and the provincial and national departments back to the problem at Joe Slovo 1: flats are more expensive and the individual housing subsidy will not be enough.
The Gateway experience shows that government is a long way from cracking the housing problem. Sisulu's "Breaking New Ground" policy, which Sexwale has embraced and rebranded as being not about housing but about "human settlements", has not delivered answers.
- Financial Mail
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