SOHCO Amalinda Village
SOHCO Amalinda Housing
South Africa

The Problem

Housing delivery has been an ongoing and contentious issue in South Africa since the first democratic elections in 1994. The government committed to providing affordable housing to all those who were unable to access it themselves. Since 1994, 2.4million houses have been built, with a further 3 million to be built in the next 15 years. However, the current backlog is already estimated at around 2.1 million, and this is expected to increase in the coming years. Cape Town alone has a backlog of around 260 000 and this increases by 20 000 each year. Initially the housing development only included low-cost housing for those who earned less than R2500 a month. This group would receive housing subsidies, and would not have to pay rent on the households. However, it soon became necessary to develop rental housing for those in a slightly higher income bracket (ie. R3000 – R8000 a month) who did not receive housing subsidies, and this was known as social housing. This project was known as Breaking New Ground (BNG), and led to the establishment of the Social Housing Foundation (SHF).

Under the SHF, numerous different forms of housing projects were established. These included social housing initiatives started by private sector companies, co-operative housing initiatives, communal residential housing (which will replace the old hostels), housing developments by local and provincial government, and transitional and special needs housing. The SHF supports these different housing initiatives through funding and expertise (the original funding coming from a range of international donors, including USAID, DANIDA, the EU, the Royal Netherlands Embassy, VROM, Rooftops Canada, NORAD, and Aedes).

The flagship pilot project was the Gateway Housing Project in Cape Town. This initiative was not hugely successful – it took significantly more time and money to complete than expected; and resulted in many people from the nearby Joe Slovo informal settlement having to move to different areas, as they could not afford the new housing. Many of the units were also poorly built; and despite construction being completed in 2006, many of the units remain empty. The new Minister of Human Settlement has just undertaken a project to tear down and re-build 40 000 poorly-built houses in provinces around the country. Although necessary, this project will cost taxpayers a huge amount, on top of the original cost of building the housing in the first place. Other social housing projects have also been unsuccessful. Because of the focus on low-density housing (single or double storey only, in open spaces), many are built far out of town and away from necessary services and infrastructure such as transport, employment opportunities, healthcare, water, sanitation and electricity.

Thus, the roll-out of affordable housing has been problematic in South Africa, and many groups have been unable to access viable housing options.

Solution and Key Benefits

 What is the initiative about? (the solution)
The Social Housing Company (SOHCO) is a social housing institution and has been building and managing medium density rental accommodation. Numerous housing projects have been completed since 1996/7 when SOHCO was launched. The Amalinda Village Project (which is the subject of this application) is located in Buffalo City in East London. The project comprises of 598 residential units, made up of one, two, and three-bedroom homes, in a cluster-type design. The complex is located on the Amalinda Main Road, close to shopping centres, the Frere Hospital, public transport, places of work, and schools. Social sustainability projects are also run, including HIV/AIDS awareness workshops; welfare referrals; and the establishment of tenant committees.

The units are targeted at households earning from R2500 – R7500 a month. The project specifically focuses on medium density housing, rather than low density housing which is generally preferred in government housing projects. This means it comprises of taller buildings, in already-established residential areas, rather than looking for open land far out of town. There has also been a focus on the design of the complex, which includes looking at the quality of the units, outdoor spaces, energy efficiency, and privacy. The housing units are also wheelchair accessible; and have built-in communal facilities, such as children’s playgrounds, and lawns and trees for greening. Unit occupation is consistently at 100% (with a waiting list); and turnover is low – less than 12% a year. The bad debt levels run at below 1%. SOHCO also provides a Rent-to-Buy option, and 106 units have already been sold this way. Rent is set at no more than 30% of the tenant’s gross monthly income.

SOHCO also has a number of other housing projects either completed or under construction, including Emerald Sky (also in Buffalo City, with 480 units); Port View in Durban (146 units); Valley View in Durban (157 units); River View in Durban (330 units); Steenberg in Cape Town (450 units planned); and Bo Kaap in Cape Town (164 units planned). All the complexes will run on the same principles as the Amalinda Village. SOHCO won the National Department of Housing’s Govan Mbeki Award for the best social housing institution in both 2007 and 2008.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
SOHCO was established as a section 21 non-profit company in 1996/7, by a Board of members with specific skills and experience in housing, housing development, social development, funding, and provincial and local government. SOHCO then contracted with a turnkey developer called NewHco to implement the project. This included both design and construction, and included architects, civil and structural engineers and a contractor. The land was made available by the Buffalo City Municipality through a tender at a discounted price, meaning the Village could be built within the suburbs of East London, and close to services. The success of the complex also requires good relationships with the house owners, and with neighbours of the complex. This meant a process of community consultation and engagement was necessary first.

The project was developed with financing from the Provincial Department of Housing, the Flemish Government, and the National Housing Finance Corporation. A property management team is based in East London to deal with any issues; and this regional team is supported by a national office. Gardening, repairs, maintenance, and security are outsourced on a tender basis. However, over time SOHCO aims to phase out these external contractors, and begin to take over these services themselves. SOHCO also has the power to evict non-paying tenants. The Social Housing Foundation evaluated the project in 2006/07 as part of their application for capital grant funding. The checklist for the evaluation included governance, financial records, human resources, head office, environmental impact assessments, social impacts, financial sustainability of new projects, and whether SOHCO is on-site to implement its project. On the basis of this, funding was provided for the Durban developments.

The project was therefore developed in partnership with a wide range of sectors, including government departments, non-government organisations, international funders, and local community members.

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
The main objective of the project is to develop rental accommodation for those who fall through the gap – they earn too much to qualify for housing subsidies; but do not earn enough to be able to afford the usual rental accommodation. A second objective is to try to address previous shortcomings in social housing initiatives, and make the concept more viable and accessible for those that it serves.

The project aimed to keep design and implementation costs low, without sacrificing quality. Thus, medium density housing was developed, which is more economical to build. Housing sites were found in already-existing residential areas, which means that municipal services and infrastructure (water supply lines, roads, sewers, electricity) are already in place and do not need to be developed. The majority of the units are two-bedroom homes, and this is also more economical than one-bedroom. The areas are also close to public transport and employment opportunities, helping to ease the financial burden on residents. The units are also available on a four-year Rent-to-Buy option, which means that those in this income bracket can buy a house within four years.

Many government initiatives do not cover rental options, and this once again helps to fill this gap in the housing market. The rental is also capped at no more than 30% of the income of the tenant. The complex also provides one, two or three-bedroom units, providing a wider range of choices for tenants than is the norm. This provides options for single tenants who do not have families, and who do not want to live in inner-city hostels.

These initiatives also help to address some of the shortcomings in other social housing projects. The complexes are within the boundaries of the city, and are therefore closer to resources and services than many others. They are also closer to public transport, making it more financially viable for tenants to be able to get to work and other services. Although they were relatively cheap to construct, the quality has not been compromised, and there have been no major structural issues with the units since occupation took place in 2001. By conducting good rental recovery practices, and having the power to evict non-payers, the project also helps to keep the default and bad debt rate low. This contributes to the success of the project, as it ensures ongoing funds are available for maintenance and addressing of any problems; and also encourages a culture of on-time rental payment, rather than defaulting.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
As already mentioned, SOHCO was established as a section 21 company in 1996/7. The development of each of its complexes has followed the same five stages: developing a brief; design and procurement; construction and marketing; commissioning and occupation; and ongoing operations.

For the Amalinda project, the design brief was developed in 1998. This included preliminary financial modelling, establishing capital budget, identifying the target market and establishing clear allocation polices, targeting the rental range, attracting preliminary interest from financiers, and design preliminary sketches. In the second stage (begun in 1999, and completed in 2004), land ownership and development rights were secured; the appropriate zoning was obtained; detailed design and costing were completed; the procurement strategy was finalised; and subsidies were applied for. The third stage began in 2000, and was finally completed in 2005. This included running the procurement process; balancing the budget; confirming all finances; commencing construction (with staged completion if possible); and launching the tenant application process at least six months before the first unit is available for occupation.

The fourth phase began in October 2001, and was completed in 2005. This then included SOHCO staff being hired; handovers of units from contractors; tenant training; tenants taking occupation; and establishing systems and service providers. The final stage includes increasing operational efficiencies; building relationships with tenants; conducting sustainability projects (including HIV/AIDS awareness campaigns; welfare referrals; and tenant committees); and maintenance programmes. This began in 2001. It also includes ongoing rental recovery.

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
The main obstacle encountered by the project was opposition from neighbours of the complex to the nature of the development. This was addressed through the formal rezoning application process, which included a series of public meetings where neighbours’ concerns were raised and discussed. The project now has a strong relationship with its neighbours. The project was also developed along very tight budget lines. This was done to ensure that the project remained as affordable as possible; but it meant many design and costing reviews had to be done to achieve the targets within the available budget.

Although the initial plan was to have a mix of one and two-bedroom units, the overwhelming preference from tenants was for two-bedroom units. This was addressed after construction had already commenced, and actually turned out to be more efficient to build. There were also initial problems with the rental and rent-to-buy options, as many tenants were unfamiliar with these. This required ongoing communication with tenants, answering queries at a range of levels, including one-on-one interaction, and the tenant committees. The information provided helped to address the initial confusion. It has also helped that the project has the right to evict non-paying tenants, as this serves as a strong reminder to others who may consider defaulting.

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
The main funds for the Amalinda project came from three sources: the Provincial Department of Housing, which provided 300 social housing institutional subsidies, to the value of R5.5 million; the Flemish government, which contributed R7.5 million of grant funding; and the National Housing Finance Corporation, which provided several loans totalling approximately R50 million. Rental on the apartments vary from R1172 (one-bedroom) to R2265 (three-bedroom). Collecting this rent helps to cover ongoing maintenance costs of the complex. The land was provided by the Buffalo City Municipality at a reduced cost through a tender process.

NewHco helped in the initial design and implementation stages, by providing architects, civil and structural engineers, and a contractor. A full-time SOHCO staff member is on site each day, to address any problems or queries. Many functions are out-sourced to a group of regular service providers, which helps to reduce SOHCO’s need to retain staff and keeping the staff complement efficient and focused on core business. However, these are slowly being phased out as the workload grows to a point where it is more important to carry full-time resources.

Tenant committees within the complex are supported with administrative assistance, and hold regular meetings to maintain good lines of communication. Regular customer service surveys are conducted to ensure the satisfaction of tenants.

Sustainability and Transferability

  Is the initiative sustainable and transferable?
After the initial funding required for design and construction of the units, the rental income covers the maintenance and operations costs of the complex. The project also outsources some of its services, which reduces its costs as it does not require in-house staff to be paid for it. This means that the project is financially sustainable, as it does not require any further grant funding. Collecting these rentals on time each month requires developing good relationships with the tenants, and working closely with tenant committees. By building these good relationships, the institutional and social sustainability of the project is improved – if tenants feel a sense of ownership of the units, they will be less likely to damage them, and this maintains the complex as an attractive and functional housing area. The Rent-to-Buy option also improves this sense of ownership.

The units are well-constructed, and the complex is located close to essential services, which include public transport, hospitals, shops and schools. This again improves the institutional sustainability of the project, as renting these units is desirable, and improves the employment opportunities for those who live there. This can also be seen by the low turnover of units (less than 12% a year); and high occupancy rate (100% with a waiting list). Good relationships with government departments (at local, provincial and national level) also improve the sustainability.

The project has already been replicated by SOHCO in numerous areas across the country, including Durban and Cape Town. The main requirement is attracting sufficient funding for similar initiatives, and the institutional and political buy-in. Community participation and engagement is also necessary, to ensure the sustainability and success of the project. Once the initial design and construction funding has been secured, the running costs of the project can be covered by the rental income, provided that the construction has been solid and does not need many major structural attention. Building complexes in already-established residential areas also reduces the costs, as infrastructure and services do not need to be established; and the costs for tenants are lower (because they do not have to travel as far to access employment).

Although significant up-front funding would be necessary, it does seem as if there is funding available, from both government and international sources (eg. The Social Housing Foundation). Social Housing Initiatives are becoming increasingly in demand, and companies that can show good design and implementation strategies should be able to attract funding. Political buy-in may be more difficult to achieve, but is clearly possible, as can be seen from this project. Thus, the project can be replicated in urban areas across the country.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
The project has been able to show that medium-density social housing initiatives can be built within already-established residential areas, and can successfully run rental recovery programmes to cover ongoing maintenance and running costs. It has also shown that rental accommodation is a viable housing delivery option, and can be used to address the gap in the housing market for those who do not qualify for housing subsidies.

The main lessons learned are that, in order for social housing to be successful, it needs to be close to the city centre, amenities, and good public transport routes. In order to remain sustainable, it also needs to maintain a high occupancy rate and good rental collection. Tenant education with a focus on maintenance of the unit is an important aspect of this. Ensuring good quality construction at the outset will help to reduce maintenance costs in the future, and will mean that rental income will cover this maintenance. Being flexible in terms of design will also help to make the project more viable, and able to respond to the needs of tenants.

Contact Information

Institution Name:   SOHCO Amalinda Housing
Institution Type:   Public Organization  
Contact Person:   Margaret Johanisen
Title:   General Manager  
Telephone/ Fax:   +27 43 741 3735
Institution's / Project's Website:  
Address:   PO Box 19509
Postal Code:   5214
City:   East London
State/Province:   Eastern Cape
Country:   South Africa

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