By Anthea Houston
Despite popular misconceptions, social housing in South Africa is not a permanent nor the only solution to the housing crisis for low-income households.
Instead, implementing social housing without the bottlenecks can be a stepping stone out of the poverty trap.
Social housing can provide a short-term measure for households earning between R1 850 and R22 000 a month to get the comfort they need with affordable services until they grow their incomes and become more economically independent.
Beneficiaries then have the means to transition out of social housing into other affordable rentals in the marketplace or, preferably, buy their own house, which is the aspiration of most South Africans, having been dispossessed from land for decades.
This upward mobility opens up the opportunity for other residents to then also benefit from social housing.
Social housing is usually medium-density developments close to urban centres with transport infrastructure, amenities and job opportunities. It contributes to urban renewal, social justice and spatial equality. These are all challenges that continue to plague our society.
In theory, the intention of the government’s social housing programme is admirable. However, the reality for Social Housing Institutions (SHI) like Communicare and tenants alike is fraught with a mix of factors that disrupts the planned virtuous circle of social housing.
A major contributing factor is a stubbornly stagnant economy that stimies opportunities for economic and social mobility at the marginal end of the job market. Job opportunities are terribly scarce and many people lack the skills needed in the South African economy. Unemployment is high, and along with a low appetite for entrepreneurship amongst the local population, stonewalls upward mobility.
While social housing targets a broad band of household income, the reality is that most beneficiaries battle to make ends meet, living barely above the poverty line. This results in many families being ‘trapped’ in social housing, where rentals are significantly discounted compared to the open market. Without far higher incomes, they are unable to progress into the open rental market or the home ownership market.
Apart from an economy that is slow to absorb skills, government spending on housing is shrinking year-on-year resulting in fewer social housing complexes being delivered across the country. Only R724 million (2.2%) of the government’s capital grants for housing were allocated to social housing in 2019/2020. Unsurprisingly, very few social housing apartments had been developed across the country by 2020. Based on Stats SA data, these 76 617 apartments could be said to account for about only 1% of the housing solutions used by households in metropolitan areas. While government has built millions of houses since 1994, mainly in the periphery of urban areas, the backlog of over 3 million houses will grow unless there is a significant investment in the sector.
One of the bottlenecks to developing more social housing is suitable land for development. Making land available requires delicate coordination at a national, provincial and local government level. This process is slow and mired in bureaucracy. Where there is land and funding at a municipal level, many of South Africa’s 278 municipalities do not have the capacity and experience to partner with SHIs to invest in social housing developments. Between 2019 and 2024, the government had 18 000 new social housing apartments in various stages of planning and development in the nine provinces in the country. Delivery is, however, concentrated in Gauteng (37%), with 15% planned for the Western Cape and 11% both in KwaZulu-Natal and the North West provinces. The balance of 26% is spread between the remaining five provinces. Moreover, about 2 250 of these apartments face planning challenges and are unlikely to be delivered.
When land and funding are available, SHIs invest between 60% and 70% of the development costs either from their own base (usually rental income) or apply to a development finance institution to meet the shortfall after qualifying for a once-off government grant. The grant covers building costs only without ongoing funding for running costs. This is contrary to best practices for successful social housing developments worldwide.
Under these circumstances, the only way SHIs can continue to invest in social housing is by cross-subsidising social housing with commercial rentals and sales which is permitted under its status as a non-profit social enterprise.
The social housing projects approved by government are then regulated by the Social Housing Regulatory Authority (SHRA) for a limited period only to ensure affordable rentals and that the right beneficiaries are chosen. During this time SHIs have to service their bonds and ongoing costs from this subsidised rental base.
This is a precarious model. What makes it even riskier is the tendency for rental boycotts, illegal occupation, building hijacking, and rental extortion rackets which are on the increase. Then there are misleading campaigns questioning the SHI’s ownership of property, fuelling tenants to withhold rentals which means that SHIs may not be able to deliver on their mandates. Legal recourse to resolve such disputes can take several years due to slow court processes. Litigation to secure eviction orders is costly and time-consuming, with the SHI receiving no rental income until the issue is resolved. Arrears recovery is unlikely in these circumstances. This scares off investors and threatens the survival of SHIs. A review of the legal framework governing this process is needed to protect the state’s investment in social housing.
To compound issues further, many people are under two misperceptions. Firstly, many believe that the organisation is purely a social housing institution, and secondly, many believe that social housing tenants are entitled to life-long benefits and home ownership after rent for some years. The government’s initial capital grant creates the mistaken belief that the social housing institution benefits in perpetuity and that rentals should never escalate.
Those who can afford to move are reluctant to sacrifice their subsidised rentals for rentals in the open market. Rather, many use the money saved on their discounted rental to fund their lifestyles while those in need of the more affordable housing opportunity remain trapped in backyards, informal settlements and overcrowded housing. This huge gap between discounted rentals and entry-level house prices compounds the problem further.
In many cases, tenants grow old in social housing complexes, which also creates additional issues for the organisation since older, vulnerable tenants may later need specialist care which is not the function of a landlord nor the mandate of SHIs.
A new social compact and a far more enabling environment are needed to ensure greater delivery of social housing stock. In the absence of this, SHIs continue to serve the public good in the housing sector.
Anthea Houston is the CEO of Communicare.