Rural Housing Loan Fund, Housing Development Agency, National Housing Finance Corporation Strategic Plans 2012

Meeting Summary

Three entities of the Department of Human Settlements (DHS) presented their strategic plans and annual performance plans.

The Rural Housing Loan Fund (RHLF) noted that it was stable and had had clean audits for its 12 years of operation. Its mandate was to enable people in rural areas to access finance so that they could incrementally improve their housing conditions. It covered communal land, rural towns and small towns. RHLF dealt with people earning R9 800 and less, but the key focus was people earning R3 500 and less. Many people in rural areas remained unemployed or on very low incomes, and were faced with rising food and energy costs. Low-income earners used a large portion of their income to pay for transport, leaving little disposable income. Levels of indebtedness still remained very high. Loans were often granted to people who really could not afford the repayments, and there were high levels of rejection for intermediaries, which led to complications in the market. While RHLF was supporting its intermediaries, it also had to identify new types of entities with whom it would work, including community based organisations. Bad debt remained a challenge. RHLF was trying to increase its impact and address the higher risks. The next few years would be a challenge because of the continuing global uncertainties and their impact on the domestic economy, and on RHLF’s target market. Although the infrastructure development programme had been launched, there would be lead times before any benefits were seen in job creation on the ground. RHLF currently had sufficient financial resources to respond to any improvement over the Medium Term Expenditure Framework but was likely to need more funding beyond that to support business growth. It had received R99 million through fiscal allocations in 2010/11 and 2011/12, and was expecting to receive a grant of R32 million in 2012/13. Large entities were also being encouraged to deploy money for development. All positions were filled except for the vacancy for Chief Operations Officer, which would not be filled until RHLF activities increased. A decision had also been taken not to fill the vacancies on the board, since the current number of directors was deemed sufficient. In future, RHLF aimed to verifying reports instead of relying on outside reporting. It was noted that more money was being lent in rural areas, but that applications to RHLF intermediaries had declined. RHLF was therefore seeking to work with community based organisations and extend its reach.

Members welcomed the report, noted that the board was functioning well, but asked about its current composition, number of meetings, and who took the decision not to fill the vacancies, as well as whether new auditors were appointed regularly, and the board fees. Members questioned the reasons for the drop in spending in March 2011, as well as underspending on salaries and consulting fees, and wondered whether the budgeting for the next year was correct. Members asked if RHLF funds were helping people to build quality housing in the rural areas, and asked how it worked with other non-government organisations and public entities, and asked whether the money budgeted was actually reaching the intended beneficiaries. A Member wondered if RHLF was catering to the correct market, but RHLF countered that it also catered for professionals and support staff who chose to live in rural areas but could not access mortgage finance. They questioned if RHLF had a role in addressing rural infrastructure backlogs, what it was doing to mitigate high levels of debt consolidation and high rejection rates of applications, how it identified entities with whom it could work, and how it would ensure that money was used for building houses. The high rate of rejections, and the cause, was questioned. Members also asked about interactions with local and provincial government and training. The voucher scheme in the Eastern Cape was further explained.

The Housing Development Agency (HDA) also noted that it had achieved clean audits since its inception. It was doing well on its two main areas of land acquisition and project development. HDA reported that state land seemed to cover about 12% of the country’s land, and HDA was intending to get 4250ha released over the next financial year, and to have 1000 hectares under management. Other targets were set out in full. It was hoping also to release 20% of the land it owned into the Development Fund. It was hoping to support 20 projects and programmes in the next year and to have 15 protocols in place. There was currently no capital grant allocation for the HDA, although this issue was being discussed with the DHS. The MTEF allocation was R92.3 million in 2012/13, rising to R97.4 million in 2013/14. Any savings would be used for land purchases. It had asked that R315 million be processed to purchase state owned land. Provinces also made money available. The major risks were identified for each of the different goals, as well as how HDA intended to mitigate those risks, and staff were in place. The sources of income were diversified and HDA tried to keep its operating expenses low.

Members noted the detailed plans for N2 Gateway and Zanemvula, but said that Cornubia was taking far too long, and, when the HDA explained that there had had to be new plans drawn, expressed their frustration at explanations about the delay, and noted that everyone was aware that there had to be integrated planning to ensure that services, as well as houses, were provided. They enquired why there was no capital grant allocation confirmed, asked where the land was situated, how far the HDA had gone in acquiring land, and noted the need for greening. The Joint Coordinating Committee processes were explained, as well as the acquisition of land owned by the state, by state-owned entities, and privately. Engagements with the provinces were questioned and explained.

The National Housing Finance Corporation (NHFC) outlined its strategic plan and explained that the NHFC worked towards achievement of government priorities for making affordable housing available and improving the property market. NHFC’s main business was wholesale funding of social rental housing. It had a good partnership with the Social Housing Regulatory Authority, and provided the grant funding for every social housing development project. It funded affordable rental housing in inner cities, so far in Gauteng, KwaZul Natal and Port Elizabeth. It had partnerships also with the banks and non-banking retail lenders. NHFC also worked in partnership with the private sector and currently was working with Old Mutual, and had funded and brought the Trust for Urban Housing Finance to its current situation, where it was a R1.2 billion company open to being funded by other private institutions. It further brought funding to the human settlement space as it was funded by two multilateral offshore agencies. The work and role of the NHFC in the Finance Linked Individual Subsidy Programme (FLISP), which bridged the gap between people who earned between R3 500 and R15 000, was outlined. It was currently determining the state of readiness of all provinces, in preparation for the launch on 1 April 2012. The new Mortgage Default Insurance (MDI) would increase the participation of banks in the NHFC’s target market, because government would offer a guarantee that would make insurance costs affordable. NHFC was currently getting a licence from the Financial Services Board and hoped to have one of the banks piloting the projects by May. NHFC planned 20 150 housing opportunities in 2012, increasing to 24 888 by 2015. That required disbursements of R1 035 million in 2013, rising to R1 279 million in 2015. The total funding requirements would be R750 million for the next three years. Those figures excluded the MDI. The main focus areas would be successful partnerships with the banks on MDI and FLISP, continued partnerships and work with the Social Housing Regulatory Authority, assessment of where and why applications were declined, and establishment and maintenance of sources of funding. Members asked whether the figures quoted included the whole package of social private rental, were appreciative of collaborations with the private sector and banks, said that banks should also engage on MDI if they wanted to support FLISP, and questioned some of the projected increases in the financial statements. They also asked about the variance between the 2012 and 2013 financial years, the figures for computers and premises and how the lack of retail business impacted on the staff. It was noted that the new board would need to explain some outstanding issues from the 2010/11 Annual Report.