Chapter 1: Introduction

This chapter explains how to find your way through Part 3 dealing with National Housing Programmes. It also provides a brief overview of the national housing programmes and housing assistance measures currently available from government.

Introduction

Navigating This part
Overview Of National Housing Programmes

1.1 Navigating This Part

This Part of the Code has ten chapters:

CHAPTER 1. Introduction. The introduction explains how to find your way through this Part (Part 3) of the Code, and also provides a brief overview of National Housing Programmes. The chapter also clarifies the status of the rules contained in the Programmes in terms of the Housing Act, 1997.

CHAPTER 2. The Housing Subsidy Scheme: General Rules. Chapter 2 sets out

the general rules on the housing subsidy scheme;
the rules for variations of the subsidy amounts by the PHDBs;
what does the subsidy buy?;
the rules for the payment of residual of non-credit linked individual subsidies and individual consolidation subsidies;
the rules on Hidden Subsidies;
the reduction of selling prices of certain state financed serviced sites;
bridging finance;
value added tax on subsidies;
transitional measures in respect of sale and rental formulas; and
the Housing Subsidy Application form.

CHAPTER 3. The Housing Subsidy Scheme : Project Linked Subsidies. Chapter 3 deals with the rules for project-linked subsidies. These rules relate to how projects operate, what must be contained in project agreements, and how consultation might proceed. They also relate to the submission and approval of project applications, the criteria in terms of which projects will be assessed and the administrative and payment procedures in respect of approved projects.

CHAPTER 4. The Housing Subsidy Scheme : Individual Subsidies. Chapter 4 deals with the rules for individual subsidies. These rules relate to the application procedures to be followed by households who wish to apply for individual subsidies, both in respect of credit linked and non-credit linked subsidies. It also sets out the procedures to be followed by the PHDBs in respect of awarding the subsidies, and the requirements of other roleplayers, lenders and developers. Finally, it sets out administrative guidelines for PHDBs in respect of the appointment of a conveyancer and the allocation of funds.

CHAPTER 5. The Housing Subsidy Scheme : Consolidation Subsidies. Chapter 5 deals with the rules for consolidation subsidies. These rules relate to the procedures to be followed by households who previously acquired public financed serviced sites, and who may apply for a further benefit to improve their housing situation, on either an individual or group basis.

CHAPTER 6. The Housing Subsidy Scheme : Institutional Subsidies. Chapter 6 deals with the rules for institutional subsidies. These rules relate to the application and award of institutional subsidies to institutions providing accommodation to beneficiaries, the form, operations and responsibilities of the institution, the various tenure arrangements, and administrative rules that apply to the PHDB.

CHAPTER 7. The Housing Subsidy Scheme: Relocation Assistance. Chapter 7 deals with procedures to be followed for defaulters, as contemplated in the Record of Understanding and the New Deal, to receive subsidy assistance for rightsizing purposes. It also deals with the responsibilities of the lender, represented by Servcon, to assess the defaulter’s affordability in respect of rescheduling of existing obligations, and their eligibility for the relocation grant.

CHAPTER 8. The Housing Subsidy Scheme: The People’s Housing Process. Chapter 8 deals with the rules for the People’s Housing Process. These rules relate to how households can follow the People’s Housing Process route in accessing consolidation, project-linked, institutional subsidies or rural subsidies, as well as technical and other forms of assistance in the house building process.

CHAPTER 9. The Discount Benefit Scheme. Chapter 9 sets out how persons may obtain assistance to acquire registered title to public rental houses, or houses sold on deed of sale, or to repay publicly financed credit that had been issued to acquire housing.

CHAPTER 10. The Public Sector Hostels Redevelopment Programme. Chapter 10 deals with the rules for the Public Sector Hostels Re-Development Programme. These rules relate to assistance for the redevelopment of public sector hostels that are owned by municipalities and provincial governments, excluding those hostels owned by municipalities which are intended solely for the use of their employees.

CHAPTER 11. The Housing Subsidy Scheme: Rural Subsidies : Informal Land Rights. Chapter 11 deals with the rules for Rural Subsidies. These rules relate to households who have certain forms of functional security of tenure and may therefore apply for rural subsidies.

Each chapter addresses the following issues where applicable:

Eligibility criteria and other conditions
How to apply
How the PHDB judges the application
After approval
PHDB Administrative Rules and Guidelines
Key points to remember

In some cases, a section is preceded by text enclosed in a box, that describes the content to follow.

1.2 Overview Of National Housing Programmes

The Housing Act, 1997, defines “national housing programme” as any national policy framework to facilitate housing development, including, but not limited to, the following:

the Housing Subsidy Scheme
The Discount Benefit Scheme to promote Home Ownership
The Public Sector Hostels Redevelopment Programme: Policy for the Upgrading of Public Sector Hostels

The Housing Act,1997 defines a National Housing Programme as any policy framework that achieves the following objectives:

assistance to persons who cannot independently provide for their own housing needs
facilitation of housing delivery
rehabilitation or upgrading of existing housing stock

Previously, the Bulk and Connector Infrastructure Grant was also classified as a National Housing Programme. In 1998, however, this programme was phased out and replaced by the Consolidated Municipal Infrastructure Programme, which is administered by the Department of Constitutional Development.

Text Box: The Housing Act,1997 defines a National Housing Programme as any policy framework that achieves the following objectives:
· assistance to persons who cannot independently provide for their own housing needs
· facilitation of housing delivery
· rehabilitation or upgrading of existing housing stock

The three National Housing Programmes set out above, and the rules and procedures which govern them, are discussed in detail throughout the remainder of this Part of the Code.

1.2.1 Housing Subsidy Scheme

The Housing Subsidy Scheme is the primary housing assistance measure, which, from 15 March 1994, replaced all previous government subsidy programmes, other than where commitments under previous schemes were already made. Beneficiaries with a household income of not more than R3 500 per month, who have not owned fixed residential property previously, and who satisfy a range of other criteria, can apply for the subsidy, and use it to get housing. Where beneficiaries have only received serviced sites under the previous dispensation and hold ownership rights to such sites, they however qualify for a consolidation subsidy.

There are six subsidy mechanisms that together comprise the housing subsidy scheme: project-linked, individual, consolidation, institutional subsidies, relocation assistance, as well as rural subsidies: informal land rights:

Project linked and individual subsidies are offered on a stepped scale, linked to household income.
The consolidation subsidy provides a “top-up” amount to qualifying beneficiaries who have already received a subsidy under the previous state financed site and service subsidy programme, including projects financed by the Independent Development Trust. The subsidy is only available where a household earns less than R1 500 per month. It is granted to enable a beneficiary to provide or upgrade a dwelling on the site.
The institutional subsidy provides a R16 000 subsidy to an institution for each qualifying beneficiary whose household resides in the institution’s stock and who earns not more than R3 500 per month. The subsidy allows for the institution to offer rental, deed of sale, shareblock or other tenure to households. Rental may be converted to ownership after the household has resided in the stock for at least four years.
Relocation assistance is offered to borrowers who, on 31 August 1997, were at least three months in arrears, and who need to be relocated to more affordable housing. Servcon mediates the awarding of the relocation grant as part of the strategy to stabilise the housing environment (see Part 1, Sections 3.1 and 3.3, of this Code).

To cater for extraordinary developmental circumstances and special housing needs, the subsidy amounts may be increased. The following variations are available:

Geophysical Variation: in situations where development costs are particularly high because of locational, geotechnical and topographical conditions, a variation of up to 15% of the subsidy amount payable (R2400,00 on the maximum subsidy amount of R16000) can apply. Where conditions are so adverse that the maximum variation of R2 400 is insufficient to address abnormal development costs, the MEC may approve an additional amount. This is clarified in section 2.4.1 of this Part of the Code.
Disability Variation: in situations where the subsidy is being awarded to a disabled beneficiary, or where a member of that beneficiary's household is disabled, or where a beneficiary or his or her dependent becomes disabled, a variation to the subsidy amount may be applied. Details in this regard are contained in Section 2.4.2 of this Part of the Code.

The People’s Housing Process provides an alternative route for accessing project-linked, consolidation, institutional and rural subsidies, for beneficiaries wishing to build or organise the building of their homes themselves. This is described in detail in Chapter 8 of this Part of the Code.

Housing subsidies are paid out of the nine Provincial Housing Development Funds (PHDF). For this, the PHDF draws down on a cash flow basis from the South African Housing Fund, against an annual budget that is based on a three year medium term expenditure framework adopted by the Department of Housing and approved by Cabinet.

The housing subsidy is intended to help households access housing with secure tenure, at a cost that they can afford, and of a standard that satisfies the minimum health and safety requirements. A beneficiary may only receive the subsidy once, except where the scheme allows for deviations from this provision.

The table below shows the specific policy intention of each subsidy mechanism. While not a mechanism per se, the People’s Housing Process is a route to follow in accessing the mechanisms set out in the table below, and is therefore also included:

Housing Subsidy Scheme: Mechanism Chapter Policy intention

Project-linked subsidy 3 To assist beneficiaries to acquire ownership of fixed residential properties for the first time, and to enable such beneficiaries to buy homes in projects approved by Provincial Housing Development Boards.

Individual subsidy 4 To assist beneficiaries to acquire ownership of fixed residential properties for the first time, and to enable beneficiaries to buy existing homes or homes in projects not approved by Provincial Housing Development Boards.

Consolidation subsidy 5 To enable beneficiaries who have only received serviced sites under the previous dispensation and who hold ownership rights to such sites, to provide or upgrade a top structure on such site.

Institutional subsidy 6 To provide subsidised accommodation through institutions to person who qualify for individual ownership subsidies, on the basis of secure tenure such as rental, installment sale, shareblock, etc.

Relocation Assistance 7 To enable defaulting borrowers of mortgage loans, who were three months in arrears with their installments on 31 May 1995 or 31 August 1997 (depending on the agreement entered into by government and the financial institution concerned), and whose loans cannot be rehabilitated, to right size to affordable housing. This forms an integral part of government's strategy to stabilise the housing environment.

People’s Housing Process 8 To support people who want to build their homes themselves to access consolidation, project-linked, institutional and rural housing subsidies as well as other support measures.

Rural Subsidy: Informal land Rights 9 To enable households who have defined undisputed informal land rights in terms of the Interim Protection of Informal Land Rights Act, 1996 to access the housing subsidy to provide for their housing needs.

Table 1: Policy Intentions of the Various Subsidy Mechanisms

Applications for each of the subsidy mechanisms can be submitted to Provincial Housing Development Boards (PHDBs) and/or accredited municipalities. When individual subsidies are linked to credit, applications can be submitted to accredited financial institutions.

1.2.2 Discount Benefit Scheme

The discount benefit scheme promotes home ownership for tenants or debtors who live in state-financed housing. The scheme applies to all state financed housing units already constructed or contracted for by 30 June 1993 and allocated to individuals prior to 15 March 1994. Under this scheme, tenants receive a discount on the price of the property to enable them to buy it, or a deduction in the amount outstanding. People may receive a maximum discount of up to R7 500 on the price of the property. This often means that the discount covers the full purchase price of the property. If there is an outstanding balance on the purchase price, the tenant will need to finance this with either savings or a mortgage loan.

A person who had previously bought a state financed property can also apply for the discount benefit in respect of the balance that he or she still owes the PHDB or municipality. Any outstanding balance owing after awarding the discount must be financed with either savings or a mortgage loan at the applicable market interest rate. This also applies to the outstanding balance on an individual loan made to a person to purchase a property. However, anyone who had previously bought the property and paid the full price cannot get a refund.

1.2.3 Public Sector Hostels Redevelopment Programme

The Public Sector Hostels Redevelopment Programme provides grant funding for the upgrading and/or conversion of hostels owned by public sector institutions to create humane living conditions and to provide affordable and sustainable housing opportunities on either a rental or ownership basis. The funding limits of the Programme amount to R16 000 per family, or R4 000 per individual living in a hostel owned by a municipality or provincial government. Hostels owned by municipalities which are intended solely for the use of their employees, are excluded from the Programme. The policy allows for three forms of re-development:

rental for single persons or families
ownership in line with the Housing Subsidy Scheme policy
alternative use, such as a school or community centre

Funding limits may be increased by up to 15% at the sole discretion of the relevant Provincial Housing Development Board, to compensate for development costs where hostels are in a particularly poor structural condition or where there are geophysical difficulties.

DEFINITIONS

Note that throughout Part 3 of the Code the following words are used. Within the context of the Code:
“beneficiary” means a person who qualifies for a particular subsidy or some other assistance measure in terms of the rules pertaining to the relevant subsidy or assistance measure as set out in the applicable chapter of Part 3 of the Code, or, somebody who has already received any such subsidy, or other assistance measure, as the case may be;
"non-qualifying beneficiary" means a person who does not qualify for a particular subsidy or some other assistance measure in terms of the rules pertaining to the relevant subsidy or assistance measure as set out in this Part of the Code;
“property”, in relation to the acquisition, use or improvement thereof by a beneficiary, means a fixed residential property; and

“PHDB” means a Provincial Housing Development Board contemplated in section 8(1) of the Housing Act, 1997, or any substituting body contemplated in section 8(13) of the Housing Act, 1997, including an accredited municipality as contemplated in section 10(2) of the Act, and includes, in respect of any services performed by officers and employees of the provincial administration or municipality, a reference to such persons.