Housing Code

Part 3

Chapter 8: Housing Subsidy Scheme / People’s Housing Process

1. Overview
2. Eligibility and Other Conditions for People's Housing Process
3. How to Apply
4. Accessing The Consolidation Subsidy via The People’s Housing Process
5. Accessing The Project Linked Subsidy via The People’s Housing Process
6. Accessing The Institutional Subsidy via The People’s Housing Process
7. Accessing The Rural Subsidy, Informal Land Rights, via The People's Housing Process
8. After Approval
9. Subsidy Agreement
10. Key Points to Remember

This chapter 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 subsides as well as technical and other forms of assistance in the house building process. 

8.1 Overview

The People’s Housing Process aims to support households who wish to enhance their subsidies by building or organising the building of their homes themselves. The process assists such households to access: 

• Housing subsidies 
• Technical, financial, logistical and administrative support regarding the building of their homes, on a basis that is sustainable and affordable. 

Experience has proved that if beneficiaries are given the chance either to build houses themselves or to organise the building of houses themselves, they can build better houses for less money. The People’s Housing Process route towards accessing subsidies provides a creative alternative to the mechanisms described in the previous chapters because beneficiaries can: 

• save on labour costs by doing some of the building work themselves or by getting their neighbours, friends and families or other persons to help them; 
• avoid having to pay a profit element to developers if they build houses themselves or organise for those houses to be built; 
• optimise their decisions by using opportunities for trade offs. 

Technical assistance and support in this process is, however, critical. Consequently, a crucial imperative of the People’s Housing Process approach is the requirement to establish a Support Organisation. This organisation spearheads the technical support process. 

In respect of the People’s Housing Process, this chapter considers: 

• Eligibility & Other Conditions: this sets out eligibility criteria, classifies the various qualifying beneficiary categories, and details concerning the support organisation. 
• Application: this sets out rules relating to applying for consolidation, project-linked or institutional subsidies and rural subsidies via the People’s Housing Process route. 
• Special Rules: for township establishment and the provision of services 
• Subsidy Agreement: to be reached between the Support Organisation and the PHDB. 

The rules set out in this chapter of Part 3 apply to these steps. For more information on the policy content behind the People’s Housing Process, see Sections 3.3 and 3.4 in Part 1 of this Code. 

Finally, the chapter ends with a summary of key points to remember. 

The General Rules for eligibility, as well as for the variations in terms of geotechnical conditions or for households with a disabled member, all apply. For more detail on these, see Chapter 2 of this Part of the Code, sections 2.2 – 2.6. Some variations to the General Rules also apply. These are set out in section 8.2, below. 

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8.2 Eligibility and Other Conditions for the People's Housing Process

The General Rules for eligibility apply (see Chapter 2 of this Part of the Code, Section 2.2). In addition, this section sets out additional conditions: 

There are five categories of potential beneficiaries to whom the support programme could apply: 

• Owners: occupants with ownership, leasehold or deed of grant rights on sites without top structures provided by the previous government in townships serviced by the previous government. In some cases the owners built their own top structures on the sites. Owners who earn R1500 or less per month qualify for consolidation subsidies of R8000. The rules that apply to consolidation subsidies have already been set out in Chapter 5 of this Part of the Code. Those rules will also apply to owners who want to participate in the People’s Housing Process, except where those rules are amended in this Chapter. 
• Non-owners: occupants with no ownership, leasehold or deed of grant rights on serviced sites without top structures provided by the previous government. In some cases non-owners may have built their own top structures on the sites. Non-owners may qualify for housing subsidies in terms of the rules set out in Chapter 2. Chapter 3 contains rules that regulate project linked subsidies and Chapter 6 contains rules that regulate institutional subsidies. Non-owners who want to participate in the People’s Housing Process could do so either in terms of the rules that govern project linked subsidies or in terms of the rules that govern institutional subsidies. Potential beneficiaries must note, however, that there are various constraints that apply to institutional subsidy projects, and those constraints are summarised in paragraph 8.6. 
• Occupants: People who have occupied land in respect of which they do not have any rights at all. Some of these people may have built some form of housing on the land. Occupants may qualify for project-linked and institutional subsidies in the manner described for non-owners above. See Table 12. 
• Landless People: People who do not have any place of their own, and who may live in hostels, backyard shacks and various other forms of accommodation. Landless people may also qualify for project-linked and institutional subsidies in the manner described for non-owners above. 
• Rural People: Families who have functional security of tenure in terms of the Interim Protection of Informal Land Rights Act, 1996 (Act No.31 of 1996), as contemplated in the policy on Rural Subsidies. Rural people may qualify for rural subsidies in the manner described in Chapter 11 of this Part of the Code, except where those rules are amended in this Chapter.

Table 12. Conditions relating to project-linked and institutional subsidy applications by non-owners, occupants and/or landless people.

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8.2.1 Support Organisations

In order to participate in the People’s Housing Process, a Support Organisation must be established. Beneficiaries who want to participate in the process have a choice. They can either form themselves into a Support Organisation or they must identify a potential Support Organisation and enter into a contract with it. The Support Organisation must be a legal entity. 

1. Forming a new Support Organisation: If the beneficiaries want to form themselves into a Support Organisation, they must form an appropriate legal entity which could be a company incorporated in terms of section 21 of the Companies Act, 1973 (Act No.61 of 1973), or a trust, or a voluntary association or a co-operative under the Co-operatives Act, 1981 (Act No.91 of 1981). They will also have to make sure that the Support Organisation can give the technical and administrative assistance that is set out in section (f), below. It must be remembered that if the Support Organisation is an institution that will undertake an institutional subsidy project, the special rules set out in section 8.6 of this chapter will apply. 
2. Contracting with a Support Organisation: If the beneficiaries elect to contract with an alternative Support Organisation the contract must set out -

• all the details of the project that will be undertaken; 
• decision making processes that ensure that the beneficiaries will be able to take mutually agreed upon key decisions. 

3. Types of Support Organisations: Subject to the special rules, which apply to institutions, PHDBs will have a wide discretion to decide whom they will accept as Support Organisations. Without limiting this wide discretion, PHDBs could accept any one of the following as Support Organisations : 

• provincial governments; 
• municipalities formed in terms of the Local Government Transition Act, 1993 (Act 209 of 1993); 
• community groupings including church groups (provided that they have been established formally as legal entities); 
• non government organisations; 
• parastatal organisations; 
• development corporations; 
• private sector institutions and developers. 

4. Facilitation: A Support Organisation must give the technical and administrative assistance set out in section (f) to the beneficiaries. The Support Organisation does not have to give the technical and administrative assistance itself. All that the Support Organisation must do is to make sure that the technical and administrative assistance is available at no cost to the beneficiary. Therefore, the Support Organisation can appoint other support providers, who will give the necessary assistance to the beneficiaries, as long as the Support Organisation agrees to pay those other support providers all the fees that they will charge. 
5. Capacity: A Support Organisation must be able to satisfy the PHDB that it is able to give the required technical and administrative assistance to the beneficiaries. For this reason, the Support Organisation must, in the application for the project to be approved, give the following details : 

• Whether its own employees will give the technical and administrative assistance or whether other support providers will give that assistance. 
• The details of any of its employees that will give the assistance particularly the qualifications and experience of those employees. 
• The details of any other support providers who will give the assistance including their qualifications and experience. 
• A copy of the contracts which it has concluded with other support providers. Those contracts must set out the work that the other support providers must do, the fees that the Support Organisation must pay, and the times at which the fees must be paid. 
• A description of the housing support centre from which the technical and administrative assistance will be given to beneficiaries together with an estimated cash flow of its operational requirements. 

6. Technical and Administrative Assistance: The Support Organisation must ensure that the following technical and administrative assistance is given to the beneficiaries : 

• All the planning that is necessary in respect of the project including the layout of the township (if applicable), the design of services (if applicable), the upgrading of any services (if applicable), the design of the houses that will be built, the determination of the total amount of the subsidy that can be obtained for the beneficiaries, and the preparation of a cash flow forecast indicating the stages at which those subsidies will be required. 
• Apply to the PHDB for the approval of the whole project. 
• Assist each beneficiary to complete the prescribed subsidy application form, submit that form to the PHDB and follow up. 
• Prepare building plans for all the houses that must be built and get those plans approved. 
• Monitor the building work that the beneficiaries do. 
• Certify the progress which the beneficiaries make in constructing their houses (this will be done through the certifier). 
• Operate the specified account (this will be done through the account administrator). 
• Advise the beneficiaries where they can buy building materials at the best prices. 
• Give the beneficiaries general advice and assistance about the process.

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7. Building Materials: In regard to building materials the Support Organisation and the beneficiaries can agree that - 

• the Support Organisation will buy building materials in bulk; 
• the Support Organisation will sell building materials to any beneficiaries as and when he/she needs those materials; 
• the beneficiary will pay the Support Organisation out of the subsidy which the beneficiary is entitled to get; 
• the Support Organisation can provide advice to any beneficiary regarding the manufacture of building materials. 

It is not, however, a requirement of the process that the Support Organisation must buy building materials in bulk and the process can be undertaken on the basis that the beneficiaries will buy the materials they need directly from suppliers. 

8. Central Office: The Support Organisation must establish an office or other facility in a place which can easily be reached by the beneficiaries. That office or facility must be staffed during normal office hours and at agreed times during weekends, so that the beneficiaries can call at the office or the facility for the technical and administrative assistance that must be given to them. This office or facility will be called a housing support centre. 
9. Fee paid to the Support Organisation: For giving all the assistance set out in this paragraph, the PHDB will pay the Support Organisation a fee. That fee : 

• will be agreed upon between the PHDB and the Support Organisation but must not be more than R570 for each and every beneficiary who is assisted; 
• will not be deducted from the subsidies that the beneficiaries will get; 
• will be paid by the PHDB to the Support Organisation at the stages agreed to between the PHDB and the Support Organisation. These fees should be paid in stages as and when the Support Organisation makes progress in implementing the project. A Support Organisation, which is also an institution, will qualify for these fees. 

10. Specified Account: The Support Organisation must open a specified account with a bank registered in terms of the Banks Act, 1990 (Act No.94 of 1990). If the Support Organisation is not a Provincial Government or a municipality it must designate that account as a trust account. The Support Organisation must open the specified account on the basis that only the account administrator may make any payments out of the specified account. The specified account must be an interest bearing account, and the Support Organisation must make sure that it gets the best possible interest rate. 

8.2.1.1 Grants available to facilitate support functions

To facilitate the preparation for and establishment of housing support functions grant funding is available on application to the PHDB. These funds are available over and above the capital subsidy that is awarded to individual households in the project. 

1. Facilitation Grants are available to any group of families for purposes of forming themselves into a support organisation or to a legal entity such as, a Local Government, NGO or other body for the purposes of setting up an agreement with a group of families to act as a support organisation on their behalf, or to an existing support organisation for purposes of preparing a detailed project application including a business plan. The approval of facilitation grants is at the sole discretion of the PHDB concerned. The specific amount is to be determined on the merits, needs and requirements of each individual application. 
2. Establishment Grants: As indicated in section 8.2.1 (i) above, fees are payable to enable support organisations to provide technical, financial, logistical and administrative support to the beneficiary community. These fees are called establishment grants. The amount of the Establishment Grant will vary due to the number of families involved in the project and the nature and extent of support functions to be rendered by the Support Organisations. The grant may not exceed R570 per subsidy beneficiary. Each project application for subsidies for a People's Housing Support Process project should include a business plan for an Establishment Grant to cover the establishment of and running cost for the support functions to be carried out or facilitated by the Support Organisation. The business plan must be operationally feasible and financially viable. 

Further rules for applying for these grants are not set out in this Part of the Code and should rather be accessed from the relevant PHDB. 

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8.2.1.2 The Certifier

The Support Organisation must appoint a certifier and identify him or her in the project application. The certifier must be a suitably qualified and experienced person. If the Support Organisation is not a provincial government or a municipality, the certifier must be independent. If the Support Organisation is a provincial government or a municipality, the certifier may be one of its employees. The appointment of the certifier is subject to the PHDB’s consent. In respect of the certifier, the following rules apply: 

1. The Support Organisation must ensure that the certifier regularly inspects the building work that each beneficiary does. The certifier must:

• give the beneficiaries advice in regard to building; 
• issue certificates in regard to the progress made by beneficiaries in building their houses or in organising the building of their own houses, and deliver those certificates to the Support Organisation. 

If the Support Organisation gets a certificate from the certifier which says that the progress that a beneficiary has made in constructing his/her house has reached a stage where the beneficiary is entitled to get payment of a part of his/her subsidy, the Support Organisation must deliver that certificate to the account administrator as soon as possible. 

2. The beneficiaries must appoint one or more representatives and the certifier must make sure that he/she is accompanied by one or more of these representatives when the certifier inspects the work done by any particular beneficiary. The Support Organisation must help the beneficiaries to nominate these representatives and the Support Organisation must make sure that the certifier only does his/her inspections when he/she is accompanied by one of the representatives. One of the beneficiary representatives must also sign all the certificates issued by the certifier. 
3. The Support Organisation must pay the certifier’s fees (or his/her salary if the certifier works for the Support Organisation). 

8.2.1.3 The Account Administrator

The Support Organisation must appoint an account administrator. The identity of this account administrator must be set out in the project application and his/her appointment is subject to the approval of the PHDB. The account administrator must have experience in dealing with financial matters, particularly in preparing reconciliations. The following rules apply in respect of the account administrator.

1. As soon as the account administrator gets a certificate issued by the certifier to the effect that a beneficiary is entitled to receive a payment, the account administrator must pay the beneficiary the amount certified by the certifier. 
2. The Support Organisation must make sure that no later than fourteen days after the end of every month while the project is undertaken, the account administrator delivers a report to the PHDB. This report must set out the following:

• All the amounts of money that have been paid into the specified account by the PHDB. 
• All the interest that has been earned on that money. 
• All the payments that have been made out of the specified account to beneficiaries. 
• A summary in respect of each beneficiary which sets out the amount of the subsidy that has already been paid to the beneficiary. 

3. Once the project has been completed (once all the houses have been finished in accordance with the project agreement and all the subsidies have been paid out) the account administrator must submit a detailed reconciliation to the PHDB of all monies received into the specified account, all interest that has been earned on those monies and all monies paid out of the specified account. When the account administrator delivers the reconciliation to the PHDB, he/she must also deliver to the PHDB a cheque for the amount which is still in the specified account (this amount should be for the interest that has accrued on the specified account). 
4. The PHDB will be entitled to assess and satisfy themselves of the capacity of the account administrator to perform the proper fulfilment of his/her duties, and for this purpose the PHDB will be entitled to require that the account administrator gives a suitable security. 
5. The Support Organisation must pay the account administrator’s fees (or his or her salary if the account administrator works for the Support Organisation).

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8.3 How to Apply

When the Support Organisation submits a project application to the PHDB it must: 

• comply with all the requirements set out in Chapter 5 of this Part of the Code, regarding the consolidation subsidy, if the project is for owners; 
• comply with all the requirements set out in Chapter 3 if the project is a project linked subsidy project, and is for non-owners, occupants and landless people; 
• comply with all the requirements set out in Chapter 6 if the project is an institutional subsidy project, and is for non-owners, occupants and landless people; 
• comply with the requirements set out in Chapter 11 if the project is a for rural housing subsidy project and is for rural people as defined in section 8.2 of this Chapter; 
• comply with all the requirements of this Chapter insofar as those requirements are applicable; 
• stipulate an agreed upon conflict resolution mechanism between the Support Organisation and the beneficiary families in the event that conflict should arise in the course of this project. 

Additional requirements in respect of the four project types (consolidation, project-linked, institutional and rural) which may be undertaken via the People’s Housing Process, are set out below. 

8.4 Accessing the Consolidation Subsidy via the People’s Housing Process 

The following rules apply together with those set out in Chapter 5 of this Part of the Code. They apply to owners wishing to access a consolidation subsidy via the People’s Housing Process. In the case of owners wishing to access a consolidation subsidy via the People's Housing Process:- 

• a township will already have been established; 
• services will already have been provided; 
• ownership, leasehold rights or deed of grant rights will already have been registered in the names of the owners. 

8.4.1 Application

1. Owners who want to participate in the process must either form themselves into a Support Organisation which must be a legal entity or conclude a contract with a legal entity to act as Support Organisation. 
2. The Support Organisation must make an application to the PHDB. The purpose of that application is to identify the whole project and to get the PHDB’s approval for the whole project. 
3. One particular requirement for an application is that the Support Organisation must estimate the cash flow requirements of the project. When the PHDB considers the application it must decide whether the cash flow requirements are realistic. 

8.4.2 After Approval 

1. Once the PHDB has approved the application, the PHDB and the Support Organisation must conclude a subsidy agreement. This agreement will provide that the Support Organisation must implement the project and that the PHDB will pay the approved subsidies. In particular the agreement will indicate the stages at which the approved subsidies will be paid. Those stages will be based on the Support Organisation’s estimate of the project’s cash flow requirements (but it must be remembered that the PHDB must approve those cash flow requirements). The matters that should be contained in the subsidy agreement between a Support Organisation and the PHDB are set out in section 8.8 in this chapter. 
2. Once the PHDB and the Support Organisation have concluded an agreement, the Support Organisation must help each one of the owners to fill in an application form for the subsidy that the owner will get, in the form of Annexure C of Chapter 5 of this Part of the Code. The purpose of that form is to get all the owner’s details from him/her so that the PHDB can make sure that the owner qualifies for a consolidation subsidy. 
3. Once all these administrative matters have been attended to, the PHDB will start paying the approved subsidies to the Support Organisation subject to section 8.4.2 (d) below. Those subsidies will be paid at the stages set out in the subsidy agreement between the PHDB and the Support Organisation. 
4. The Support Organisation must then open a bank account which is called the "specified account”. The PHDB will pay the subsidies into this account. The rules that apply to specified accounts are set out in section 8.2.1(j) and 8.2.1.3. 
5. The Support Organisation must identify an account administrator and a certifier (the Support Organisation will do this when it applies for the project to be approved). The function of the account administrator is to operate the specified account (in other words to make payments out of that account and to give reconciliations in respect of the account to the PHDB). The function of the certifier is to certify the progress that the owners make in constructing their houses. The rules that apply to account certifiers and administrators are set out in paragraphs 8.2.1.2 and 8.2.1.3. 
6. Each owner must then begin to construct his/her house. The Support Organisation must help the owner to get a building plan approved. 
7. The owner’s subsidy will be paid to him/her by the account administrator out of the specified account. The stages at which the owners will be paid will be set out in the agreement between the Support Organisation and the PHDB. Those stages will be linked to the progress that the owner makes in building his/her house. For example, the first payment could be made to the beneficiary once he/she has excavated foundations, the second payment could be made once the foundations are complete, etc. 

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8.5 Accessing the Project Linked Subsidy via the People’s Housing Process 

The following rules apply together with those set out in Chapter 3 for project-linked subsidies. The differences between the consolidation subsidy process for owners and the project linked subsidy process for non-owners, occupants and landless people are that in the project linked subsidy process : 

• ownership, leasehold rights or deed of grant rights will have to be given to the beneficiaries; 
• it might be necessary to establish a township (although in the case of non-owners a township may already have been established); 
• it might be necessary to install services or to upgrade services (although in the case of non-owners their sites may already have been serviced fully). 

8.5.1 Application & Approval 

1. Non-owners, occupants and landless people who wish to participate in a project linked subsidy project must also either form themselves into a Support Organisation or must conclude a contract with a legal entity to act as a Support Organisation. 
2. The Support Organisation must then : 

• apply for the approval of the project to the PHDB; 
• if the approval is obtained, sign a subsidy agreement with the PHDB;. 
• help beneficiaries to complete subsidy application forms and submit those forms to the PHDB. 

The Support Organisation will fulfil these duties in the same way that it will do if it is assisting owners. The only differences are, that the contents of the application that the Support Organisation makes, will be different, the agreement between the Support Organisation and the PHDB will be different and the application form that must be completed for each beneficiary will be the application form set out in Chapter 3 (the purpose of this application form is to ensure that the beneficiary qualifies for a project linked subsidy). 

8.5.2 After Approval: Progress Payments 

1. In a project linked subsidy project, the land is always serviced as part of the project. Chapter 3 provides the following - 

• the total subsidy amount that will be payable for the project is divided into the amount that is paid for services and the amount that is paid to construct top structures; 
• the amount that is paid for services can be paid in various progress payments; 
• the amount that is paid for top structures can also be paid in progress payments. 

2. If a project linked subsidy project is undertaken for non-owners, occupants and/or landless people, the total amount of the subsidy that will be paid must also be divided into the amount that will be paid to provide serviced sites and the amount that will be paid for the top structures. The total subsidy amount that will be paid for services is also called the “services money” in this Chapter and the amount that will be paid for top structures is called the “top structure money”. 
3. The services money will be paid in the progress payments explained in section 3.5.4(3) of Chapter 3. 
4. The top structure money will be paid into a specified account which the Support Organisation must open (see section 8.2.1(j)). The money will be paid in terms of an agreed cash flow exactly in the same way as with the process for owners. 
5. The stages at which the top structure money will be paid to non-owners, occupants and landless people will be set out in the agreement between the Support Organisation and the PHDB. Those stages will be linked to the progress that the owner makes in building his/her house. For example, the first payment could be made to the beneficiary once he/she has excavated foundations, the second payment could be made once the foundations are complete, etc. An account administrator and a certifier must also be appointed in exactly the same way as with the process for owners. 

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8.6 Accessing the Institutional Subsidy via the People’s Housing Process 

The following rules apply together with those set out in Chapter 6 for institutional subsidies. It should be noted that institutional subsidies can apply to many different kinds of projects and are not limited to typical greenfields projects. In many cases institutional subsidies are used to purchase, for example, an existing block of flats. This block of flats is then upgraded and individual beneficiaries are allowed to occupy individual flats. 

Non-owners, occupants and landless people will only have the option of undertaking an institutional subsidy project if the individual beneficiaries will themselves be required to do or to organise construction or upgrading work. If the institution will itself do all the required construction work, there is no scope for the People's Housing Process to operate and an application must be made for an institutional subsidy in the normal way. 

8.6.1 Summary of rules relating to institutional subsidy projects 

1. In terms of the rules contained in Chapter 6 of this Part of the Code institutional subsidy project are undertaken by institutions. Chapter 6 of this Part of the Code imposes the following constraints in regard to institutions:- 

• they must take the form of a company incorporated in terms of the Companies Act, or a voluntary association incorporated in terms of section 21 of the Companies Act (a so-called section 21 company), or a company incorporated in terms of the Shareblock Controlled Act, or a co-operative incorporated in terms of the Co-operative Act, or an association formed in terms of the Communal Property Associations Act; 
• they cannot do any business other than business that is strictly related to the undertaking of an institutional subsidy project. 

2. To qualify for institutional subsidies, an institution must allow beneficiaries who earn a household income of R3 500 or less to occupy residential properties which belong to the institution (the rules concerning the basis upon which beneficiaries must be allowed to occupy residential properties are set out below). If the institution allows beneficiaries who earn a household income of R3 500 per month or less to occupy its residential properties in accordance with those rules, the institution qualifies for a subsidy of R16 000 for each and every such beneficiary. Provided that the beneficiary earns a household income of R3 500 per month or less, his/her household income is irrelevant. So, for example, even if a beneficiary earns a household income of more than R3 000 per month (but less than R3 500 per month) the institution qualifies for a subsidy of R16 000 (such a beneficiary would only qualify for a project-linked subsidy or an individual subsidy of R5 500). 
3. It could therefore be advantageous for potential beneficiaries to participate in an institutional subsidy project. It must be remembered, however, that the Government has decided to grant the advantages explained above to institutions for the following:- 

• it has been difficult for beneficiaries to obtain credit from financial institutions; 
• the Government therefore decided to encourage institutions to give credit to beneficiaries; 
• the manner in which the Government decided to encourage institutions to give credit, is to allow institutions who give credit to qualify for subsidies on the basis explained above. 

4. In order to ensure that institutions give credit to beneficiaries, the following constraints have been built into the rules that govern institutional subsidies:- 

• the institutions must either build residential properties or it must upgrade existing residential properties; 
• in building new properties or in upgrading existing properties, the institution must use both the subsidy that it receives and other funds available to it (in conventional terms the institutions must gear the subsidy); 
• the institution must then allow beneficiaries to occupy the residential properties built or upgraded by it for a minimum period of four years; 
• the beneficiaries may occupy those properties by virtue of any form of tenure agreed upon between them and the institution; 
• if the institution concludes a lease agreement with a beneficiary, that lease agreement must be a lease at the will of the beneficiary so that the institutions will not be entitled to cancel the lease except if the beneficiary breaches it (by, for example, failing to pay his/her rent); 
• if the beneficiary terminates the lease before a period of four years has expired, the institution will be obliged to replace the beneficiary with another person who also qualifies for an institutional subsidy; 
• if the institution sells any property to any beneficiary, the beneficiary must be given at least a period of four years to pay the price of the property to the institution. 

5. When an institution applies for the approval of an institutional subsidy project, it must satisfy that Provincial Housing development Board that it will remain financially viable throughout the whole project. The reason for this rule is that the institution will in all probability remain the owner of the residential properties concerned (at least for a period) and if the institution experiences financial difficulties the rights of the beneficiaries to occupy the institution's residential properties would be prejudiced. 

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8.6.2 Application

1. If non-owners, occupants and/or landless people intend to participate in an institutional subsidy project they must either : 

• form themselves into an institution and ensure that they comply with the rules in regard to institutions set out in Chapter 6; or 
• identify a potential institution and conclude a contract with it. That contract must deal with the matters set out in paragraph 7.4. 

2. Once the beneficiaries have formed themselves into an institution or once they have concluded an agreement with the potential institution, the institution must then apply for the approval of the project. 

8.6.3 After Approval 

If the project is approved: 

1. The institution must conclude a subsidy agreement with the PHDB and that agreement must contain the matters set out in section 8.8. 
2. The institution must comply with all the obligations imposed on the Support Organisation in this Chapter. Any reference to a Support Organisation includes, if applicable, a reference to an institution which will undertake an institutional subsidy project in terms of the programme to support the People’s Housing Process. 

Thereafter, the process that will be followed will be exactly the same process as that followed for project linked subsidy projects with the following exceptions:

3. The services money will be paid to the institution at such stages as may be agreed upon between the institution and the PHDB (in the context of an institutional subsidy project the PHDB is not obliged to pay the services money in the progress payments set out in Chapter 3). 
4. Instead of selling properties to beneficiaries, the institution must conclude agreements with those beneficiaries in terms of which the beneficiaries will be given occupancy rights (the types of agreements and the rules for each are explained in Chapter 6). 
5. The institution must ensure that the application form prescribed by Chapter 6 is completed for each participating beneficiary and is delivered to the PHDB (the purpose of the application form is to ensure that the beneficiary qualifies for an institutional subsidy). 
6. If an institution sells a property and gives a beneficiary four years within which to pay the price, the rule set out in Chapter 6 is that the subsidy of R16 000 which the institution obtains in respect of that beneficiary is regarded as the final payment made by the beneficiary to the institution on account of the purchase price. That rule will apply to an institutional subsidy project undertaken as part of the People's Housing Process. The price which the beneficiary must pay will be the full price of the property, including the value of the work and materials to be supplied by the beneficiary, and the full amount of the subsidy will be regarded as the beneficiary’s final payment. 

8.6.4 Summary of the Process 

A very brief summary of the process to be followed for institutional subsidy projects is therefore as follows: 

• The institution is formed or the potential beneficiaries conclude an agreement with a potential institution. 
• The institution applies for approval of the project. 
• If the project is approved the institution concludes a subsidy agreement with the PHDB. That agreement specifies the amount of the services money and the top structure money, specifies the stages at which the services money and the top structure money will be paid to the institution and specifies the stages in which the top structure money will be paid to a beneficiary. 
• The institution that ensures that all town planning, land survey and services construction work is done and gets payment of the service money in the agreed stages from the PHDB.
• The institution opens a specified account and appoints a certifier and an account administrator. 
• The top structure money is paid into the specified account and is paid out to the beneficiaries as and when they reach the agreed stages in constructing top structures. 

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8.7 Accessing the Rural Subsidy: Informal Land Rights, via the People's Housing Process 

The following rules apply together with the rules set out in Chapter 11 of this Part of the Code except where those rules are amended by the following rules. 

8.7.1 Summary of rules relating to Rural Subsidies 

1. Land Rights: Beneficiaries of Rural Subsidies will be able to access the subsidy if they occupy land; 

• by virtue of the laws and customs of a tribe, if the land is State land (as defined below); 
• as holders of registered quitrent tenure rights or registered rights/permissions to occupy in terms of any of the enactments referred to in Chapter 11 of this Part of the Code; 
• by virtue of the administrative practice which previously existed, if the land occupied is State land. This category includes all unregistered quitrent tenure rights and unregistered rights/permission to occupy granted in terms of the enactments referred to above. 
• Rural subsidies will be made available, in addition to the person envisaged above, also to persons who have access to land in terms of the informal rights protected in the Interim Protection Act, provided that those persons can illustrate that they have complied with the provisions of Chapter 11 of this Part of the Code. Beneficiaries will be required to proof to the satisfaction of the PHDB, their rights to the land. 

2. Implementation Agents: Families who wish to participate in rural subsidy projects, must conclude an agreement with an implementation agent, accredited by the Provincial Housing Development Board. The role of these implementation agents will be- 

• to educate the general public in regard to the availability of rural subsidies, 
• to plan projects and to submit those projects to the PHDB and, if applicable, the Land Minister, for approval; 
• if the PHDB approves any particular project, to implement it; 
• in applicable instances, to ensure that participating beneficiaries obtain access to credit. 

The fees payable by the beneficiaries to the implementation agent will be paid out of the approved subsidies. The fees are limited and in this regard - 

• the fee payable to the implementation agent for the planning of the project and for obtaining the PHDB's approval should not exceed 5% of the total amount of the subsidies approved in respect of the project; 
• the fee payable to the implementation agent for assisting the beneficiaries in implementing the project should not exceed 2% of the total subsidies approved by the PHDB. 

3. Financial Agents: The PHDB shall as and when it concludes an agreement with the beneficiaries, conclude an agreement with a financial agent who will be responsible to receive subsidy funding and effect the payment thereof at agreed milestones. 
4. Nature of projects: Rural subsidies may, be used for any purposes which in the discretion of the PHDB, amount to housing purposes. The following purposes may be regarded as housing purposes - 

• the provision of sanitation facilities; 
• the provision of roads and stormwater drains within the boundaries of any particular settlement;
• the provision of water; 
• the construction or upgrading of dwellings; 
• the purchase of building materials in order to enable a beneficiary himself or herself to construct or upgrade a dwelling. 

Rural subsidies may only be accessed on a project basis. Rural subsidies are, however, to be regarded as subsidies of the last resort. If, in any particular area, it is possible (for example in terms of the Less Formal Township Establishment Act, 1991) to create secure rights of tenure for subsidy beneficiaries, preference must be given to subsidy forms which are based on these rights. 

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8.7.2 Rules to be applied in applying for rural subsidies via the People's Housing Process

1. Beneficiaries who enjoy functional security of tenure contemplated in paragraph 3 of Chapter 11 of this Part of the Code, who wish to participate in a rural subsidy project, must either form themselves into a Support Organisation as described in this Chapter of the Code or must identify a potential Support Organisation and conclude a contract with it. (A Support Organisation must be a legal entity). The requirement in Chapter 11 of this Part of the Code for accreditation and appointment as an implementation agent will not apply in respect of a Support Organisation which intends to apply for and implement a rural subsidy project 
2. The fee structure regarding implementation agents as described in section 8.7.1 (b) of this Chapter of the Code will not apply in respect of Support Organisations. Instead Support Organisations or groups of families forming themselves into a Support Organisations may apply, for facilitation grants as described in section 8.2.1.1 (a) of this Chapter of the Code. The Support Organisation will also be entitled to an Establishment Grant for rendering its support functions as contemplated in section 8.2.1.1 (b) of this Chapter of the Code. 
3. The application has to specify the total subsidy amount applied for. This amount must be divided into the amount that is to be paid for infrastructure and the amount that is paid to construct top structures; 

• the amount that is paid for infrastructure can be paid in various progress payments; 
• the amount that is paid for top structures can also be paid in progress payments. 
• the total subsidy amount that will be paid for services, is called "the infrastructure money" in this section 8.7 of this Chapter and the amount that will be paid for top structures is called the "top structure money". 

4. The infrastructure money will be paid in the progress payments agreed upon between the Support Organisation and the PHDB, 
5. The top structure money will be paid into a specified account which the Support Organisation must open (see section 8.2.1 (j)). The money will be paid in terms of an agreed cash flow exactly in the same way as with the process for owners. 
6. The stages at which the top structure money will be paid to rural people will be set out in the agreement between the Support Organisation and the PHDB. Those stages will be linked to the progress that the rural person makes in building his/her house. For example, the first payment could be made to the beneficiary once he/she has excavated foundations, the second payment could be made once the foundations are complete, etc. An account administrator and a certifier must also be appointed in exactly the same way as with the process for owners. They are to be paid for their services by the Support Organisation. 
7. The norms and standards in respect of permanent residential structures as determined by the Minister of Housing in terms of section 3(2)(a) of the Housing Act, 1997, do not apply in respect of rural subsidy projects. 
8. The Support Organisation must :- 

• apply for the approval of the project to the Provincial Housing Development Board; 
• if the approval is obtained, sign an agreement with the Provincial Housing Development Board; 
• help beneficiaries to complete subsidy application forms and submit those forms to the Provincial Housing Development Board. 

9. The Support Organisation will fulfil these duties in the same way that it will do if it is assisting non-owners, occupants and landless people under a Project Linked Subsidy project. The only differences are that the contents of the application that the Support Organisation makes will be different, the agreement between the Support Organisation and the Provincial Housing Development Board will be different and the application form that must be filled in for each beneficiary will be the application form set out in Chapter 11 of this Part of the Code, (the purpose of this application form is to ensure that the beneficiary qualifies for a rural subsidy). 
10. The differences between the process for non-owners, occupants and landless people in terms of the Project Linked Subsidy and the People's Housing Process for rural people in terms of the Rural Subsidy are as follows:- 

• ownership, leasehold rights or deed of grant rights will not be required to be effected; 
• it will not be required to establish a township; 
• it might be necessary to install services or to upgrade services; 
• In a project linked subsidy project the land is always serviced as part of the project. In the case of Rural Subsidies, this will not necessarily realise; 
• the amount of the subsidy that will be payable for infrastructure will be paid in progress draws to the Support Organisation on a basis agreed between the Support Organisation and the PHDB; 
• the top structure money will be paid into a specified account which the Support Organisation must open. The money will be paid in terms of an agreed cash flow programme; 

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8.7.3 Project Proposals

If a Support Organisation is able to identify any particular project for which rural subsidies will be sought, it shall prepare and submit to the relevant PHDB a comprehensive proposal which contains the following - 

1. Description of land; 
2. Infrastructure to be provided, for example 

• A borehole will be drilled at a central point on the land to be developed, 
• A solar pump will be installed at the borehole. 

3. Engineering services to be provided; 
4. The preparation of a general plan which indicates the allotments occupied by each one of the beneficiaries, and the approval of this general plan by the Surveyor-General; 
5. The design of the houses to be erected (sketch stage); 
6. the names and identity numbers of the qualifying beneficiaries who will participate in the proposed project; 
7. the support of the owner of the land, (including, if applicable, the approval of the Land Minister in terms of the Interim Procedures); 
8. details of allotments in respect of which the project will be undertaken, and the nature of the informal rights held by the beneficiaries in respect of those allotments; 
9. proof, in the form required by Chapter 11 of the Code, of those informal rights; 
10. a copy of the written agreement concluded between the beneficiaries and the Support Organisation; 
11. details of the amount of the subsidy for which application is being made, and the manner in which the amount of those subsidies will be applied; 
12. if engineering services are to be provided, a copy of the agreement concluded with the service provider, which makes provision for the maintenance of those services; 
13. if the participating beneficiaries will obtain credit, details of the credit provider concerned, and the terms and conditions on which credit will be made available; 
14. Details of the certifier and the account administrator that will be appointed by the Support Organisation; 
15. Beneficiary Representatives: the identity of the beneficiary representatives who will accompany the certifier on all his/her inspections and who will co-sign the certifier’s certificates, or the method to be adopted in appointing those community representatives. 
16. Payout Stages: the stages at which the subsidies may be paid by the account administrator, out of the specified account, to the beneficiaries. 
17. Fees for Support Organisation: the fees that the PHDB will pay to the Support Organisation and the time at which those fees will be paid. 

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8.8. After Approval 

1. The PHDB will conclude a contract with the Support Organisation. 
2. The fees due for the land survey work will, be paid by the PHDB to the Support Organisation as a progress draw, and the rules for the progress payment are the same as the rules for the second progress draw set out in Chapter 3. 
3. If it is necessary to install services, or to upgrade services, the Support Organisation must, in the application, to have the project approved : 

• give details of the services that will be installed, and the anticipated costs of those services; 
• indicate the identity of the civil engineer or other person or persons who will design the services and the fees that he/she will be entitled to receive for doing so; 
• indicate whether the Support Organisation will itself install services or whether a contractor will be appointed. 

4. The fees due to the civil engineer for emergency designs and specifications will be paid by the PHDB to the Support Organisation as a progress payment, and the rules for payment of that progress payment will be the same as the rules for the first progress payment set out in Chapter 3. 

• The costs of providing services will be paid by the PHDB to the Support Organisation as a progress payment, and the rules for that progress payment will be the same as the rules for the third progress payments set out in Chapter 3. 

8.9 Subsidy Agreement 

The subsidy agreement that must be signed between the PHDB and the Support Organisation must contain the following:

1. The detail of the project proposal (see section 8.7.3) as approved by the PHDB. 
2. Breach of Contract: the arrangements if a breach of contract is committed either by the Support Organisation or the PHDB. 

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8.10 Key Points to Remember

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