DIVISION OF REVENUE BILL HEARINGS - 2003

1. DIVISION OF REVENUE BILL HEARINGS - 2003 DEPARTMENT OF HOUSING PRESENTATION TO THE SELECT COMMITTEE ON FINANCE

2. OVERVIEW • INTRODUCTION • PURPOSE OF GRANTS • HOUSING SUBSIDY GRANT • HOUSING ALLOCATION FORMULA • HUMAN SETTLEMENT REDEVELOPMENT PROGRAMME • MONITORING OF PERFORMANCE • MOTIVATION FOR RETENTION AS CONDITIONAL GRANTS • END

3. INTRODUCTION Housing administers two conditional grants: • Housing Subsidy Grant • Human Settlement redevelopment Grant

4. PURPOSE OF GRANTS • Housing Subsidy grant is to finance housing subsidies under the national housing programme • Human Settlement Redevelopment Grant:isto fund projects which are meant to improve the quality of urban environment by addressing the legacy of dysfunctionality

5. HOUSING SUBSIDY GRANT • Past performance • Since 1994 – more than 1,47m houses have been built or under construction and 1,8m subsidies approved benefiting more than 8m people • Subsidies approved in the last 3 years average 235 540 p.a. • Housing units delivered last 3 years average 197 520 p.a. • It is estimated that the programme has maintained average of 350 000 Direct jobs and 325 000 indirect jobs

6. HOUSING SUBSIDY GRANT ( CONT.) • TO DATE THE PROGRAMME HAS ACHIEVED A 61 % TO 39 % SPLIT IN ALLOCATION BETWEEN MALE AND FEMALE HEADED HOUSEHOLDS • SINCE 1994 THE PROGRAMME REPRESENTS AN INVESTMENT R21,309BN BY DECEMBER 2002 INTO LOW INCOME COMMUNITIES

7. HOUSING SUBSIDY GRANT ( CONT.) • Experiencing slowdown in delivery in the past 2 years resulting in average of 15% under spending due to the following reasons: • Transformation/restructuring since 2000 elections and capacity of some Local Authorities • Delaying effects of the Environmental Impact Assessment processes • Land transfer issues • Local Government: Municipal Systems Act, No. 32 of 2000 which has been resolved • Delayed finalization of outstanding issues relating to Job Summit Projects – which has since also been resolved • Deposits to be made by beneficiary towards the warranty of their properties

8. HOUSING SUBSIDY GRANT(CONT.) • Currently the Department is undertaking a Capacity requirement analysis for a new strategy for capacity building processes to address the capacity problems at local governments for housing delivery • The grant provides for funding of emergency housing in accordance with the Grootboom Case Constitutional Court Judgment at 0.5% to 0.75% of allocations

9. HOUSING ALLOCATION FORMULA • Background information to the formula used • 2002/03 allocates funds as a combination of the old formula that was rural/urban neutral and the current formula that is urban biased in order to phase in the new formula by 2004/05 • As from 2004/05 the new formula is expected to have been phased in completely • Use is made of the statistics from Stats-SA as updated by the October survey

10. HOUSING ALLOCATION FORMULA • The formula format is weighting in order of priority of the elements as defined above • A = HN(50%) + HH (30%) + P (20%), where A= ALLOCATION HN= HOUSING NEED HH= HOUSEHOLDS EARNING LESS THAN R3 500 PER MONTH P = POPULATION

11. HOUSING ALLOCATION FORMULA • HOUSING NEED USED IN THE FORMULA IS DEFINED ON A WEIGHTED FORMULA THAT TAKE INTO ACCOUNT THE FOLLOWING : HN = HL(1.25) + SE(1.2) + SBY(1.0) + TC( 1.0) +FR(0.5) WHERE HN = HOUSING NEED HL = HOMELESS PEOPLE SE = SHACKS ELSEWHERE SBY= SHACKS IN BACKYARDS TC = TENTS AND CARAVANS FR = FLAT/ROOMS ON SHARED PROPERTY

12. PROVINCIAL ALLOCATIONS

13. HUMAN SETTLEMENT REDEV. PROGRAMME • Introduced in 1999/2000 as pilot programme started very slowly at R20m p.a. and grew to current levels of over R100m. • Addresses dysfunctionalities in Human Settlements • Expected to accelerate delivery as guidelines are developed taking into account experiences learnt in the last two years. • Currently there are 123 projects approved throughout 9 provinces on a multi year basis with a gross commitment value of R302m • 29 projects targeted to the Presidential Urban Renewal and Integrated Sustainable Rural Development Nodes. • Current allocations are 2003/04 – R109m; 2004/05 – R116m; 2005/06 – R122m .

14. H.S.R.P PROVINCIAL ALLOCATIONS

15. MONITORING MECHANISMS • Monitoring is performed in accordance with requirements of the DORA on a monthly basis • The Department has developed specific and targeted monitoring frameworks for monitoring the grants • Project performance reports are used to determine project that are stalling and underlying reasons • Department has installed a Transversal system which is being rolled out to provinces (HSS) • Provincial reports are presented to MinMec, H.O.D meetings on a quarterly basis • Structured Quarterly Provincial visits take place targeting especially provinces that show low expenditure

16. MOTIVATION FOR RETENTION AS CONDITIONAL GRANTS • It is proposed that these grants continue under the current mechanisms in order that the Minister of Housing can fulfill her functions adequately • The current mechanism provide the basis for uniform norms and standard across the country • The Human Settlement Grant provides for the corrective mechanism for addressing dysfunctional settlements and provides the department with the lessons as basis for policy intervention • It is confirmed that the Housing Grants meet with the Constitutional requirements – S214

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