1. Portfolio Committee on Human Settlements 08 March 2016 Review Of Community Residential Units Programme (CRU) Mr. M. Tshangana

2. Contents 1.Purpose 2.Background 3.Findings 4.Key Policy Proposals 5.Consultations 6.Recommendations 2

3. Purpose The purpose is for the Committee to: 1.Note the key research findings on the CRU Study by the Department. 2.Share key strategies for review of the existing policy provisions for the programme. 3

4. Background There are 181 public sector hostels which are owned by Provincial Governments and/or Municipalities excluding hostels for use by municipal employees. The BNG strategy conceptualized hostels as part of the social housing programme which included communal housing, family units and shared facilities. 4

5. Background… The CRU is a sub programme of the Social and Rental interventions and accessible to households earning up to R3500 PM. It is comprised of 8 options: 1.Stabilization option, 2.Demolition option, 3.Refurbishment option, 4.Conversion of other use buildings for residential purposes, 5.New build infill development option, 6.New build Greenfield developments option, 7.Complete hostel development 8.Long term maintenance 5

6. Key Findings 1.Since 2007 an estimated 29 837 units were either developed or refurbished against a budget of R9, 5 billion. 2.The programme was only applied to 78 projects in all Provinces excluding the Eastern Cape. 3.Approximately 89% of undertaken projects used the redevelopment option and or refurbishment of existing hostels. 6

7. Key Findings…cont.. 4. The average cost per unit amounted to R319 301. 5. Size of units range between 46 to 65 sqm. 6. The majority of units were 2 or 3 bedroom family units. 7

8. DEV TYPE NO. PROJECTS NO.OF UNITS TOTAL m 2 TOTAL NATIONAL INVESTMENT AVERAGE COST PER UNIT AVG. COST PER m 2 E. Cape 000000 Free State 56144231 2991 322 679 288215 2805 718 Gauteng 2310 611499 7524 546 719 606428 4919 098 K/Natal 191 68486 923750 284 403445 5378 632 Limpopo 270343 061323 039 000459 5157 502 Mpumalanga total: 799655 071494 911 515496 8998 987 New Build 238622 359230 845 626598 04610 325 Hostel Redev. 561032 712264 065 889432 8958 072 NW Province 772640 380289 266 791398 4397 164 NC Province 145818 320132 628 937289 5837 240 W. Cape total 1485154063441 648 611 494193 6134 057 W. Cape - Refurb 117 560365 8841 362 749 612180 2583 725 W. Cape -New Build 395540 460285 861 882299 3327 065 TOTAL7829 8371 381 150R9 508 141 034 8

9. Findings…Cont.. 7. There are high cost on the demolition of existing buildings and site rehabilitation as hostel were originally built on less than ideal terrain. 8. The CRU grant was to fund the construction of top structures but was used to finance infrastructure upgrades such as water and sanitation including the provision of social amenities. 9

10. Findings…Cont 9. The CRU Implementation Toolkit not used nor known by implementers. 10. A majority of CRU allocations done were driven – by automatic allocation to current hostel residents - Stock was allocated to people earning well above the income threshold. 10

11. Problem Statement 25% of the gross monthly income is only one of the assessment tools to determine affordability. – The lowest estimated monthly rental is R800 per month based on a principle of recovering the monthly operational and admin expenses. – If the qualification criterion of limiting housing debt expenses to a maximum of 25% of gross income is applied, a household must earn at least R3 200 per month to afford a monthly rental of R800. 11

12. Problem Statement Poor Programme Management – Norms and standards nor systems for the long term monitoring and evaluation – High investments on units that are too large and costing more than they would through normal market mechanisms. – Rentals are set below the economic cost recovery rate, forcing municipalities to apply large scale subsidization that is neither affordable nor sustainable – Rental collections of about only 18%. 12

13. Proposals 1.Use CRU as a Capital Grant for redevelopment of existing public sector hostels 2.Shift new build CRU to Social Housing – Income limit of R3 500 be adjusted to accommodate households earning up to R5 500 per month. 3.Approve the set specifications, norms and standards 13

14. Key Proposals 4. Set cost limits on stock to be constructed – Minimum – R139 306 for a Bachelor – Maximum – R395 146 for 2 bedroom Feasibility @ 3.5% Social Facilitation – Per unit @R500 Tenant admin – Per Unit @R350 5. Change the terminology of hostel to affordable rental 6. Improve the CRU management 7. Negotiate funding for CRU engineering Services and social amenities with municipalities. 14

15. Consultation The proposals have been tabled at Policy, Research and Strategy Task Team comprised of Provinces, Municipalities, SALGA and entities – August 2015 – February 2016 15

16. Recommendations It is recommended that the Committee: 1.Note the key findings on the review of the CRU Programme. 2. The Department upon required approval of the policy by Minister and MinMec table the final policy to be implemented 16

17. Thank You 17