Infrastructure

(1) Interventions are based on the nature and cause of the delays relating to specific projects. The MAHAMA Housing Project is a City of Cape Town project developed on land which is partially owned by the National Government. The City of Cape Town is communicating direct with the National Department of Public Works and Infrastructure about the transfer of a number of the sites. The electrification of informal settlements is a function of the City of Cape Town.

(2)(a) Given the diverse circumstances of various inner-city housing projects it is not helpful to generalise concerning any ‘prolonged delays and affordability concerns’. As in the case of the response to (1) above information can be supplied for identified projects. 

(2)(b) There are numerous definitions and measures used to define affordability. The Western Cape Department of Infrastructure defines and ensures affordability through the categorisation of monthly income levels.  The National Housing Code (2009) requires that income levels be defined as the gross combined monthly household income. Based on this income categorisation, the specific household would have access to the various housing instruments available.  

The Housing Code makes provision for families earning between R 0 to R 3,500 per month. These households can often be referred to as "indigent" or "vulnerable" households. For this group, affordability is defined as a zero-cost capital grant. These households qualify for fully subsidised units (Breaking New Ground units, formerly know as “RDP”) or serviced sites under the Integrated Residential Development Programme (IRDP). Many of the municipalities also provide further “indigent relief policies” to this income grouping such as reduced or free basic services and/ or highly discounted utility rates and charges. 

In terms of the Housing Code, the next level of income band and defined affordability are households who have a gross combined monthly income of between R 3,501 to R 22,000 per month. This has often to be referred to as the so-called “Gap" Market”.  Households in this bracket do not qualify for free housing and are often unable to qualify and afford to buy a property by means of a home loan or mortgage bond on the open property market. Affordability within this category is typically defined by the “30% Rule”: the principle that a household should not spend more than 30% of its gross monthly income on housing repayments or rent. This is a widely recognised benchmark in the South African banking industry particularly for mortgage application and banks still use this as a primary screening tool or an internal risk threshold.  Instead of a fixed percentage, Section 81 of the National Credit Act (NCA) and the Affordability Assessment Regulations (Regulation 23A) require credit providers to take "reasonable steps" to assess a consumer's: financial means and prospects; existing financial obligations; debt repayment history and minimum living expenses. 

For the “Gap Market”, the Department provides for the approval and disbursement of the First Home Finance (FHF) subsidy, previously known as the FLISP subsidy, which is an individual subsidy made available to households earning between R 3,501 to R 22,000 who are able to purchase a house or serviced stand. The quantum of subsidy is based on a sliding scale dependant in the beneficiary’s income. The lower the income, the higher the grant, effectively reducing the principal loan amount and ensuring the resulting monthly bond meets the 30% affordability threshold.  The programme has been "de-linked" from traditional mortgages. One of the most critical shifts in recent years is that FHF is no longer strictly "finance-linked" to a traditional mortgage bond from a major bank. One can now access the subsidy by means of: pension/ provident fund-backed loans; unsecured housing loans from registered lenders; co-operative or community-based savings schemes (e.g., stokvels); rent-to-buy/ instalment sale agreements and employer-assisted housing schemes. The programme also allows applicants to provide their owns savings/ resources.  

The Department has piloted several initiatives to assist families in the R 3,501 to R 22,000 income category. This has included Mill Park Deferred Ownership project as well as the Melkhoutfontein Incremental project, specifically aimed at assisting families in the R 3,501 to R 7,000 income category.

The Department has actively facilitated the Social Housing Programme, that provides well located affordable rental opportunities to households earning between R 1,850 to R 22,000 per month. The social housing programme provides a sustainable means of providing a significant number of rental opportunities to families within the R 1,850 to R 22,000 category.  In terms of affordability within the rental sector, most letting agents and landlords use the 33% rule as an internal risk management tool. They will typically require a tenant to prove a gross monthly income of at least three times the monthly rent to ensure the tenant can realistically afford the unit. 

The Social Housing programme provides grant funding in the form of the Consolidated Capital Grant (CCG) and this gets administered by the Social Housing Regulatory (SHRA). The CCG enables social housing developers, either a social housing institution (SHI) or other delivery agent (ODA), to develop affordable rental units within Restructuring Zones. The grant funding enables the social housing units to be rented out at far below market related rentals and so households earning between R1,850 and R 22,000 per month can be assisted and accommodated. The "higher-income” rental units cross-subsidise the operational costs of the units for those closer to the R1,850 mark. The Social Housing Act (2008) and the regulations set by SHRA mandate affordability whereby rent is specifically structured to be affordable for households earning between R1,850 and R22,000 per month. 

The major challenge is that the various subsidy programmes have not been adjusted to account for annual year on year inflation and hence the time value of money.  The FHF programme has remained on the maximum income of R 22,000 per month for numerous years. As a result, the income threshold should be well above R 30,000 per month.  The City of Cape Town has adopted the definition of Affordable Housing with their Municipal Spatial Development Framework (2023). The definition states that: “Affordable housing should be primarily targeted at households earning between R3,500 a month and the upper threshold of the Financial Sector Code Affordable Housing Standards, currently R27,200 in 2023 (in 2018, these were households typically earning R22,000 or more). The 2021 Financial Sector Code Affordable Housing Standards define the affordable housing target market as households earning an upper income limit of R26,100 (rounded) (BASA, 2021). Any housing provision that complies with the definition of the Financial Services Sector, annually updated by using the midpoint between the Consumer Price Index and Building Cost Index, is considered as Affordable Housing in terms of the MSDF. With contributions from the State – in subsidies, land, or other development incentives – the National Department of Human Settlements’ upper threshold of R22,000 can be applied and a deeper reach into the lower income bands of the affordable housing market can be achieved.”

The last Financial Sector Code (FSC) definition of what constitutes ‘affordable income’ for 2025 was an amount of R 34,400 per month, as published by the Banking Association of South Africa (BASA). This amount is still to be adjusted upward for 2026.  The principle of affordable housing being linked to the Financial Sector Code definition should be supported, as this is the only definition that is currently linked to inflation and adjusted on an annual basis. Any definitions need to account for this in order to remain relevant and for the Department to adequately respond. By adopting the FSC definition, other forms of private sector funding can be accessed to increase the delivery of much needed affordable housing. Increasing the maximum income threshold, allows for further cross-subsidisation on the lower income levels, so enabling a mixed-income development model.  The National Department of Human Settlement is currently considering a policy change for the maximum income threshold for both the FHF subsidy and the social housing programme to be increased to R 30,000 per month.  The concerns are however that this proposed threshold is already far behind.