Infrastructure

1. (a) There are numerous definitions and measures used to define affordable housing. The Western Cape Department of Infrastructure (DOI) defines ‘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, a specific household would have access to the various housing instruments available.

In terms of the Housing Code, the level of income band that is often referred to as affordable housing are households who have a gross combined monthly income of between R 3,501 to R 22,000 per month. This has often been referred to as the so-called “Gap Market”.  Households in this bracket do not qualify for free housing and are often unable to qualify or 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 recognized benchmark in the South African banking industry particularly for mortgage applications. 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. 

The Social Housing Programme provides well located affordable rental opportunities to households earning between R 1,850 to R 22,000 per month.  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 major challenge with all the various subsidy programmes, including the Social Housing Programme, is that there has been no adjustment to income levels, so as to account for annual year on year inflation and hence the time value of money.  The First Home Finance (FHF) programme, previously known as FLISP, has remained on the maximum income of R22,000 per month for numerous years. Were the appropriate adjustments to have been enacted, the income threshold should be well above R 30,000 per month now. The City of Cape Town has therefore 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 R34,400 per month, as published by the Banking Association of South Africa (BASA).  This amount has recently been adjusted upward to R34,800, 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. The DOI, as indicated in the SCOI on 15th May, have utilised the FSC definition of affordable housing in the recent tender issued for the PPTL site.  This definition therefore aligns the City of Cape Town’s definition. 

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 Settlements 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.

The definition and application of affordable housing in the Western Cape are guided by both legislative and policy instruments.

(b)(i) Legislative instruments include the Constitution of the Republic of South Africa, 1996, particularly section 26, the Housing Act, 1997 (Act 107 of 1997), the Social Housing Act (Act 16 of 2008), the Rental Housing Amendment Act, (Act 43, 2007), the National Credit Act (Act 34 of 2005).

(b)(ii) Policy instruments include the National Housing Code (2009), which categorises households according to gross combined monthly household income to determine eligibility for the various housing programmes and instruments available, the Social Housing Regulations (No. R. 51 of 26 January 2012), the Financial Sector Code (FSC)- Affordable Housing Standards (issued annually by the Banking Association of South Africa).

2. (a)(b) Yes, distinctions are made between affordable housing, social housing and gap housing.

Affordable Housing

Definition:  Affordable housing is a broad term that refers to a range of housing opportunities that are affordable to households based on their gross combined monthly household income. Social Housing and GAP housing both fall under this broader ‘umbrella’. The Financial Sector Code (FSC)- Affordable Housing Standards (issued annually by the Banking Association of South Africa), has effectively created a ‘maximum threshold’ for what is deemed affordable.  This is helpful as it is the only benchmark that it adjusted year-on-year for inflation.  The ‘minimum’ threshold would be determined by the income categorisation for the Social Housing Programme that provides opportunities for the income range of R1,850 to R22,000 per month. The minimum entry point would therefore be R1850.

Eligibility criteria: Effectively affordable housing would be various housing products affordable to families earning between R1,850 up to R34,800, currently.  These products can be in the form of ownership units, or as formal rental units.

Social Housing

Definition: The Social Housing programme provides grant funding in the form of the Consolidated Capital Grant (CCG) which is 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 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 the Social Housing Regulatory Authority (SHRA) mandate affordability whereby rent is specifically structured to be affordable for households earning between R1,850 and R22,000.

Eligibility criteria: Households earning between R1 850 and R22 000 per month may qualify, subject to the criteria of the Social Housing Act and the policies of accredited Social Housing Institutions.

Gap Housing

Definition: Gap housing refers to housing opportunities aimed at households earning too much to qualify for fully subsidised housing, but too little to access conventional housing finance easily. The definition typically refers to individual ownership tenure as compared to rental tenure, such as social housing. This market is primarily supported through the First Home Finance (FHF) programme. For the “Gap Market”, or “gap housing”, the DOI provides for the approval and disbursement of the First Home Finance (FHF) subsidy, previously known as the FLISP subsidy. This is an individual subsidy made available to households earning between R 3,501 to R22,000 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., stockvels), rent-to-buy/instalment sale agreements and employer-assisted housing schemes. The programme also allows beneficiary to provide their own savings/resources. 

Eligibility criteria: - First Home Finance (FHF) households earning between R3 501 and R22 000 per month may qualify, subject to prescribed criteria, including being a first-time beneficiary of a government housing subsidy, not previously owned property, meeting SA citizenship and dependency requirements.

3. (a) The primary affordability benchmark applied is generally aligned to the “30% affordability rule”, whereby a household should not spend more than approximately 30% of its gross monthly income on housing costs (repayments or rent). In the social housing sector, affordability is similarly assessed using income-to-rent ratios, typically structured to ensure that rent remains affordable within the prescribed income bands of eligible households, with internal affordability thresholds applied by Social Housing Institutions and other delivery agents.

(b) These benchmarks are derived from a combination of policy, regulatory and financial practice frameworks. For FHF, the 30% affordability threshold is widely used within the South African housing finance sector and aligns with affordability assessment principles under the National Credit Act, 2005 (Act 34 of 2005), including Regulation 23A, which requires credit providers to conduct affordability assessments based on income, expenses and existing financial obligations.  Social housing is governed by the Social Housing Act, 2008 (Act 16 of 2008) and the regulatory framework of the Social Housing Regulatory Authority (SHRA), which oversees both accredited Social Housing Institutions (SHIs) and other delivery agents (ODAs). Within this regulatory framework, SHRA requires that affordability be assessed as part of the application and allocation process to ensure the long-term sustainability of rental obligations for qualifying households within the prescribed income bands. In implementing these requirements, SHIs and ODAs typically apply income-to-rent ratios as an affordability assessment tool, commonly using thresholds of approximately 30% to 33% of gross monthly household income. This forms part of the broader affordability and risk assessment methodology used to determine whether applicants can reasonably sustain rental payments over time.

4. There is no specific affordable housing framework implemented in the province

(a)(i) The affordable housing programmes are managed within the existing legislative frameworks. The programme effectively is managed based on tenure option. In other words, ownership tenure if focused on the FHF subsidy instrument, and opportunities that this unlocks. The second component is rental tenure, and this has its primary focus on the facilitation of the social housing programme and other rental initiatives, such as mixed use and mixed income developments.

(a) (ii) Currently there is no specific intention to implement an affordable housing framework. The current Western Cape Infrastructure Framework and Implementation Plan over giving guidance to any future frameworks and implementation strategies.

(b) Currently no separate affordable housing framework is going to be implemented.