(gri FS14) Home ownership can help families build their wealth and assets over the long term and support the development of communities. Standard Bank South Africa is committed to finding sustainable solutions that increase access to affordable housing finance for customers. Our approach is to finance quality affordable housing units priced between R250 000 and R550 000. The household income level for units we finance is generally between R5 500 and R15 000 a month.
Home loans for low-income customers
Our target is to grow our affordable housing home loan book in a responsible manner to R24 billion by 2015. We are on track to meet this target and currently have a 35% share of the affordable housing market in South Africa. We are also focusing on improving our risk management capability through subsidy schemes or risk-sharing strategies that improve affordability.
We continuously look at the relevance of our offering and policies given market dynamics and the changing economic circumstances of our customers. Particular challenges in providing housing finance to low-income earners include a lack of credit records and high levels of indebtedness. We review our affordability calculations regularly and aim to provide a holistic solution that looks beyond only the affordability of mortgage repayments. Assessing this market requires a somewhat different approach, so we will consider factors such as combined household income and the contributions other family members make towards expenses. We welcome the South African Government’s revised subsidy scheme which is expected to benefit households that earn below R15 000 a month, further increasing access to home ownership.
During 2012, we financed R3,6 billion in affordable housing loans through 18 237 home loans. Some 80% of this finance was disbursed to first-time home buyers. Low-income earners who belong to pension and provident funds can enter into finance agreements with Standard Bank’s Pension-backed Lending unit to buy, build or renovate a home. In 2012, this unit issued loans to the value of R413 million.
We are piloting a borrower education intervention for first-time home buyers on managing home ownership, their rights and obligations, and steps to take if they are unable to meet their monthly payment obligation. We also encourage customers to consider other provisions such as a valid will and life insurance to protect their families should the breadwinner die. During 2012, 205 customers participated in this programme. The pilot will be used to develop a borrower education programme that will be compulsory for all first-time home buyers.
Last year we piloted a rent-to-buy housing model designed to help customers with impaired credit records qualify for home loans. From this we have learnt that we need to help these customers with rehabilitation on a sustainable basis to prevent them from continuing with behaviour that leads to impaired credit records. We will continue to explore this model for customers who have been rehabilitated.
Affordable housing developments
We fund affordable housing developments which include the South African Government’s subsidised housing, affordable and medium-income housing, rental housing, as well as social and commercial facilities. We primarily operate as a financing partner and provide solutions such as debt and equity funding to experienced developers and public sector entities.
We also fund inner city redevelopments through assisting investors with refurbishing and upgrading inner-city buildings or converting commercial office buildings into residential developments. We enter into strategic partnerships with organisations that act as intermediaries for smaller inner city investors who would not necessarily qualify for finance through our conventional lending criteria.
In South Africa, barriers to the supply of affordable housing stock include escalating building costs and the availability and price of well located land with bulk services such as water, electricity and sewerage infrastructure in place. Added to this are long process delays due to complex legislation and regulation, and capacity constraints at provincial and municipal levels. In addition, there are only a few established developers active in the affordable housing market, a market that is recognised as high-risk with low margins and requires development at a large scale.
To address these challenges, we work with property developers, local and international development finance institutions and government agencies to promote effective partnering in the housing value chain. These partnerships are essential, particularly between the private and public sectors, so as to leverage economies of scale to benefit all stakeholders. Examples of this include our work with the National Housing Finance Corporation and the European Investments Bank to lower the cost of funding affordable housing developments, and entering into land availability agreements with local and provincial governments to facilitate development.
At December 2012, 906 affordable housing units were completed with a further 743 units under construction. Financing for affordable housing developments amounted to R346 million. Over the next three years, our target is to provide development financing to complete the construction of a further 6 700 housing units.
We promote environmental considerations and alternative technologies that use renewable energy, such as solar water heaters, in residential development projects. We also encourage the use of passive design considerations such as the optimum use of public transport, facilitating ease of pedestrian movement and proper orientation of residential units. Where feasible, we promote the clustering of social, retail and other amenities such as parks, taxi ranks, schools, shops and sporting facilities in the design concept of integrated residential developments.
Together with the Sustainability Institute of South Africa, we developed a guide for ‘greening’ low-cost housing. The guide is aimed at developers and decision-makers that are in any way involved in the development of human settlements. A sustainable housing calculator enables users to calculate additional cost incurred from implementing a selected green intervention, the reduction in carbon emissions that can be achieved and how long it will take for the homeowner to recover the additional cost from the savings achieved.
Case study: affordable housing developments
Extract: An example of Standard Bank’s commitment to uplifting inner cities is 120 End Street, a residential and retail development project in Doornfontein, Johannesburg. Currently, the 120 End Street development project is the largest conversion of a disused commercial inner city building in the southern hemisphere. The 47 000m2, 26-storey high-rise building was converted into 924 affordable rental apartments and includes a ground floor retail section to serve the residents.
|Affordable housing loans|
|Number of affordable housing accounts||89 487||76 176||72 994|
|Number of affordable housing loans granted during the year||18 237||9 500||N/A1|
|Number of pension-backed lending accounts||69 096||13 907||15 823|
|Affordable housing finance|
|Affordable housing developments||Rbn||0,3||0,1||0,2|
|Total finance disbursed to affordable housing||Rbn||4,3||3,8||2,9|
|Note: for South Africa only.|