Affordable Housing Institute

American and other creature

Function or utility

Analog in the United Kingdom

Analog in the South Africa

Accrued but unpaid interest

Interest that is not paid currently but is recorded in the financing accruals (and hence is typically deductible) and is payable only on some future event: note maturity, property sale, property refinancing, conversion to market use. Serves two purposes: (1) creates non-cash tax losses (hence increases shelter value) and (2) accumulates into a contingent 'exit toll' that may inhibit or prevent market conversion.

This is an accounting fundamental and exists wherever interest is not paid at an accounting date.

Yes, as an accounting matter – but not used as an active tool either to finance soft equity or to create ongoing affordability.

Affordable Market

Relative term relating to moderate-income households in the housing market.

This is the term used by the housing finance sector for consumers who can afford the repayments on housing units costing between R80 000 and R100 000. They are regarded as affordable by households earning just under R3500 – the maximum income limit for eligibility for the state housing subsidy. Loans for buying these units are offered by small banks and non-bank lenders, most of which access NHFC wholesale finance. This segment should also include households that can afford to buy housing units priced from R35 000 to R80 000. However, despite the activities of the NHFC, such units are generally not available..

Affordability covenant

A pledge by an owner to maintain a particular property as affordable (according to a stated definition) for a specific interval of time (typically 20-40 years). Normally secured by a government entity in exchange for a financial or other government concession. Normally reflected in a Use agreement and recorded as an encumbrance against title to the land.

Yes. Local authority (council housing) is now largely being transferred to Housing Associations via Housing Corporation Approved Development Programme Grant (AHDP). Affordability generally in perpetuity. Homeownership component.

Yes. This is variously applied in the South African context:

• Institutional subsidy (see block grants): in terms of this subsidy mechanism, landlords can only rent subsidized units to eligible beneficiaries (i.e. households earning less than R3500).
• Some cooperatives operate similar to the US “limited equity” model, in which rentals are specifically kept affordable for members.

Allocation mechanisms

Certain scarce resources are allocated to sub-units of government (typically state) in finite amounts. The allocators then compete the resource according to a fixed set of scoring rules (typically called a Qualified Allocation Plan, or QAP).

Allocation by central government to local authorities - national formulae. Allocation by Housing Corporation to housing associations by regional offices in accordance with regional and local strategies.

Money from the South African Housing Fund is allocated to the nine provinces for the purposes of financing the implementation of any national or provincial housing programme that is consistent with national housing policy. The Minister allocates the money to the provinces on the basis of criteria determined by the Minister after consultation with the nine MEC’s for Housing in the nine provinces. Criteria are determined on an annual basis and include:

• housing backlog in the province
• household income (defined by number of households in the various subsidy bands)
• ratio of urban to rural areas
• performance of the provincial government

The allocation per province varies from time to time given their progress in addressing the housing backlog and the specific criteria defined for each year.
Section 12 of the Housing Act (No 107 of 1997) governs the allocations process.
Allocations to local governments from the national fiscus are made in terms of what is referred to as an “equitable share”.

Block grants

A Federal or state program that provides one-time up-front cash grants for designated public purposes; awards are usually made by an intermediary state or local agency. (For tax purposes, grants are occasionally restructured as low-interest loans with accruing financing.) The US trend is to converting an ever-greater share of Federal housing resources to block grants.

Special programmes in some localities.

South Africa offers a number of block grants. The most significant in respect of housing is the Housing Capital Subsidy. This subsidy was introduced in March 1994 to replace all previous government housing subsidy programmes, and is the basis around which the national housing policy operates. It is offered as a single, lump sum grant to eligible households on a once-off basis. Eligible applicants must:

• Have a household income (combined income from all members) of no more than R3500 per month.
• Be a South African resident
• Be legally competent to contract
• Have dependents (a spouse, children, parents)
• Have never before received state funded housing assistance

The amount of subsidy awarded is dependent on the household’s income, and ranges from R7000 for households earning between R2500-R3500 per month to R20 300 for households earning up to R1500 per month. It is available through a range of mechanisms:

• project linked and individual subsidies, providing ownership tenure for houses built either by developers or by the beneficiaries themselves through the "peoples housing process"
• consolidation (or "top-up") subsidies providing a grant to improve housing developed in terms of previous subsidy dispensations (prior to 1994)
• institutional subsidies, providing a grant to a housing association or landlord who provides housing for rent to eligible beneficiaries
• relocation assistance offered to borrowers who, on 31 August 1997 were at least three months in arrears, to assist them in relocating to affordable housing

Other block grant programmes are targeted at a macro level, at eligible local authorities. Of these, the Consolidated Municipal Infrastructure Programme grant is the most relevant for housing. This grant is allocated by national government (the Department of Provincial and Local Government) to local authorities for investment in bulk and connector services. The CMIP has two primary objectives:

• To provide funding to municipalities to minimise backlogs through the provision of at least basic levels of infrastructure services to low-income households within a period of 10 years.
• To support government’s housing programme.

Bridging finances

Finance required only for a limited period in order to enable production which will generate income to repay the finance.

An important emphasis of South Africa’s housing policy has been on broadening and deepening the housing supply sector, and on the role of the emerging builder therein. Prior to 1994, housing development was the domain of established developers and to the extent that there was any growth, this happened within the five established construction companies. In supporting the role of the emerging builder, bridging finance has been critically important, as such builders haven’t the capital to carry the costs of development until they are paid for their services. However, risks associated with any emerging market made it extremely difficult for such builders to access the necessary finance to participate. It was in this context that Nurcha was established. Since then, other, private financiers have also entered the bridging finance market, specializing in providing finance as well as support to emerging builders. See Quango.

Building and housing standards

State-defined guidelines for human settlement planning and design, as well as construction.

Building standards are defined in the Red Book, published in March 2000, the Red Book provides guidelines on all human settlement planning and design issues, ranging form a new planning philosophy to detailed guidelines on infrastructure provision, such as water, sanitation, roads, alternative energy sources, etc.
For housing built with the government’s subsidy (see block grant ) the government has instituted national minimum norms and standards. These specify a range of details including a minimum house size of 30m_, and minimum levels of water, sanitation, roads, stormwater and streetlighing.
The National Home Builders Registration Council is responsible for ensuring that builders adhere to standards as set out in the Red Book and elsewhere and that they follow a code of practice involving ethical and technical standards. All South African builders are required to register with the NHBRC and to provide a standard industry warranty on their work. Failure to honour the warranty in the event of defect would result in de-registration and the builder’s exclusion from the housing market entirely. See Quango.

Capital gains tax exemption

Waiver by government of its tax claim on the appreciation in a single-family home when sold by the homeowner.

(Available in USA on sale of primary residence and purchase of a more expensive one or sale by a homeowner older than 59½.)

Yes.

Additionally, (1) stamp duty exemptions are available on the acquisition of properties in defined, deprived areas of the UK within certain limits, (2) capital gains tax exemptions are available on certain gifts and transfers relating to housing associations, local authorities, and the Housing Corporation, and (3) to the extent that a property is used for business proposals, reduced rates of capital gains tax may be payable on gains made by individual vendors.

Capital Gains Tax also applies in South Africa but not in respect of the family home. Capital Gains Tax does apply on the household’s second property.

Charitable contribution deductions or exemptions

Deductions from personal income subject to taxation for donations (of cash or property) to recognized charitable organizations (certified as such by the Internal Revenue Service). In effect, creates a tacit partial match by the government (via tax expenditure, that is foregone revenue) for any donation in designated areas.

Yes. UK charity law was first codified in the statute of Elizabeth I in 1601 (nineteen years before the Founding Fathers reached Cape Cod!). Current charity law is extremely important to the 'social housing' sector as a high proportion of housing associations benefit from charitable status which carries with it valuable tax exemptions.

Some donations qualify for tax deduction and these are specified in the Tax Act. Donations for housing-related purposes do not qualify for tax exemption and must be made after tax. This is true unless the donating body is a listed public company, in which case such donations can be counted as a business expense and therefore tax exempt.
Some Housing Associations are themselves tax-exempt, in that they are exempt from paying tax on income. This is subject to their tax-exempt status in terms of Section 10 of the Income Tax Act. South Africa’s entire tax regime, including Section 10 of the Income Tax Act, is currently under review. This process is expected to lead to a rationalized and streamlined tax regime in South Africa.

Collection methodologies

Methods used by financiers to collect loan repayments from borrowers.

Collection methods are a critical aspect of risk management in the low income housing loan sector. A few options are available:

• Payroll deduction, in which a lender enters into agreement with an employer that the loan installment will be deducted from the employee's salary and paid to the lender directly. This allows the lender access to the installment due before the employee has an opportunity to spend their salary.
• Standard debit order, in which a borrower instructs their financial institution with whom they hold a transaction account to pay the lender the installment owing. This approach avoids cash-based transactions but does face the risk of the borrower spending the money in the account before the debit order transaction (specified for a certain date of each month) goes through.
• Preferred debit order, similar to above, but in which the lender in question is given preferential status and is paid on the installment owing before any other possible creditor (credit card, shop account, etc) is paid. While this works well for the preferred creditor, it undermines the access of other creditors and involves greater risk on their part.
• Direct cash collections, in which loan collectors go door to door to collect repayments on a monthly basis, or in which the borrower brings the repayment in to a central repayment facility.

Community Reinvestment Act (CRA)

A Federal statute (enacted in 1977) aimed at forcing financial institutions to reinvest in communities from which they draw deposits. Details available at http://www.ffiec.gov/CRA/default.htm.

Institutions are rated annually (Outstanding, Satisfactory, Unsatisfactory) based generally on the level of new investment they have made in their service areas, and whether it is lending or equity investment. Ratings are outcome-oriented (guidance is sparse) and change with market evolution.

Ratings are especially scrutinized whenever banks combine, merge, or are acquired Ð and when they do, community activists have a seat at the table to extract reinvestment pledges.

As a result, financial institutions are always seeking CRA-qualifying loans and investments, and they carry lower yield requirements in consequences.

No.

However, the government's CITC consultation document surfaced the idea that the banks should voluntarily report this information so the government need not propose legislation to compel them to do so.

Of course, even if legislation were proposed, it might well not be enacted, or not enacted for a very long time.

South Africa is developing its own CRA legislation, based on the American model, and a draft Bill is currently the subject of debate.
The Bill introduces the concept of prescribed lending targets for lower and moderate income households. A proposed “Office of Disclosure” will analyse data received from financial institutions, and will monitor their progress in meeting CRA targets. Redlining is specifically prohibited.
The Department of Housing (DoH) has, however, come under some criticism from the financial sector. Of particular concern is that the housing market has not yet normalized sufficiently to allow for such coercion within the framework of sound and prudent lending. The draft Bill currently available from the DoH website is being substantially redrafted to accommodate some of these concerns.
The proposed Bill forms part of an expected triad of legislation beginning with the already promulgated Home Loan Mortgage Disclosure Act (Act No 63 of 2000) – see Mortgage Disclosure, below, and including The Promotion of Equality and Prevention of Unfair Discrimination Act, 2000.

CMBS

Collateralized mortgage-backed securities, issued by secondary mortgage market makers (e.g. Fannie Mae) to pool existing mortgage loan products.

No.

Yes. CMBS’ do exist in South Africa though the market is still underdeveloped. See secondary mortgage market or securitization of mortgages.

Cooperative (co-op)

Collective non-profit entity that owns a property and is in turn owned by shareholders who are themselves the residents. (Technically, owning a share entitles the holder to rent one specified apartment in the property.) Co-ops can thus include in their governance restrictions on purchase and sale, including limitations on who can buy or sell and at what price.

Co-ops exist. Members have £1 share. Most are housing associations registered with the Housing Corporation.

Yes. Co-operatives are formed in terms of the Co-operatives Act, No 91 of 1981. This legislation is targeted primarily at agricultural co-operatives. Housing co-operatives are relatively new in South Africa, and are registered by the Registrar of Co-operatives as “trading cooperatives”. The most established cooperative at this stage is Cope Housing Association. Currently it manages in excess of 528 units ac
The legislation is currently under review and a new Bill which should better accommodate the housing application of the cooperative concept is expected. Responsibility for cooperatives has been shifted from the Department of Agriculture to the Department of Trade and Industry.

Credit enhancement

Private entities that guarantee payment on individual or pooled mortgages.

No.

Yes. Known as guarantees, credit enhancement is a standard requirement in the affordable housing market, given the limited availability of mortgages. The Home Loan Guarantee Company (HLGC) and Nurcha both provide guarantee products that are specifically targeted at affordable housing clients, though private insurers also operate in this market. Also see pledging of assets.
Nurcha and NHFC (see Quango) together with the HLGC provide wholesale guarantees which guarantee the obligations of social housing institutions.

Credit gap

The income and product price range where credit is not available.

Also referred to as a black hole or a product gap. Because of the risks associated with the moderate income market, a credit gap has emerged for households earning less than approximately R6000 per month. Although such households might be able to afford regular monthly repayments, their income profile, as well as the nature of the house they might buy, has meant that finance is largely unavailable. This is especially true in respect of mortgage finance where the house isn’t considered sufficient security against a loan. This has a perverse impact on the housing market and access to housing as experienced by low to middle income households. Households earning less than the subsidy eligible ceiling of R3500 can access subsidized housing. Households earning more than that ceiling however, can neither access the subsidy nor the finance, and are consequently often less well housed than those who earn less.

Depreciation

Annual allowance, deductible against income (and hence passed through to owners or partners), computed as a fraction of the property's basis (typically, its cost). Has the effect of providing a tax expenditure that makes owning rental property more attractive. Can be differentially allocated to affordable housing in exchange for affordability/ rent concessions.

Yes in accounting, no for tax benefit. Tax relief not available in the UK in respect of depreciation charges. (As part of the move to align tax treatment with accounting requirements, this is under review by the Inland Revenue.)

Depreciation on capital assets is specified in the Tax Act, and will assist in reducing the taxable income on rental property. It only applies for a certain number of years. It is not generally used for cross-subsidisation purposes in affordable housing, and is insignificant in financial calculations.

Developers, multifamily ownership

Private companies that will build, acquire, renovate or reposition properties for eventual occupant ownership (condominiums or similar).

Yes. Also Housing Associations who use private funding.

Yes. Also Social Housing Institutions, Housing Associations and other landlords who use private funding and/or who access the institutional subsidy. In the past, there has been very little new-build in this housing form in the affordable housing market– refurbishments of inner city flats, or conversions of office space have been more common. This is now changing, though affordability levels of the clients still make refurbishments and conversions more affordable, and in the case of these units, rental tenure is more common. The few new-build multifamily developments that are targeted at the affordable housing market are using a deferred ownership mechanism known as installment sale. New-build of multifamily ownership is very common in upper income segments of the market – condominiums and town houses.

Developers, multifamily rental

Private companies that will build, acquire, renovate or reposition properties for multifamily rental occupancy.

Yes. Also Housing Associations who use private funding.

Yes. Also Social Housing Institutions, Housing Associations and other landlords who use private funding and/or who access the institutional subsidy. Multifamily rental is far more common than multifamily ownership, above, though the same affordability considerations apply.

Disposal of state owned stock

A practice whereby local authorities dispose of their public housing to private individuals or companies. See housing authority.

The Discount Benefit Scheme – a national programme applied in local jurisdictions – was introduced in 1994 to assist residents of state-financed rental housing to acquire ownership by offering a discount on the selling price of their unit. The “discount” in many cases effectively cleared the selling price, allowing the residents to receive title for little or no cost.

Eminent domain

A legal right conveyed on government whereby the government may, upon a finding of need, take a particular property by action of law notwithstanding the owner's unwillingness to sell. Government must then pay the owner fair market value of the property taken (adjudicated in court if necessary) and the unwilling seller is exempted from capital gains taxes resulting from the sale. Often used in urban renewal contexts.

Yes, compulsory purchase authority.

A compulsory purchase order (CPO) is made either by a planning authority (a local authority) under planning powers or by a regional development agency.

CPO's usually result in compensation greater than the property's market value.

Yes. Referred to as expropriation. The “Property” clause in the Bill of Rights (Section 25) of the Constitution of the Republic of South Africa, 1996 (Act No 108 of 1996) states that 25(2) “Property may be expropriated only in terms of law of general application – (a) for a public purpose or in the public interest; and (b) subject to compensation.” Compensation is determined by a court, and must be 25(3) “just and equitable, reflecting an equitable balance between the public interest and the interests of those affected.” Expropriation is governed by the Expropriation Act, No 63 of 1975. While expropriation has been common for the development of freeways, missile testing, game reserves and so on (the proposed Gautrain rapid light rail project in Gauteng is expected to involve substantial expropriation), the South African government has been hesitant in using this right for land reform. To date, only one expropriation case was tried for land reform and the government failed in its efforts.

Erf number

Also known as stand or plot number; different from address.

The number of the erf in a township as per the layout or general plan.

Exemption from property taxes

Waiver by government of any claim to local property taxes, based on a condition of the property or its ownership.

In the US, §501c3 non-profit organizations (e.g. churches, universities) are generally exempt from property taxes. (For this reason, when they acquire formerly taxed properties, they normally negotiate a contemporaneous PILOT.)

See PILOT.

Property that is vacant — unoccupied or undeveloped — may be exempt from local taxation. This encourages inexpensive land-banking of otherwise desirable land.

No, though various recommendations have been made in this regard.
There have been instances whereby local authorities allow charitable institutions forgo their property tax responsibilities, though this has never been realized in housing.

Fixed-rate long-term debt instruments

Borrowing where the rate is fixed at inception. A critical tool in underwriting acquisition/ construction of rental housing. See yield curve.

UK and US similar.

Limited. Generally interest rates are not fixed for longer than a three to five year term. The volatility of interest rates in South Africa has made such an instrument unviable.

Government Sponsored Entities (GSEs)

Private corporations, chartered under Federal law, that have a unique status (and an implied but not stated Federal credit enhancement of their paper). Today there are two principal ones: Fannie Mae and Freddie Mac.

No.

Yes. In the wake of the 1994 democratic elections and the promulgation of a new housing policy in December 1994, a number of such entities were established. These are referred to as “national institutions established by the Minister” in the Housing Act, 1997 (No. 107 of 1997), Sections 3(4)(h) and (6) and (6A). They include:

• the National Housing Finance Corporation (www.nhfc.co.za)
• the National Urban Reconstruction and Housing Agency (www.soros.org/nurcha)
• the Social Housing Foundation (www.shf.org.za)
• the National Home Builders’ Registration Council Their identification as “national institutions” in terms of the Act entitles them to receive allocations as the Minister defines, from the South African Housing Fund.

Hostel

A publicly or privately owned commune housing workers.

South African hostels generally house migrant workers who have come to their employment without their families. As a housing category they are associated with the apartheid era of influx control and segregation. They are most common in the mining industry. Hostels are generally single-sex, and in terrible condition. Workers generally share sleeping quarters with as many as ten or more workers per room (though about four workers is common). Group ablution facilities serve the residents.
Since 1994, there has been an effort on the part of both the public and private sectors to redevelop hostels and improve the living conditions of their residents. In some cases this has involved converting hostels into family accommodation. In others, simple shared or single flats have been developed. These are then offered to residents at a calculated rental, which is included within their wage package. Mining houses especially note the importance of the housing in attracting and retaining quality workers.

Housing authority

A local public body, typically an arm of local government (such as a city, town, or county in rural areas), that owns and operates the low-end affordable housing. Receives Federal subsidy (operating subsidy to cover annual costs, improvement funds for construction/ renovation) on a wholesale basis, subject to complex formulas.

Yes, local authorities. Major privatization underway: Local authorities are transferring thousands of apartments annually to housing associations because of accumulated capital backlog and need for revitalization.

Housing Authorities have existed in South Africa – for instance, in the Durban municipality, the Durban Corporation owned and managed public housing stock. Even so, housing has historically tended to be on the local authority’s books rather than ring-fenced in a special agency. Since 1994, the emphasis has been on disposing of local authority-owned stock. See disposal of state owned stock.
Another trend has been the establishment of private, independent Housing Associations by local governments who retain some control through their shareholding or representation on the Board. These Housing Associations offer housing either for rent or in some cases, also for ownership through installment sale agreements. Examples can be found in the Greater Germiston Inner City Housing Corporation in Germiston, First Metro Housing in Durban, and elsewhere.

Housing finance agency

A public body, typically an independent offshoot of the state government, that is in the business of financing long-term debt instruments to support construction, acquisition, renovation, and preservation of affordable housing. Typically awarded one or more scarce Federal resources (volume cap bonds, tax credits, soft secondary debt) which in turn it allocates to individual properties or sponsors (see Block grants).

Housing Corporation: a quango agency of the Department of Transport, Local Government and the Regions. Finances and regulates housing associations.

The National Housing Finance Corporation (see Government Sponsored Entities, above). The National Housing Finance Corporation (NHFC), www.nhfc.co.za, is a wholesale financier that funds housing lenders so that they may on-lend to end-users with monthly incomes of up to R6000. End user loans are secured either by mortgage or by some other form of security (such as the borrower’s pension-provident fund withdrawal benefit). Interest rates are not subsidised, but priced appropriately for risk. The NHFC’s main contribution therefore is that it has made housing finance accessible to low income households who cannot access private finance because of high risk perceptions.
The NHFC was established by the Department of Housing in 1996 with a once off amount of R880 million and no prospect of further state funding. Its mandate is “to search for new and better ways to mobilise, raise and deploy finance for housing from sources outside the public sector and in partnership with a broad range of organisations.”
The Rural Housing Loan Fund (RHLF) is similar to the NHFC with the exception that it targets households living in rural areas. The RHLF was established by the Department of Housing and the German Reconstruction and Development Bank (KfW) with a German government grant of DM 50 million in 1996. The primary objective is to improve basic living standards of low income rural people through the provision of funding to qualified intermediaries (housing lenders). End user loans are not secured with the house; many houses funded with RHLF loans are on communal land or in informal settlements. As with the NHFC, loans are not subsidised, but are rather priced appropriately for risk.

Inclusionary zoning

A statutory requirement, normally adopted at the state level (although could be used at a national level), requiring localities that receive revenue sharing from the state government to assure that a percentage of their housing stock must be affordable.

Local authority planning powers (Section 106) that require developers to provide a percentage of 'affordable housing' (either rent or sale) as a planning requirement.

No.

Installment sales

A deferred ownership mechanism in which the purchaser pays installments towards the purchase price of a unit. Once an agreed threshold of payment has been achieved (usually set at 50% of the purchase price) the purchase may elect to take transfer of the property. Transfer is effected through the balance of the purchase price being paid, usually through some form of loan agreement. In the interim, ownership rests with the developer, landlord or Housing Association.

Installment sale, under the Alienation of Land Act, is a South African ownership mechanism sometimes used in multi-unit developments in conjunction with sectional title.
Because of the inaccessibility of housing finance in the affordable housing market, a number of Housing Associations have been playing the role of financier in installment sale arrangements. In this context, they are the title holder of the unit until through the regular payment of installments results in the full purchase price being paid. In subsidized housing schemes, such transfer can only happen after a minimum of four years.

Integrated development plan

A municipal development plan usually covering a five year delivery horizon.

Integrated Development Plans were first introduced in the Development Facilitation Act, 1995 and the Local Government Transition Act, 1995 as a mechanism for local authorities to carry out their development role. IDPs address the short, medium and long term development future for the municipality. As the term implies, they integrate across sectoral divisions (housing, health, transportation, education, commercial activity, etc.). They are implemented in South Africa using a participatory process in which local level stakeholders can comment on and influence the final plan. All housing development, whether affordable or middle to upper income, whether initiated at a provincial or local level, must align with the local IDP.

Leases

Agreements between an owner and a tenant for a fixed rent for a finite time (typically, one year) with neither party having any obligation to the other at lease-end.

Several variants:

• Assured shorthold tenancies.
• Assured tenancies (in housing associations).
• Secure tenancies (in housing associations and local authorities).

Yes. Leases are regulated by the Section 5 of the Rental Housing Act, 1999 (Act No 50 of 1999). In terms of the Act, a lease may be either written or verbal, unless the tenant specifically requests a written lease. Whether it is written or verbal, all leases must comply with the Act.

Limited partnerships

Partnerships consisting of at least one general partner and one or more limited partners. The limited partners are investors who contribute capital in exchange for shares in the venture. There is an established body of law defining the permissible ranges of sharing arrangements whereby investors can secure most (99%) of the tax benefits while de facto economic benefits flow largely to the general partner (sponsor).

Limited partnerships constituted under the 1907 Limited Partnership Act are extensively used in property finance arrangements. However, they are not commonly used in UK social housing.

In principle this is possible, but as social housing today (2003) is either a direct homeownership model or direct non-profit ownership, soft equity investment and equity syndication have not been used.

Linkage

A requirement, usually imposed at the locality level, whereby developers of commercial property (typically downtown office buildings) must make (typically up-front) payments, in addition to their assessed real estate taxes, into a special "linkage" fund that the locality may then use to construct affordable housing.

In effect, a surcharge levied on downtown development based on the theory increased urban jobs create the need for more housing and on the practicality that the market will bear it. See inclusionary zoning.

Section 108 agreements can be made with developers/owners to achieve local facilities as a 'charge' on the gain achieved from a positive planning decision.

Not exactly. There is no “linkage” fund in South Africa. However, in some cases, developers have been required to make a contribution in kind. This is usually linked to zoning or the issuing of licenses, such as for the development of a casino. (In Gauteng, for example, the developers who were given the license to build the Gold Reef City Casino were required in exchange to also build the Apartheid Museum). Not exactly. There is no “linkage” fund in South Africa. However, in some cases, developers have been required to make a contribution in kind. This is usually linked to zoning or the issuing of licenses, such as for the development of a casino. (In Gauteng, for example, the developers who were given the license to build the Gold Reef City Casino were required in exchange to also build the Apartheid Museum).

Loan administrators

Service providers who assist lenders in administering loans.

Loan administrators act as intermediaries between low-income clients and financiers. The relatively small loans sought by households in this segment of the market do not warrant the administrative attention the clients will require of financial institutions. Still low income households pose a possible opportunity for financiers, especially in the context of the pending CRA (see Community Reinvestment Act).
Loan administrators replace estate agents in the affordable housing sector. They offer financial institutions a comprehensive service which includes identifying clients, performing credit checks, helping clients to fill in loan applications, liaising with developers in respect of the property to be purchased, and monitoring clients’ repayments so that they can intervene wherever necessary on behalf of the financial institution concerned.

Masakhane

A government initiated programme to encourage residents to pay their property taxes and infrastructure services charges, as well as their housing loan installments.

The Masakhane campaign (let us build together) was initiated in 1995 by the Department of Housing and the former Department of Constitutional Development and office of the RDP. The campaign sought to change public perceptions and attitudes regarding the rights and responsibilities of individuals, communities and local government. It encouraged residents to pay their rates, services and housing loan or rental payments, contribute towards their community and feel a sense of civic pride. In return, residents were told they could expect improved municipal governance and service delivery.
The implementation of this campaign was less than successful and “masakhane initiatives” soon dwindled and disappeared. The concept, however, remains. Financiers often refer to the need for a revitalized Masakhane campaign to restore their faith in the low income housing market.

Mashonisa

An informal sector lender

Mashonisas specialize in short term loans of generally no more than 30 days, of small amounts (generally R150-250). Interest rates are high (about 50% per month). Many mashonisas are women who lend money as a way of earning an income. They may have between 15 and 20 clients. These informal sector lenders operate completely outside the formal sector and are entirely unregulated. It is estimated that there are between 25 000 to 30 000 mashonisas throughout South Africa and that their annual outstanding loan book is around R1,8 billion.

Mortgage Disclosure

A requirement, usually imposed by government, for lenders to disclose their lending practices. This is to ensure fair and good banking practice and to ensure that there is no discrimination in loan application.

In 2000, the South African parliament passed the Home Loan and Mortgage Disclosure Act, 2000 (Act No 63 of 2000). This Act requires disclosure by financial institutions (both bank and non-bank) in terms of some aspects in their home loan business (both mortgage and non-mortgage). The Act requires that lenders provide data on:

• the number and amount of completed applications for housing credit, grouped by category of borrower and property location
• the number and amount of rejected applications, and the reasons for the rejection, also grouped as above
• the total number and amount of approved and disbursed loans
• the number and amount of approved housing loans, grouped by category of borrower and property location

Seen as a first step in enhancing access to housing finance, the legislation has been criticized for being imprecise in its pursuit of equality in banking. It has, for instance been noted that the HLMDA does not provide any specific statutory or regulatory incentives to pursue better practice. In this regard, the Community Reinvestment Bill is currently under debate.
The HLMDA has not yet been implemented as the regulations are still being finalised.

Mortgage insurance

A commitment by a financially responsible entity (in the USA, the Federal Housing Administration (FHA) in turn backed by the full faith and credit of the U. S. Treasury) to insure payment on a mortgage. Reflected by FHA's pledge to buy the loan, should it ever be in default, for 99% of par (a 1% discount).

No. Mortgage insurance is privately arranged by individuals through lender or an insurance company. Foreclosure and repossession possible.

No. Mortgage insurance is privately arranged by individuals through lender or an insurance company, such as the Home Loan Guarantee Company. Foreclosure and repossession is possible. In the 1990’s, rising interest rates and high unemployment contributed to many foreclosures.
Between 1995 and 1998, a wholly government-owned company, the Mortgage Indemnity Fund, did insure mortgages of accredited lenders against loss in certain areas, if they were unable to repossess due to a breakdown in the due process of law. This was an interim government intervention – part of its policy to “stabilize the housing environment”. By the time the MIF closed its operations in May 1998, it had generated R10 billion in new loans. No replacement for the MIF has been considered.

Mortgage interest deductibility

Allowance for homeowners to deduct against their personal income the interest cost of debt on their first mortgage. Normally monetizes through into higher house prices.

UK homeowners do not receive tax relief for mortgage interest paid in respect of their own homes. Tax relief is, however, available on property acquired to let (income-producing rental property).

South African homeowners do not receive tax relief for mortgage interest paid in respect of their property. If the property is used for a commercial purpose, however, the interest can be deducted as a business expense. Tax relief is available on property acquired to let (income-producing rental property).

Municipal bonds

Long-term debt instruments issued by localities (typically cities and states), backed either by specific clusters of assets (e.g. a power plant, a particular set of apartment properties) or "general obligation" (meaning they are a debt of the issuing entity). Often credit enhanced.

Yes, but not for housing.

Yes, though the municipal bond market has been characterized as small and illiquid with very few market makers, inhibited by the current perceptions of risk associated with local government. Some believe that the establishment of the Infrastructure Finance Corporation Limited (INCA), a 100% privately owned and operated infrastructure debt fund, has created an opportunity for stimulating the market. As a result of Inca’s participation in the bonds market, several municipal loan investors (such as Sanlam) have restructured their loan portfolios, taking out Inca bonds. Inca has therefore become the primary lender for infrastructure finance.

Niche market lenders

Band and non-bank lenders targeting a particular niche. In the housing sector, also referred to as housing lenders.

These lenders use the Usury Act amendment exemption for loans of less than R10 000 and repayable over 36 months or less, to offer loans for housing purposes. This exemption entitles them to price for risk on their loans (loans of more than R10 000 are subject to an interest rate ceiling in terms of the Usury Act). Their niche market focus enables them to approach employers to secure payroll deductible facilities, and to approach pension and provident funds to secure Pension and Provident fund backing (see pledging of assets).
Within the niche market lending sector are the non-bank lenders that provide loans for housing purposes either exclusively or as part of a wider portfolio. They form part of the broader micro finance sector, a relatively young industry that has only become significant in South Africa during the past ten years. Not governed by the Banks Act, they operate in terms of the Usury Act and are governed by the Micro Finance Regulatory Council, a body set up for the purpose in 1999.

Non-profit (private) owners

Private non-profit entities who make a business of owning (and usually operating) multifamily affordable housing.

Housing Associations and Registered Social Landlords (RSLs) are a good analog.

Social housing institutions. Many are supported with international donor funding, and rely as well on the institutional subsidy (see block grant). Most access loan finance from the NHFC (see housing finance agency). Housing is generally offered for rent though some social housing institutions also offer housing for installment sale. In 1997 the South African government set up the Social Housing Foundation as a body to support the establishment and growth of social housing institutions. See Quango.

Passive losses (or passive income)

A subdivision of taxable income or loss into three categories: active (arising from your trade or business), portfolio (arising from investments, chiefly securities), or passive (arising from investment in real estate). An overkill reaction created by Congress to stem the growth of what it called "abusive tax shelters." Has the effect of limiting utility of tax shelter losses (and as such, is a means of curtailing their growth in the absence of an allocation system). Tends to be a nightmare of complexity with numerous adverse side effects.

No.

No – feature is unique to the US and generally undesirable.

Passthrough ownership vehicles

Entities that are not separately taxed but instead distribute ratable shares of their income or loss which are taxed to the shareholders or investors. Includes partnerships, limited partnerships, Limited Liability Corporations (LLCs), and real estate investment trusts (REITs)

Yes, except for REITs. In principle UK general partnerships (formed under the 1890 Partnership Act) and limited partnerships (formed under the 1907 Limited partnerships Act) fulfill some of these criteria. However, neither offers the tradability available in respect of interests in US REITs.

Yes – joint venture arrangements pass income directly through to partners who are taxed individually.

Peoples housing

Self-build, owner builder construction. Owner builder labour is also referred to as “sweat equity”.

Peoples housing is the process whereby individual households satisfy their own housing needs independently, sometimes with state financial support through the housing subsidy. It has been captured within the housing subsidy mechanism known as the “peoples housing process” or PHP. Participants are eligible for housing subsidies that they use for the purchase of land, the installation of services, and the purchase of building materials. Beneficiaries can then elect to construct their home themselves (sometimes with technical support supplied by a local NGO or the provincial government), or hire local builders.

Pledging of assets

A practice whereby a borrower offers certain assets as collateral against the loan.

Because of the limited availability of mortgages in South Africa’s affordable housing market (given the risk perceptions associated with that market), most lenders require borrowers to pledge their assets as collateral. A common form of security is the borrower’s Pension and Provident Fund withdrawal benefit. The legislation governing Pension and Provident Fund management allows for the withdrawal benefit to be used either for housing or education purposes. In this market, it is not uncommon for lenders to require the loan being 100% secured through a combination of guarantees and Pension and Provident Fund backing. Also see credit enhancement.

Preferences on renting or occupancy

Requirement for affordable owners that in selecting applicants to become residents, they must give priority to certain types (typically, among the neediest). Tends to lead to income concentration. Mandated in the US from 1981 through 1998 but still practiced by many housing authorities.

Differs slightly in different housing markets. Priority in subsidised housing to 'those in greatest need' let to concentrations of poverty. Still the overriding principle in high-demand, high-cost areas.

More flexibility (aiming at more balanced, sustainable communities through mixed-income, mixed-tenure) possible in areas of increased choice for low-income households.

If a social housing institution or other landlord wishes to access the institutional subsidy (see block grant) in order to offer housing for rent, it can only offer the subsidized unit(s) to eligible households (i.e. those earning less than R3500). Some social housing institutions have made the business decision to apply for subsidies for only some of their units, making their other units available to households earning over the subsidy limit of R3500. This does help to some extent against income concentration and also enhances the diversity of housing given the greater levels of affordability.

Prevailing wage laws

A requirement, common in Federal contracting, that any construction be performed by union contractors (as opposed to so-called "open shop" contractors paying the "prevailing wage" (a legal euphemism for union labor rates, which are substantially higher than market rates).

In effect, a surcharge levied on new construction or substantial rehab properties that access Federal financing (or subsidy).

No equivalent in the UK.

No. In fact, policy (not legislation) encourages the use of labour-based construction, and in this, local labourers are often given preference. Some communities demand that development in their area use local labour. While this leads to substantial short-term job creation, it does mean that the creation of sustainable, long term jobs is limited, as each new project accesses new local labour.

Property in possession

A property repossessed by the lender as a result of the borrower having gone into default.

As a result of a range of factors including rising interest rates, and increasing unemployment, not to mention inappropriate loan approvals, many financial institutions faced a rising crisis of properties in possession in the early 1990’s. In June 1995, government and the banking sector established a private company known as Servcon Housing Solutions. Servcon’s initial, three year mandate was to deal with an estimated 14 000 repossessed properties and non-performing loans as a result of bond boycotts and consumer affordability problems. In March 1997 the mandate was extended to include an additional 10 500 properties. Servcon’s current portfolio comprises some 33 089 properties which went into default before 31 August 1997.
Unlike other countries where the housing market is stable, the problem of properties in possession in South Africa is particularly difficult because households often refuse to vacate their property. Servcon’s job is to negotiate a solution that might include being “right-sized” into more affordable accommodation. See Quango.

Property management firms

Private companies that specialize in managing apartment properties. Some specialize further specifically in affordable housing.

Yes but not dominant. Most many private landlords own one or a few apartments and let to low-income households whose rent is paid wholly or partly by Housing Benefit.

Yes. These firms might manage developments comprising rental housing stock, or sectional title units where owners have sublet to tenants (very common in the inner city). Property management firms also manage some employer housing developments of either apartments or free-standing units.

Property tax abatement (PILOT)

State or local laws allowing specific properties to be granted an exemption from property taxes and instead make a Payment In Lieu Of Taxes (PILOT) according to a stipulated formula (negotiated or set by statute). Typically granted only to affordable housing

Only a few. The nearest UK equivalents are (a) business rate reductions in some cases, and (b) individuals may benefit from a reduction in state taxes levied on business property (valuable relief).

No. In Johannesburg, the Better Buildings programme involves the writing off of already accrued debt on a residential rental building in exchange for that building being taken over by a reputable landlord and converted into well managed housing. Once the building is transferred to the new landlord, however, property taxes are again payable.

Property taxes (rates)

Among the oldest forms of taxation, an assessment of taxes against owners of real property. Typically assessed based on a percentage of property value (called in the US, ad valorem) measured by a local assessor. Reassessment is normally done annually and almost always upon property transfer. Localities can choose to rate all property types similarly ("100% assessment") or to assess taxes more lightly against preferred forms (e.g. residential homeownership).

Proceeds of property taxes are used to fund local government, typically schools, police, firefighting, water/ sewer/ refuse, and local services. See tax liens.

UK local taxation is comprised of two parts:

á       Council tax (assessed against residential property and retained by the locality).

á       Rates (assessed against businesses and rebated to central government.

Council tax and rates are often assessed based on property value but reassessment is infrequent so there can be wide variations among similar properties.

Yes.

Quango

A quasi-governmental, non-governmental organization. Chartered by the government to fulfill a governmental purpose more entrepreneurially than government can. Typically receive some special authority or benefits by virtue of being a quango. (In the US, Ginnie Mae is a close US analog to the quango, and the major GSEs, Fannie Mae and Freddie Mac, are outgrowth of previous quangos. Over the decades, US quangos have become steadily more private-sector and less governmental.)

Yes, a significant and growing form. Among the UK quangos relevant to housing are Housing Corporation.

The Regional Development Agencies, Commission for New Towns, Countryside Agency, English Nature and the Environment Agency all fall under the same government department (DTLR).

Yes. The DoH refers to these as “housing support institutions.” Most of these institutions are focused on facilitating improved access to housing finance by small contractors and by beneficiaries. At national level, these include:

• Servcon Housing Solutions. Established by the DoH and the then Council of South African Banks , Servcon assists households who have defaulted on their loans to resume payment in a way that is mutually satisfactory to the household and the financial institution. A finite number of properties are included in their portfolio.
• Thubelisha Homes was established to procure or develop housing stock appropriate for rightsizing, in terms of the Servcon initiative.
• The National Home Builders' Registration Council (NHBRC) was established to ensure quality building by registered builders. All housing builders must register with the NHBRC and agree to provide a five-year warranty on their work.
• The National Housing Finance Corporation (NHFC) is a wholesale financier that funds housing lenders so that they may on-lend to end-users.
• The Rural Housing Loan Fund (RHLF) is a wholesale financier of housing lenders whose focus is on rural areas, small towns and secondary cities.
• The Social Housing Foundation (SHF) provides capacity building and support services to emerging and established social housing institutions.
• Nurcha (National Urban Reconstruction and Housing Agency) provides bridging finance and end user guarantees to stimulate the delivery of low-income housing.
• The Peoples' Housing Partnership Trust (PHPT) was established to facilitate the government's peoples' housing process.

(Also see Government Sponsored Entities.)

Rating agencies

Companies that evaluate the credit-worthiness of debt issuers and particular debt issues according to established criteria. Higher ratings (e.g. AAA) are regarded as safer and therefore command lower interest rates; lower interest ratings (e.g. BBB) require higher rates. Some issues are so weak they are unrated (colloquially, 'junk paper') and command the highest rates of all. Standard and Poor's (S&P) and Moody's are two prominent examples.

Yes.

Yes. In South Africa, international ratings have become especially important given the introduction of South Africa in the world economy and the abolition of financial sanctions in 1994. Fitch and IBCA are also prominent in South Africa.
Since the 1994 elections, the credit ratings industry has grown substantially, as a result of a range of factors, including :

• black empowerment and corporate unbundling (because these deals are debt financed)
• disintermediation by corporate borrowers
• the entry of provincial and local governments into the capital market since the promulgation of provincial borrowing powers legislation
• securitisation

Right to housing

A constitutionally defined right.

South Africa’s Constitution has been hailed worldwide as a highly progressive document. In respect of housing, Section 25 of the Bill of Rights states that “(1) Everyone has the right to have access to adequate housing. (2) The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realization of this right. (3) No one may be evicted from their home, or have their home demolished, without an order of court made after considering all the relevant circumstances. No legislation may permit arbitrary evictions.” In addition, Section 28 of the Bill of Rights deals with the rights of children and states that “28(1) every child has the right – (c) to basic nutrition, shelter, basic health care services, and social services.”
To date, there has been one constitutional challenge in respect of this right. Known as the Grootboom case, this involved a community who had been evicted from land they had been illegally occupying, but for whom alternative accommodation was not arranged. The case was argued in terms of Section 28(1)(c) and the state was ordered to provide for emergency circumstances in respect of housing for those in need. To date the Department of Housing has not responded to this instruction.

RDP houses

Houses subsidized as part of the government’s Reconstruction and Development Programme (RDP). Also known as “RDP giveaway”.

The RDP was the incoming ANC government’s election manifesto and it was under this banner that the housing subsidy scheme (see block grants) was introduced. 30m_ ‘houses’ with basic services and on 250m_ plots of land have been allocated to over 1,3 million households since the 1994 introduction of the scheme, at no or little cost to the beneficiaries. Since these “RDP houses” are generally smaller than the “matchbox houses” developed by the apartheid regime, they have come under some criticism. In 2001, government introduced a new policy requiring beneficiaries to either participate in the building process of their home (known as “peoples housing”) or to contribute an amount of R2479 towards the unit.

Real estate taxes

Another term for property taxes.

Term not used.

Real estate transfer taxes

A tax levied (usually on the seller) when property changes legal ownership. Typically calculated as a percentage of property price (in some cases, percent of cash consideration, or possibly total development cost).

Yes, stamp duty at a base rate of 4%.

Yes, transfer costs. Transfer costs are payable on most properties, in respect of the registration of transfer of a property into the name of the beneficiary. The one exception is if the property is originally owned by a close corporation, in which case VAT is payable.

REITs

Publicly tradeable (liquid) entities that own and operate income-producing real estate. The means by which direct ownership in real estate is made available to the general investing public. REITs are also passthrough entities whose tax consequences are allocated ratably to their shareholders.

No. The UK treasury and Inland Revenue have both stated that they do not wish to see US-style REITs introduced.

While REITs are not active in the residential market, they own most of the commercial and industrial property in South Africa. REITS are listed on the stock exchange, can be traded, and are governed by legislation.

Rent control

Statutes that inhibit rent increases unless either approved by government or permitted according to statutory or regulatory formulas. Generally decried by all economists as leading to property deterioration and urban decline.

Present in the US only in a few unique jurisdictions (university-dominated cities and towns).

Yes, since 1915, although the 1988 Housing Act exempted new construction and new (post-1988) tenancies. Now there is 'rent restructuring' that is supposed to bring local authority and housing association rents for similar properties in same area in line within ten years. Another type of control.

No, though it did exist previously. The Rent Control Act, 1976 and the Rent Control Amendment Act, 1989, were repealed with the introduction of the Rental Housing Act, 1999 (Act No. 50 of 1999). This new legislation sets the framework in which rental housing must operate in South Africa, and supersedes all provincial legislation, such as Gauteng’s Residential Landlord and Tenant Act. It provides for the establishment of Rental Housing Tribunals at provincial level, where disputes between landlords and tenants can be worked out.

Resident income subsidy

A supplement provided by the Federal government that, when added to the resident's direct rent payment (called "tenant share") together comprises the apartment's mix. Dominant US form is Section 8. Can either be attached to particular apartments (project-based) or portable when the resident moves (resident-based or vouchers). Typically sets the resident's share at a percentage of income (30%).

Can lead to creating perverse economic incentives that promote dependency and discourage self-sufficiency.

Yes, Housing Benefit. Strong taper effect. Very complex, means-tested benefit administered by local authorities. Often leads to significant delays in payments to landlords (6-9 months not uncommon). Also can take up to two years through courts to secure an eviction for non-payment.

Same disincentives created. 100% of rent paid for those on income support.

No. When South Africa was debating its current subsidy scheme prior to its introduction in March 1994, this form of subsidy was expressly rejected. The housing backlog in South Africa is so large that it was important for government to be able to quantify its housing responsibility in real financial terms. For this reason, a once-off capital subsidy was introduced. See block grants.
Some employers, including the public sector, do offer a housing subsidy as part of the wage package for their employees. This subsidy is targeted at home ownership, however, and not generally at housing for rent.

Secondary market

The market of existing housing (free standing units, townhouses or flats) The housing involved is not new; it has already been lived in either by the owner occupier or the tenant. It is being sold by existing owners and not developers.

A particular facet of South Africa’s affordable housing sector is the dysfunctionality of the secondary market. This is for a number of reasons including:

• The limited availability of finance given the risks associated with this segment of the population and the housing they occupy (see credit gap).
• The limited availability of estate agents in low income areas.
• Demand issues: the relative newness of new housing construction in this market, given the recent introduction of the housing subsidy scheme. Households residing in these units are not yet ready to put their houses on the market.
• Supply issues: Those that are cannot find other housing in which to move, given the narrow focus of the subsidy scheme on the construction of RDP houses.
• The cycle of negative equity that persists in low income areas, which militates against the sale of property once occupied.

Secondary mortgage markets

An established trading mart whereby existing mortgages are sold from one lender to another. Often they are pooled or securitized.

No.

Yes, though this is relatively new in South Africa. In the middle to upper income markets, SA Home Loans was recently established specifically to offer securitized mortgages. In the lower to moderate income markets, the NHFC’s Gateway Homeloans sought unsuccessfully to introduce a secondary mortgage market. See Securitisation of mortgages, below.

Sectional title

A shared ownership arrangement whereby the resident owns their own “section” of a multi-unit development, and a share of the common space. Usually the person owns the top structure (i.e. the flat) and shares the land on which it is built communally with other sectional title-holders of the property. Known elsewhere as condominium.

Sectional title was introduced in South Africa in 1971. In terms of the Sectional Titles Act, owners establish a Body Corporate that elects trustees to exercise the powers vested in the Body Corporate. In most cases, trustees appoint a managing agent to assist them with managing the sectional title scheme. In order for the Body Corporate to manage common areas effectively, sectional title owners are required to pay levies. These levies cover costs of ongoing management by the managing agent, regular maintenance, incidental repairs (such as to broken lifts) and the rates that are payable to the Local Council. Body Corporates determine the setting of levies and their annual increases. This poses a particular problem, especially in the low to moderate-income sectional titles market, because it is in the owners’ interest to keep levies to a minimum. Consequently, most Body Corporates operate on a shoe-string budget, and this has a significant impact on the quality of management and maintenance that is achieved.
A very real consequence of the management problems associated with Sectional Title, especially as it is experienced in the inner city, lower income markets, is that investors are extremely reticent to extend funding. Management considerations become a key factor in how a bank evaluates an application for funding. As a result, some landlords or developers have had to play the role of financier – extending loan finance to residents purchasing sectional title units by installment sale. While this solves the short term problem of access to finance, it still fails to address the longer term issues of management. See installment sale.

Securitization of mortgages

An investment banking function whereby a bundle of mortgage loans are packaged together and pledged as collateral for a new instrument that is then sold to investors. Differences between the mortgages themselves and the new security are typically additional features to make the security desirable to investors. Often accompanied by stated or implied credit enhancement. CBMS's are a form of securitized debt.

No.

While mortgage securitization exists in South Africa it is not yet well established. Attempts to establish a secondary mortgage market in the moderate income sector led to the establishment of Gateway Home Loans (Pty) Ltd in the middle 1990’s, by the National Housing Finance Corporation (see housing finance agency). Gateway was not able to adequately test the securitisation model for a range of reasons, including the limited functioning of the primary market. There have been rumours that the Gateway model might be reintroduced in South Africa, though these are still unsubstantiated.

Social housing

An institutionalized form of housing tenure in terms of which forms of tenure other than normal ownership is provided, characterized by high quality subsidized housing focused on low income earners, and where there is a measure of tenant participation in the management of the institution. The distinction with rental is threefold: (i) target – i.e. on low-income earners; (ii) financing – involving subsidies and often some other form of donation; and (iii) management – relying on some form of tenant participation.

Social housing became a promoted tenure form in South Africa in the late 1990’s. To date, three forms of tenure are offered: housing for rent, for deferred ownership (see installment sale), and for cooperative ownership (see cooperative). Social housing institutions might be formed by private developers, by local authorities, by companies or by NGOs. Degrees of tenant participation required or desired vary. Social housing institutions are supported by the Social Housing Foundation. Note: not all subsidized housing in South Africa is called “social housing”. Only subsidized housing offered for rent or deferred or cooperative ownership is classified in this way.

Soft secondary debt

Financing, usually deriving from a government appropriated source, that is repayable only out of future property cash flow, residuals, or otherwise.

No.

No.

Stokvel

Informal lending institution

Stokvels are community-based lending arrangements. Generally a group of people get together and each contribute a specified amount per day or per week. At the end of every month, one member of the stokvel receives all the money deposited in that month, and this rotates on a monthly basis. The cycle is determined by the number of members in the group. Stokvels have been used in some communities as housing savings groups, and members have also assisted each other in the house building process. Some researchers estimate that the collective savings among stokvels in South Africa amounts to as much as R200m and that loans of a total of R250m have been distributed through an estimated 800 000 outlets.
See mashonisa

Syndication

The process of selling shares in a venture to multiple investors (dividing pizza into slices).

No.

Yes. Although not used in the low to moderate income housing market, syndication is used in the higher income market, such as for luxury holiday accommodation, known as “time share”.

Syndicator

A private company that makes a business of structuring syndications and placing the investments.

No.

Yes, but only in