Affordable housing creating jobs, fostering economic growth and sustainable communities in South Africa
The housing construction sector boasts one of the highest employment multipliers in South Africa, and has the potential to significantly address unemployment in the country, according to research findings released this week.
The 10-month long study, conducted by a team under University of Cape Town associate professor Francois Viruly, audited the social and economic impact of affordable housing developments commissioned by International Housing Solutions, a global private equity investor which has financed projects with a combined total value of more than R7.8 billion.
The research had two objectives: to determine the indirect benefits derived from living in integrated affordable housing developments, and the job creation impact of such developments.
“The research breaks new ground, as little research has been undertaken to measure the indirect economic as well as social benefits that the supply of affordable housing creates in SA,” says Viruly.
The timing of the release of the report is particularly significant, coming as it does after a number of developments in recent weeks, which indicate that the country’s approach to the housing backlog is set to move from a singular focus on the provision of free, RDP housing to the development of affordable housing. This will allow South African families an opportunity to start on, and move up, the housing ladder.
“The concept of RDP housing has been a revolutionary programme replicated nowhere in the world,” says IHS Managing Partner Soula Proxenos.
“However, after some 3 million homes have been ‘given away’, it appears this policy has served its purpose and something more sustainable is likely to take its place. Several developments these past weeks have confirmed that SA is moving towards other forms of subsidy that aid poorer households and allow them to join the formal housing ladder in the affordable housing sector,” says Proxenos.
“President Jacob Zuma’s State of the Nation Address, the R83.5 billion in housing subsidies announced by Finance Minister Pravin Gordhan during his budget speech, and pronouncements by Mayor of Cape Town Patricia de Lille and Planning Minister Trevor Manuel, have collectively given a clear indication of how the country’s housing crisis might be addressed by the development of affordable housing in coming years and decades,” she says.
Since the launch of its first fund, the SA Workforce Housing Fund, IHS has invested in the development of more than 27 000 affordable housing units countrywide. Viruly and his team conducted hundreds of interviews among tenants and developers of these projects, and released the results of the research on Wednesday.
The study found that it takes between 1200 and 1500 man-hours to build a 40m2 house, with the average being approximately 1289 hours. This comprises 541 hours of skilled and 748.8 hours of unskilled work. This again translates to 2.45 people employed continuously to complete a typical house in 13 weeks.
Taking into account direct and indirect employment opportunities in line with the aforementioned calculations, it is expected that IHS’s investments over the life of the first fund will create 100 000 jobs. An estimated 5 000 jobs will be created per annum in perpetuity, through the maintenance and management of housing units, the payment of rates and taxes , and the expenditure on goods and services by households directly related to the housing units. 50 000 jobs will be created once-off for the construction of the invested units. This means that, over the life of the first fund, a total of 100 000 man years of employment will be created.
Regarding the social impact of IHS’s developments, which are all designed to ensure healthy, integrated communities rather than just to provide dwellings, Viruly notes that residents surveyed reported “an improvement in the quality of life for children, health and housing”.
“More than 50 percent of households have also seen an improvement in access to education and employment from the property that they presently occupy,” he says.
“Developers and users agree that the units have had a positive impact on the neighbourhood safety and security. The overall conclusion is that the developments surveyed provide benefits that go well beyond the mere provision of housing, but rather are playing an important role in creating sustainable human settlements. The developments provide numerous indirect benefits, which include improvement to accessibility and employment, leisure and social amenities.”
Proxenos says IHS had seen that their projects were having a notable positive impact on communities and job creation, but needed independent research to confirm anecdotal evidence.
“We are delighted that we are now able to objectively measure the positive contribution our investments have made to the South African landscape. And we are very happy to have it confirmed that the development of affordable housing - which has been earmarked by government as a sector which will be seeing an unprecedented collaboration between the public and private sector - has the potential to address some of the very serious challenges facing the country.”
Gloria Mamba of the DBSA, which was one of the first institutions to invest in IHS’s first fund, says the bank was very satisfied that its decision to throw its weight behind IHS was making a tangible difference to the lives of South Africans on so many levels. “We have been privileged to be able to make this contribution to the South African landscape, and look forward to working with IHS in future,” she says.
“Affordable housing is an important sector for the DBSA and its prominence will grow following the government subsidy support announced by the president. Working with IHS has offered us strong risk adjusted returns and, as can be seen from the results of the study, is improving the living conditions of South Africans while providing much-needed employment.”
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