Accelerated rental/social housing delivery

1. Accelerated rental/social housing delivery Land release and packaging – key issues and bottlenecks, conclusions and recommendations June 2008

2. Main processes in the social housing project life cycle: • Included in this presentation: • Land identification, allocation and release • Land packaging (obtaining planning approvals, and servicing) • Not included in this presentation: • Design and construction of units • Unit take on (External by SHI from contractor, Internal by property management from development) • Ongoing property management

3. Phase 1 - Land identification, allocation and release

4. Most critical phase, with potential for long delays due mainly to: • “Politics” of competing/vested interests, and “soft issues” (personalities and power plays) • Inadequate understanding of social housing among politicians, and… • insufficient political will to support social housing • Problems of capacity and interdepartmental co-ordination within municipalities to screen land registers and pre-assess land parcels w.r.t. suitability for social housing • Long disposal process due to little understanding of MFMA compliant ways available to municipalities for disposal of land other than at “market” value through open tender

5. Existing land identification, allocation and release process: • Existing process as appears to be practiced in most municipalities (with some local differences) : • PRZs are demarcated in line with IDPs/SDFs • Municipality identifies areas (and possibly some specific land parcels) for housing development within PRZ • Specific parcels for social housing (SH) are identified through a screening or pre-assessment process that is carried out either internally (by technical departments), or by procuring professional consultants to do the job • Council takes a decision that the land is surplus to municipal service delivery requirements and can be disposed of for SH purposes • Disposal procedure through open tender/proposal call in line with municipality’s procurement policies and procedures (usually open tender)

6. Main problems with existing process (1): • Land registers/data bases do exist, but status and condition of information could be incomplete/suspect/out of date • Social housing not high priority and competing for land with “RDP” housing, banks and private developers – little pressure to prioritise land for social housing • No social housing “champions” in municipality to drive process • Non-existent and/or understaffed capacity to screen land registers for suitable parcels of land and do pre-assessments on identified pieces of land with potential

7. Main problems with existing process (2): • In many cases land disposal is managed by estates (property management) departments or even separate municipal entities whose (real and perceived) mandate is to maximise financial returns from land disposal, resulting in a bias towards commercial development, and a mind-set focused on obtaining market value • In addition land disposal policies and procedures in municipalities informed and guided mainly by legal and treasury departments  narrow interpretation of MFMA and treasury regulations which limits it to open tender and evaluation of bids on price basis • Above usually results in land being unaffordable to SHIs

8. Main problems with existing process (3): • Land identified and taken through municipal evaluation and decision-making processes on ad-hoc rather than planned basis – wasteful and time-consuming replication of bureaucratic procedures in each case • The above is exacerbated by the absence of: • Clear provisions within the municipality’s supply chain management policy for disposal of land via “private treaty” (direct “sale”) to SHIs as catered for in MFMA/treasury regulations • Coherence between housing plan and land disposal framework in the above policy • Co-ordination between infrastructure budgets (including MIG) and housing • Main reason for some problems above – no coherent municipal rental/social housing policy and/or delivery framework

9. Suggested general principles for land release (1): • Land for social housing should preferably be made available through the Provincial Steering Committee (PSC) process, ensuring provincial and local government and the delivery agencies (SHIs & developers) are all in the loop • Land should be targeted by ownership in the following order of preference: • Municipal • Provincial • National and parastatal • Private

10. Suggested general principles for land release (2): • Focus initially should be on municipal land - process for devolution and acquisition from other levels of government and parastatals complicated in short term • General consensus that municipalities unlikely to procure additional land (at a cost) and then release it to delivery agencies (SHIs, etc) without recovering costs • Private treaty/direct sale (or leasehold) approach should be favoured above currently common disposal method of open tender/proposal call which adds months to process • Nothing precludes SHIs from identifying parcels of land on their own and approaching municipalities with unsolicited bids, but then municipal policies should be clear on how to deal with these within MFMA, etc

11. Suggested general principles for land release (3): • There should be strategies for land release in both the: • Short term (ready for project funding in next financial year), and… • A medium term pipeline (1-3 years) • Remain within social housing policy context i.e.: • Land should be within Provisional Restructuring Zones (short term), but don’t exclude looking at land… • with potential i.t.o. criteria to be included in possible future “expanded” PRZs (medium term)

12. Suggested process for land identification, allocation and release (1): • Municipalities put in place a “champion” with the necessary support structure to drive the process (with technical support as required) • Municipalities develop comprehensive rental/social housing delivery frame works, inclusive of policies, strategies and procedures, which deal with: • Identification of, and equitable land distribution agreements with delivery partners (SHIs, etc) • Up to date and pre-assessed land data bases • Land disposal frame works in line with housing plans, spatial planning frame works and supply chain management policies

13. Suggested process for land identification, allocation and release (1): • Municipalities are appraised of the fact that land can be released to SHIs directly by private treaty (direct “sale”) at nominal value within the MFMA/treasury regulations framework with the motivation that: • It alleviates the plight of the poor • It is in the public interest • The land is surplus to own strategic service delivery requirements • Municipalities are provided with technical support where required to ensure they have in place: • Rental social housing delivery frame works • the necessary and correct land data bases, • housing plans, • supply chain management policies (with land disposal frameworks), guidelines, templates/standard documents suitable for the direct sale approach (with protective conditions and claw-back clauses)

14. Suggested process for land identification, allocation and release (2): • Municipality sets up internal liaison/co-ordinating structure (interdepartmental steering committee) driven by appointed “champion” with necessary status to ensure social housing is prioritised at the right level • Process is monitored (and assisted) through PSC process, with technical and other support as and when required from PSS/TS teams • Municipality develops and implements comprehensive rental/social housing delivery frame work, including policy, strategy and procedures • In terms of framework above, municipality identifies preferred delivery agencies (SHIs), and works out an equitable land distribution agreement with them

15. Suggested process for land identification, allocation and release (3): • Municipality decides on preferred disposal medium: • Outright “sale” • Outright sale with conditions (registered in title deed) • Long term leasehold with suspensive conditions • Social housing champion drives process to obtain council decisions that: • Land is surplus to municipal requirements • Land can be allocated for SH and disposed of for that purpose, subject to positive outcome of pre-assessment • Potential parcels pre-assessed internally – technical evaluation by departments (with external technical support where required)

16. Suggested process for land identification, allocation and release (3): • Intentions advertised to allow for public participation and transparency (say 30 days) – experience and opinion indicate that no major objections can be expected if all prior processes followed properly • Enter into private treaty (direct sale) or leasehold agreement with preferred agency(ies) – must include suspensive conditions and claw-back clauses to ensure: • Land is used for the intended purpose only • Land is kept out of speculative for profit market, and remains in service of low income people over some generations • Delivery partner performs as intended

17. Suggested process for land identification, allocation and release (4): • Pre-assessment of land (desk-top internal, with technical support where required) should include at least: • Ownership check (land register and/or deeds search) • Title and cadastral check for servitudes, long leases and other legal encumbrances • Availability of bulk services • Confirmation that it is within PRZ • Current zoning, and formal town planning/EIA procedures required for further packaging (check especially for agricultural zoning which complicates sub-division, environmental approvals, etc) • If possible with existing information in municipal and other data bases - preliminary assessment of slopes, geotechnical conditions, flood lines, etc

18. Suggested process for land identification, allocation and release (4): • Full feasibility assessment by delivery agent (SHI) - involve external professionals such as town planners, environmental assessment professionals, engineers, conveyancers, etc., and should include at least: • Formal title deed and cadastral checks • Formal geotechnical survey • More in-depth bulk services investigation and engineering services requirements • Formal report on town planning and environmental assessment procedures required • Cost estimates and initial financial viability studies incorporating all the above • The possibility of making available to SHIs financial assistance for the above should be urgently considered • The possibility of establishing a “bridging” fund for bulk services where municipalities are waiting for other funding (MIG, DBSA, etc) to be investigated

19. Recommendations for assistance to municipalities from Public Sector Support and Technical Support teams (1): • Collate legal opinions (from e.g. Treasury, SALGA, certain municipalities), document case-studies and existing practices that have been successfully used in some municipalities (i.e. find “precedent”) in support of the direct sale approach (a study is currently underway) • Investigate “Status quo” and evaluate in the selected municipalities the following (PSS team facilitates entry and co-ordinates through the PSC process): • Land data bases • Housing plans in IDP/SDF • Reliability (how realistic) of capital budgets for bulk services aligned to proposed release of land for SH in IDPs/MTEFs

20. Recommendations for assistance to municipalities from Public Sector Support and Technical Support teams (2): • Investigate “Status quo” and evaluate in the selected municipalities the following (PSS team facilitates entry and co-ordinates through the PSC process) (continued): • Social housing policies if any (including for instance policy on waiver of or discounts on bulk contributions) • Supply chain management policies and land disposal frameworks • Existing procedures for identification, allocation and disposal of land for social housing • Structuring of, and co-ordination between divisions that are involved in making social housing happen

21. Recommendations for assistance to municipalities from Public Sector Support and Technical Support teams (3): • Provide guidelines and assist with formulation of comprehensive rental social housing strategy and delivery framework (NMBM pilot underway) • Draw up guidelines for the streamlining of procedures, and alignment of the above (data bases, housing plans, SH and supply chain management policies, etc) • Assist where required, with screening of land data bases, and pre-assessment of potential land parcels • Collate, and where required prepare templates/standard documents for use by municipalities in the direct sale approach e.g. Land Availability or Sale Agreements with the necessary protective conditions and claw-back clauses • Assist with the dissemination of all the above information within municipalities to promote streamlined liaison and co-ordination (via PSC and direct one on one contact)

22. Land identification and release – conclusion (1): • In practice the above means that by the time a parcel of land comes through the PSC “gate” and is given to the SHI/developer for further packaging, it should be as “clean” as possible, and sail through the EA/township establishment/re-zoning process relatively smoothly • In addition this prior process should remove all obstacles to the release of the land, and result in an irrevocable commitment to alienate the land to the SHI/developer (Council/provincial resolution and acceptable legal agreement in line with PFMA/MFMA, supply chain management policy and land disposal framework). • LAs in some cases probably need guidance and technical support in this regard to provide the with the mechanisms and “comfort” to allocate and alienate land for social housing without having to put it out to tender and obtain market value (i.e. release it free of charge or at nominal prices where no prior expenses have been incurred in for instance partial or full establishment and servicing)

23. Land identification and release – conclusion (2): • Although it was agreed that preference be given to municipal land (simplest process and affordability), some municipalities may already have a shortage of, or run out of suitable land in the near future • Strategies to deal with the above may have to include more consideration of: • Land banking (problems with this acknowledged) • Devolution of more provincial/state land to municipalities (problems with holding costs and loss of rates revenues acknowledged) • Bad/better buildings programmes i.e. redevelopment of existing buildings • Acquisition (and expropriation) of private land – possibly time-consuming and costly • Incentives for private developers to include more social housing in proposed mixed-income developments

24. Land identification and release – conclusion (3): • The following were considered to be key issues in shortening both this pre-packaging process, (and also the subsequent packaging itself): • Good strategic thinking/planning by LAs resulting in solid planning and policy frameworks (IDPs – especially with regard to infrastructure and housing plans, SDFs, SEAs) • LA housing policy must be in place, and supportive of social housing • Co-ordination and communication between technical departments in LAs • Alignment of funding from different sources (MIG, LA capital budget, provincial subsidy, Capital Re-structuring grant, loan funding, etc) with cash-flow requirements of the process (certain steps are often long delayed while funding is awaited). This also means alignment of approvals and agreements by different authorities and other parties, e.g. integrating technical approvals and financial closure requirements for provincial subsidies and Capital Re-structuring Grants • Finally, Public Private Partnerships (PPPs) in formal form were to be avoided due to the complexity of treasury requirements, etc

25. Phase 2 - Land packaging Town planning and environmental approvals, and land servicing

26. Land packaging process (PHASE 2 in the flow charts below) • Consensus is that the actual application for approvals should be run by the SHI/developer, as their interest in fast approval would expedite the process better than were the “disinterested” LA to drive the process. Clear agreements would be needed as to division and overlapping of responsibilities for actions, financial obligations where costs were involved (and how these would be funded), and legal implications for instance with regard to warranties implied or otherwise. Infrastructure maintenance planning and provision should be an integral part of all processes. • Once the land has been identified, allocated and released to the SHI/developer through the PSC gateway, the SHI/developer becomes the “applicant” in the township establishment process. This process involves the following main steps to be undertaken by the applicant with the help of a professional team:

27. Township establishment – main steps (1): • SHI appoints and briefs the planning, design and environmental professionals • Town planning and design professionals gather the information and prepare the planning report (basic layout, motivation, preliminary engineering services design) in a consultative and iterative process for submission to LA (provincial ordinance route) or province (DFA route) • Environmental assessment practitioner (EAP) advises on development alternatives and type of EA required, and uses information from planning report to prepare submission for environmental approval • Urban designer/architect and planner work together on Urban Design Framework and development concept. QS prepares initial viability studies. • Town planner submits application to LA (ordinance) or province (DFA) – forms and fees

28. Township establishment – main steps (2): • From here the ordinance and DFA routes respectively diverge (municipal process for ordinance, provincial tribunal for DFA) • Advertisement to invite public participation. If no objections, LA departments carry out technical evaluation, involving provincial or national departments or parastatals if required. If there are objections, hearings are held and rulings given. Rulings can be taken to higher authorities on appeal, with potentially serious delays. • In meantime EAP drives and obtains environmental approval/Record of Decision (RoD) – this can also take quite long! • Once objections/appeals are settled, and RoD has been obtained, departments within LA continue with technical evaluation and issues comments • Professionals attend to comments • LA admin section places item on council agenda for approval (this can be a “black hole” of administrative delay, and needs constant attention from professionals “walking” the documents • Council approves the plan or refers it back to technical for amendment (repeat previous 3 steps =delay!)

29. Township establishment – main steps (3): • If DFA route was followed, all of steps in municipal process above, would be dealt with within the sittings of the DFA Tribunal where all affected parties are given a hearing, and LAs are given prescriptive time-frames for evaluations and responses. • DFA Tribunal approves plan • From here the ordinance and DFA processes converge again for steps below • Approval to proceed with implementation of TSE, subject to conditions of establishment is gazetted • Engineer prepares detail services design, obtains approval from LA (design services agreement), calls tenders and supervises installation of services, obtains final LA approval (services certificate)

30. Township establishment – main steps (4): • SHI appoints land surveyor who calculates co-ordinates, and prepares survey diagram of outside figure for Surveyor General (SG) approval, followed by General Plan approval • Once SG approval obtained, conveyancer forwards approved General plan to Deeds Office, and prepares opening of Township Register (includes complying with conditions of establishment, obtaining LA rates clearance, etc) • Opening of Township Register and issueing of services certificate conclude the process

35. Overall conclusions and recommendations(1) • Most critical and problematic phase is land identification, allocation and release for social housing by municipalities – streamlining and alignment of land registers, plans, policies, procedures, co-ordination and land disposal process management structures (with PSS/PSC facilitation and technical support where required) needed • Phase 2, land packaging should be run by delivery agents (SHIs) as they have direct interest in its speedy conclusion. Technical competence exists, but financial support/bridging finance to carry out early assessments, planning applications and land servicing required. • The bottlenecks caused by misalignment between planning and EA processes, housing planning and infrastructure budgeting, have been identified, and could be alleviated through some directed technical support to municipalities to ensure proper pre-planning

36. Overall conclusions and recommendations(2) • NDoH/SHF need to sit down and work out/clarify the roles of e.g. Public Sector Support Team, Technical Support Team, ISHP and M&E t avoid duplication and complication in the process • TS teams should be established on regional basis with small team at national level to co-ordinate and oversee • Assessment tools and process must be reviewed and streamlined where required – e.g. project status assessments for inclusion in the PSC pipeline, Quickscans for ISHP funding evaluations, etc • Suggested that PSS and TS teams work together and are involved in assessments from the start (PSC pipeline) through to final ISHP funding assessments • PSS/TS teams to carry out immediate status quo/needs analysis within the targeted municipalities (land registers, land disposal mechanisms, etc)