Remember, social housing is built and managed by special social housing companies. These companies can’t make a profit, but they must make sure that they have enough money to finish the building project and look after the flats.
Land. Land in well-located areas is often very expensive. The best way to help pay for social housing is if the social housing company does not have to pay for the land. The government has lots of land which it can lease or give to the social housing company for free.
Government subsidy. This money is a grant from the government. It is reserved for social housing companies to use to build social housing flats. It is called a subsidy because the company does not have to pay it back. This is important because it means that the company can keep the rent low. There are two different types:
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A Provincial Institutional Subsidy (PIS). This will pay about R110 000 per flat.
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A Restructuring Capital Grant (RCG). This will pay about R125 000 per flat. The study hopes taht the National Treasury will increase this amount to R154 000 per flat in the next year.
This means that between R235,000 and R264,000 of each flat can be paid for by grants. The total grant funding will be about R71 million.
This leaves a big gap. If the total cost is R112 million and the company will only get R71 million then they still have to find R41 million to build the flats.
They can find the money in three ways:
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The company can used their own funds from savings to pay for the gap. This is called equity
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The company can take out a loan from a bank.
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The company can be creative and use money that they earn from a part of the property to pay for the construction on the rest. This is exactly what the study says will be the best idea. This is called cross-subsidisation:
Cross-subsidisation
This is where income from one part of the property helps to pay for the costs on another part. If you build and sell some shops, you can use the money to pay for the social housing.
Tafelberg is in a very good location. Many people want to live and work here. This means that property prices are very expensive in the area. This is a problem for many people who cannot afford to live in well-located areas like Sea Point.
But it is also a good thing. If the social housing company can sell or lease some of the land, then they can use the money to help pay for the social housing. This is a good idea because many companies and people would like to be able to use this land and the company can get a good price.
The study says that the shops (block A1) and the community facility (blocks D1 and D2) could be sold and the money would then help pay for the rest of the project.
The study says that the shops could be sold for R15 million and the community facility could be sold for R26 million. Together these could make up the missing R41 million.
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