South African Property Article - Low-cost housing under threat

Low-cost housing under threat

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The increased cost of cement and soaring fuel prices mean the delivery of low-cost houses "is becoming impossible", housing associations say.

Rising building costs would not only mean fewer houses would be built to ease the city's housing backlog, but they could also affect the quality of the homes provided.

Bheki Nkonyane, of the Cape Town Community Housing Company, said steep building costs meant there was "no way people could afford structures that would not compromise on quality".

The issue of quality was more serious in the Western Cape because of such environmental factors as flooding and strong winds, he said.

The auditor-general's report on the administration of low cost-housing projects in the Western Cape has said most of the units inspected are "of a poor quality". Of 110 houses inspected, more than 60 were found to be sub-standard.

Nkonyane said housing companies needed to work with "policymakers" such as the government and municipalities to find ways of dealing with rising costs.

Johan Snyman, of the Bureau for Economic Research, said the rises in cement prices had exceeded the inflation rate since 1999.

One reason was that the energy-intensive production of cement made it vulnerable to fuel price hikes.

Retail cement prices had risen more than 8 percent since last year, Snyman said.

The building sector was "transport-intensive" as labour and materials had to be transported long distances to construction sites.

The prices of cement and bricks have each increased by about 140 percent since 2000.

With the 96 percent increase in the price of diesel in the past year, builders have been hit hard by rising costs and lower profits.

Thubelisha Homes, a section 21 company that undertakes low-cost housing projects for the national Department of Housing, said amounts tendered for developments were beginning to reflect the price increases in materials.

The most recent study by the Economic Bureau for Research found that amounts tendered last year were on average 15 percent higher than those in the year before.

The bureau predicted the amounts tendered this year would be on average 12 percent higher than those last year.

Nkonyane said the average 42 square metre house would cost about R120 000, half of which would be subsidised by the government.

The government needed to increase subsidy amounts to take rising prices into account, otherwise affordable housing would be "an illusion", he said.

A survey by the University of the Witwatersrand's School of Construction Economics and Management has found, however, that cement accounts for only a small percentage of residential building costs.

Authored By: AnÉl Powell
Published By: www.iol.co.za