COMMUNICARE Building housing and healthcare communities for senior citizens

The Company has an approved social housing strategic framework which is linked to a 5 year programme roll out. This framework was put together after an intense process involving inputs from staff, management and Board members, and was subsequently formally adopted by the Board on 28th February 2006.

This framework largely guided the more detailed work that was undertaken on a 3 – 6 months period ending in July 2006 which resulted in the establishment of a new social housing strategy and policy guidelines for effective and efficient management of the Company’s housing assets. It is envisaged that this process will compliment and strengthen subsequent implementation of the Company’s 5 year affordable housing programme roll-out.

This milestone will now enable the Company in the interim, to further use this framework to strengthen further partnerships with various role players in the private and public sectors including the NGO communities involving in similar work, whilst seeking greater understanding of its strategic repositioning within the social housing sector. It is hoped therefore that this will enable the necessary recognition of its role and commitment to the programme. Already, the Company has concluded to date a Memorandum of Understanding (MoU) with the City and the PGWC which broadly seeks to create and sustain a supportive environment for social housing delivery. A contractual and partnership arrangement exists already with the City of Cape Town which will give impetus to social housing delivery efforts between us.

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Communicare has a long documented history in the provision of well located and good quality housing units for social rental purposes which are affordable to individuals and families on low incomes. Presently the Company owns and facilitates the management of the following categories of affordable social rental housing assets:

These units meet the criteria of the national housing policy definition of social housing.

During the past 5 years there has been little development of new social rental units. There is however now a commitment to use resources from Communicare and link these with the national and City wide strategic framework for enhancing the capacity of social housing institutions like Communicare to deliver additional social rental opportunities. It is largely informed by the following elements:

Social rental housing is a core business activity of Communicare. As such the Company is committed to providing a good housing service to its existing tenants whilst actively undertaking the development and management of additional housing assets.

In doing this the Company will strengthen its external networks and partnerships. It will also apply some of its reserves to mobilizing additional financing through subsidy and loans to make the sustainable development and running of this stock a reality.

It is based on a developed 5 year programme including quantum of such units, access to appropriate land and finance, and the structuring of its internal and external resource use for the development and management of the stock.

While the development and strengthening of the Social Rental housing programme is a primary element of the Company’s core business, the Company also recognises its responsibility to develop other housing and tenure opportunities for people on incomes between R7500 and R 15,000 who normally have difficulties accessing housing in well located areas of the City. Therefore it has committed itself to use some of its expertise and resources to facilitate the development of a Gap Housing programme for first time bond holders.

The principle being that the use of its resources should not merely be geared towards the provision subsidized housing to low income households, but be used on a structured basis to give them “a foot up” to appropriate housing opportunities.

In doing this the Company is also helping to structure opportunities for people to move from the social rental stock into other tenure and financed forms of housing.

This support business portfolio is critical for the success of a sustainable core business programme. This will be proactively managed with appropriate levels of resources from Communicare.

The flows from such income generation for the two core business programmes are now agreed and allocation across the two core business programmes. Social housing will receive an average of R25m over the next 5 years.

Such reserves must be used in a sustainable manner ensuring that it is not converted into unnecessarily high individual subsidies.

The Company has as its secondary core business area, the development of ownership and economic rental units in better located areas for households on the income range of R7, 500 - R15, 000.

This will require that the company’s resources be applied to mechanisms that give such beneficiaries the opportunity of “a foot up” whilst not using these resources to subsidise this income group.

For rental stock it will use this as a basis for a wider range of incomes in its developments whilst assisting with affordability and sustainability

The detailed plan that defines both physical building product, development of useful financing mechanisms and allocation of amounts from the Company’s profits and reserves to be used on a sustainable basis.

A specific part of this is to develop products to encourage those with growing incomes to move from social rental housing when this becomes appropriate.

One of the great strengths of Communicare is its development of substantial reserves and more importantly, the generation of successful business ventures that continue to add to reserves. Presently, the following programmes contribute substantially to the internal social housing reserve funding source, namely:

While the above programmes are secondary in purpose to the core business they are essential elements that will make it possible for Communicare to deliver its social and gap housing programmes over a number of years in a sustainable manner.

It is therefore essential that this portfolio of profit generating business activities is maintained and strengthened to provide the streams of additional finance for the core business. This involves the planned injection of Communicare resources to ensure the projected profits.

The following are critical support services provided by Communicare for supporting both its core + support business activities:

Assessment underway on possible re-orientation of “Social Services” to align more closely with core business whilst maintaining the Elderly Care Service for the Company’s tenants (special needs category) and the key housing management aspects of tenancy management and development of tenant consultation and participation.

Developing more targeted use of the financial management and information management services across the core and support businesses.

Developed a 5-10 year land use and acquisition strategy that maximizes use of land and building resources in the interest of both the core and support businesses both with development of serviced land and top structures.

It is estimated that the likely flow of financing from the Company’s support business to help finance the core business will be an average of R25m per annum. The likely funding quantum to be proportioned over the next 5 – 10 years is presently being determined. The manner in which the required equity injection will be factored between the gap housing and social rental options requires more defining in terms of the Company’s business objectives.

In addition, the past experience has seen use of these as grants into projects without sufficient attention being paid to mechanisms that could make them more sustainable and re–usable over a series of projects e.g. equity investment to cover first 5 years of social housing rental, equity investment in ownership where such equity can be recouped when present owner opts to sell, etc.

The likely 5 year flows of finance from support business and reserves to core business and amounts within both different delivery mechanisms and core business must be defined within the land use and financial reserves plan.

Develop mechanisms that allow for the following:

Decisions on the gearing up of finances from other sources:

Govt subsidy 35%

Loan finance 20%

Communicare equity investment 45%

Target subsidy to ensure that it helps a “deep down reach” into correct range of income groupings. End of 5 year programme mix

Ensure that subsidy or these capital inputs develop some sustainability across a number of projects rather than only 1 e.g. large equity only investments in single projects

The Company has progressively addressed the identified critical issues and shortcomings with a view to formulate an overall appropriate social housing policy, has formulated an implementation plan which commenced in July 2006 to ensure sustainability of its programmes. An overall social housing policy framework has since been approved and is currently being implemented which focuses on the following key functional areas:

Three decentralized area offices have been established during this period that serve as an administrative conduit and provider of accessible social rental management and community development support services and programmes which are fair and equitable to all Communicare household members and local communities.

This policy has had a positive impact on the other business units of the Company since it has ensured a more structured basis for implementation of the Company’s 5 year programme roll out, characterized by clear levels of support.

This has been undertaken on the basis of a 6 month process involving staff and management which commenced in February - July 2006. It also allows for immediate delivery of 2 pilot projects on identified land while finalising the policy and procedural details as outlined in the diagram below.