The Passenger Rail Agency of SA (Prasa) has started with the development of a R575m Goodwood Station social housing scheme in Cape Town.
Social housing is a government-sponsored programme administered by the Social Housing Regulatory Authority (SHRA) on behalf of the department of human settlements. It involves the provision of rental accommodation to SA citizens with household income of R1,850 to R22,000 per month. The SHRA says a development must provide the primary target market with rental units for R700 to R1,300 per month and secondary target market units priced at R2,300 to R4,800 per month.
Phase one of the Goodwood development lasted until October. On completion in May 2024, the development will offer 1,055 rental units with bachelor units measuring 30m2, one-bedroom and two-bedroom units measuring 32m2 and 42m2 respectively. It will also have a small retail offering on the station deck.
The project is a welcome development in a city with one of the largest housing backlogs and which is one of the most unequal in the provision of basic services.
Early in March, Western Cape provincial infrastructure MEC Tertuis Simmers said 599,855 people were on housing waiting lists in the province, and that it would require a budget in excess of R100bn to clear this backlog. A total of 356,524 were on the city’s lists and 242,431 on the lists of the province’s nonmetro municipalities.
Prasa Group CEO Hishaam Emeran said the development is being undertaken by the group’s investment vehicle, Intersite Investment.
“The development situated near the Goodwood Station is developed on the land owned by Prasa through our land release programme to create opportunities for social housing near transport nodes/transport network and for municipalities to meet their affordable housing needs of municipalities, on a long-term lease agreement,” said Emeran.
It is developed by DCI Community Housing Services and co-funded by SHRA, the Infrastructure Fund, and the City of Cape Town.
“This project demonstrates the importance of cross-sector collaboration and public sector partnerships in generating socioeconomic and commercial value,” said Emeran.
Prasa will achieve 6%-7% of gross rental income annually for the period of the development lease of the project.
The rail transport utility owns a land portfolio of 4,500ha, which includes stations, depots and rail reserves as well as property buildings. Its investment property portfolio is valued at more than R5bn. A portion of vacant land measuring about 200ha nationally still has a potential for development.
Its property portfolio comprising 1,400 leases contributes about R700m revenue annually. The group is targeting R1bn in revenue in the next three to five years.
The group’s Corporate Real Estate Solutions (CRES) manages the railway stations, retail spaces at its stations, offices, residential spaces and land making Prasa one of the largest intermodal transport landlords in SA.
Emeran said through CRES, the group is working on a pipeline of more than 20 development projects, with the private sector investment value estimated at about R6bn over the next five years. This includes the conversion of Prasa’s office property, the Tippet building in Braamfontein, Johannesburg, into residential rental units.
Intersite and coinvestor Urbane Living will convert the office building into 189 residential units with rooftop storage for about R67m. Scheduled for completion in November 2024, the project will offer apartments priced between R4,500 and R6,500 per month.
“As we rebuild passenger rail services and bring people back to rail, unlocking value in our property portfolio is an important part of our strategy to secure long-term financial sustainability and support our primary mandate of providing a safe, reliable, affordable commuter rail service,” said Emeran.
Soho Properties CEO Marius Muller said increasing building costs and high interest rates are the main challenges facing the social housing sector.
Furthermore, high consumer inflation makes it harder for tenants to afford rent. There is no support from traditional banks to fund social housing providers and lack of debt funding from the private sector is a huge obstacle for the provision of social housing.
“There is high demand for affordable housing in SA, especially social housing and continued support from SHRA and the government is needed to accelerate developments,” Muller said.
According to its medium-term strategic framework for 2019-24, the the SHRA targets 30,000 social housing units by March 2024 in areas close to transport and economic hubs.
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