One of JHC’s most significant achievements is that it has reached a position of financial sustainability while it has succeeded, too, in fulfilling its social mandate. Operating within a framework of sound governance and strict business principles it has achieved its defined financial and social objectives.
The Johannesburg Housing Company was set up with an initial capital grant of R50-million from the European Union, as well as funding from the Flemish government. Since then, we have grown our asset base and balance sheet, which is made up of debt, equity and grant funding.
The initial grant funding that was awarded to JHC provided the capital base required for the development of inner city social housing at a scale sufficient to deliver an adequate return for the organisation’s continuing viability.
By the end of 2000, JHC had established a portfolio of nine buildings, including two new-build developments. Having built up a reputation for innovation while maintaining good governance and sound management practices, the company was able to attract lending from commercial banks back to the inner city.
In mid-2000 JHC won support from Absa Bank for the development of Elangeni in the CBD. This loan, the first ever secured from a commercial bank for social housing development in the inner city, was facilitated by JPMorgan. It signalled the lifting of South African banks’ earlier redlining of the inner city as a no-go zone for property development loans.
The financing structure that JHC conceived for the Brickfields housing project – which established a new scale for housing development in the inner city – involved debt, equity and subsidy finance. It brought together government, some of South Africa’s leading private companies, banks and housing finance institutions. The Brickfields complex, comprising three linked housing precincts, was completed in 2006 and added more than 700 new housing units to the inner city.
The funding model that served to establish Brickfields – with grant funding constituting a minimum of 50% of the mix and the balance combining equity as well as commercial and soft loans – became the basis for the National Department of Housing’s (now Human Settlements’) Reconstruction Grant for Social Housing. JHC’s management of operational costs has always been based on the requirement that each building should cover all its operational costs, including interest where applicable, from operational income.
Different buildings have been required to reach different returns, based on age and target income market. This too has become an industry standard in the social housing sector. As JHC continues to take on new social housing projects it seeks development funding to contribute to the delivery of housing for low- and moderate-income people and the building of inclusive residential communities in the Johannesburg inner city and Greater Johannesburg area.
Any enquiries in this regard can be directed to the CEO Ms Elize Stroebel.