In a ground-breaking move and first for South Africa, Nedbank and Development Bank of Southern Africa (DBSA) agreed to collaborate on funding sustainable green housing in the affordable housing market.
On Monday, representatives of Nedbank Corporate and Investment Banking (NCIB) Affordable Housing Development Finance division and the Green Fund which is managed by DBSA on behalf of the National Department of Environmental Affairs (DEA), concluded an agreement to jointly fund the development of approximately 400 affordable green housing units in the Western Cape and Gauteng Provinces.
This will be achieved through creating an earmarked R120 million concessionary loan funding pool administered by Nedbank.
The agreement between Nedbank and DBSA’s Green Fund will enable the development of sustainable green housing in the affordable housing market. The agreement also includes the monitoring of energy and water consumption in green affordable housing units to verify the actual savings.
“Green affordable housing combines social and environmental sustainability to promote access of lower middle income individuals to better quality housing units with lower running costs. This captures the spirit of Nedbank’s Fair Share 2030 initiative, recognising that to be a thriving bank, we need to operate in a thriving society,” says Manie Annandale, Head of Affordable Housing Development Finance at NCIB.
The 400 families across the Gauteng and Western Cape Provinces will not be the only beneficiaries of this collaboration. Local industries will be stimulated through the increased demand for green housing technologies such as insulating materials, efficient lighting, heat pumps and solar water heaters, thus leading to the potential of creating new jobs.
“Funding initiatives such as this partnership are meant to support South Africa’s efforts to move towards a greener economy which is a priority focus area for the DBSA’s Green Fund. A partnership with Nedbank’s Affordable Housing Unit makes it possible to fund innovative affordable housing projects which contribute to achieving the objectives of the National Development Plan,” says Mohale Rakgate, General Manager for Project Preparation Development unit at the DBSA.
Whilst environmental sustainability might seem like a luxury in the affordable housing market, lower lifecycle costs make green homes particularly attractive to this segment. A typical household in this market earns up to R20 000 per month, purchasing a home for under R620 000 or occupying a rental unit costing up to R6 500.
“Utility bills amount to 10-20% of rental or bond instalment, pushing a household’s accommodation-related expenditure up to 40-50% gross income, and placing pressure on affordability. Above-inflation increases in electricity tariffs will erode affordability further in years to come. Meaningful savings in electricity and water bills can reduce the likelihood of default on rentals or bond payments, and help to improve access to housing for new market entrants,’’ notes Annandale.
In South Africa, the new benchmark for environmentally sustainable housing is the EDGE (Excellence in Design for Greater Efficiencies) tool. This tool was developed by the International Finance Corporation (IFC) for application in developing economies, and recently adopted locally by the Green Building Council of South Africa (GBCSA) as the basis for a new green housing certification system.
Compliance requires savings of at least 20% in each of three categories namely; energy, water and building material embodied energy. It is anticipated that a family of four living in a new two bedroom unit compliant with EDGE and SANS 10400-XA could save as much as R350-450 per month compared to an older conventional unit with no energy efficiency features.
Once savings are demonstrated, it is anticipated that property developers will be able to recover the green construction premium from residents by sharing in the operational savings, either through marginally higher selling prices or rentals. In the case of housing sales, mortgage lenders will play a critical enabling role by taking into account the likelihood of lower operational costs in their assessment of home loan applications relating to units in green developments.
Fair Share 2030 is Nedbank Group’s business response to a series of economic, social and environmental challenges that threaten society’s long-term success. It represents an annual flow of money to be lent in a way that contributes to meeting eight major long-term goals for the future.
The goals relate to provision of affordable energy services while containing carbon emissions; sustainable clean water and sanitation; improved employment rates; savings and investments that support national development objectives; and good, cost-effective health and educational outcomes. These goals address socioeconomic and environmental issues, and their interplay.