Nedbank Corporate and Investment Banking’s (NCIB’s) Affordable Housing Development Finance division has concluded an agreement with the Development Bank of Southern Africa’s (DBSA’s) Green Fund to jointly provide R120-million in funding for the development of around 400 affordable green housing units in the Western Cape and Gauteng.

This would be achieved through the creation of a concessionary loan funding pool administered by Nedbank and would enable the development of sustainable green housing in the affordable housing market.

The agreement also included the monitoring of energy and water consumption in these 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,” commented NCIB Affordable Housing Development Finance head Manie Annandale.

The parties outlined in a joint statement on Tuesday that the 400 families across Gauteng and the Western Cape would not be the only beneficiaries of the collaboration, as local industries would also be stimulated through the increased demand for green housing technologies, such as insulating materials, efficient lighting, heat pumps and solar-water heaters.

“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 [Development Finance] unit makes it possible to fund innovative affordable housing projects which contribute to achieving the objectives of the National Development Plan,” commented DBSA Project Preparation Development unit GM Mohale Rakgate.
 
While environmental sustainability might seem like a luxury in the affordable housing market, lower life cycle costs made green homes particularly attractive to this segment.

A typical household in this market earned up to R20 000 a month, buying a home for under R620 000, or occupying a rental unit costing up to R6 500.

“Utility bills amount to between 10% and 20% of a rental or bond instalment, pushing a household’s accommodation-related expenditure to between 40% and 50% of 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,’’ noted Annandale.
 
In South Africa, a new benchmark for environmentally sustainable housing was the Excellence in Design for Greater Efficiencies (Edge) tool, which was developed by the International Finance Corporation for application in developing economies, and recently adopted locally by the Green Building Council of South Africa as the basis for a new green housing certification system.

Compliance required savings of at least 20% in each of three categories, namely; energy, water and building material embodied energy.

It was expected that a family of four living in a new two-bedroom unit compliant with Edge could save as much as R350 to R450 a month, compared with an older conventional unit with no energy efficiency features.
 
Once savings were demonstrated, it was expected that property developers would 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 would 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.