UK-based development finance institution CDC Group has announced a R500-million commitment to affordable housing platform Divercity Urban Property Fund for housing development. 

This investment will fund the construction and management of more than 2 500 new affordable and environmentally sustainable residential units over the next five years, predominantly in Johannesburg.

CDC says South Africa faces a housing shortage of about 2.3-million units and that a significant majority of its lower-cost housing is built on the urban periphery.

“This limits residential options for low- and middle-income households to predominantly informal, congested and low-quality housing on the outskirts of cities,” it states.

It also impedes access to essential services including schools, healthcare facilities, public transport networks and employment hubs needed for improved social inclusion and living standards, it adds.

CDC’s capital will enable Divercity to grow its rental housing platform, which provides low- and middle-income households with safe, inclusive and affordable housing options.

Construction of the new residential units will help address the growing housing deficit and issues of spatial segregation in South Africa, meeting the needs of people with limited other housing options available.

Up to 4 000 construction and permanent operational jobs are expected to be created, resulting in new economic opportunities, and boosting employment.

The new units will be built to green building standards, demonstrating both CDC and Divercity’s commitment to minimising greenhouse-gas emissions and supporting climate change mitigation, in alignment with CDC’s commitment to invest using a climate lens.

CDC private equity head Samir Abhyankar says cities in sub-Saharan Africa are experiencing rapid population growth amid an increasing shortage of housing units, with low-income populations being particularly affected.

“With our re-entry as an equity investor in South Africa, we are proud to have partnered with Atterbury and Ithemba to set up Divercity as a leading affordable and sustainable housing platform in South Africa.

“The investment will help promote inclusive growth and enhance social and economic integration in the country. CDC’s patient capital and development expertise can help accelerate growth, improve living conditions and support the livelihoods of low-income and vulnerable households,” he notes.

With investment in Africa’s housing sector constrained, CDC’s countercyclical funding can stimulate local housing markets and drive transformative economic, inclusive and sustainable impact in South Africa and other African countries.

CDC construction head Ilaria Benucci points out that urban population growth and a challenging macroeconomic environment necessitate patient and long-term investments that will help close the gap between demand and supply in South Africa’s housing market.

“We are delighted that our investment in Divercity will support the developer to deliver rental housing that will meet the housing needs of groups within the low- and middle-income bracket.

“We are confident CDC’s investment will have a demonstration effect on commercial investors, ushering in greater investment into the housing sector."

Diversity CEO Carel Kleynhans expresses his confidence that CDC will add significant value to the funds’ goal of changing the face of affordable rental housing in South Africa and establishing it as an investment grade asset class.