TURKEY: MANAGEMENT OF RENTAL HOUSING PROJECTS

1. Introduction

The presentation delves into the management of formal rental housing projects, emphasizing the experiences and frameworks from Sub-Saharan Africa, particularly South Africa. It focuses on two primary government-assisted rental housing programs:

Social Housing (SH)
Community Residential Units (CRU)

These programs aim to provide affordable rental housing to low and moderate-income households, addressing the significant housing shortages in urban areas.

2. Comparative Analysis: Social Housing vs. Community Residential Units

a. Target Households

Social Housing (SH): Caters to households with monthly incomes ranging from R1,500 to R7,500.
Community Residential Units (CRU): Designed for households earning between R800 and R3,500 per month.

b. Location

SH: Typically situated in well-located restructuring zones to promote urban integration.
CRU: Not necessarily in restructuring zones, but location remains a factor in prioritization.

c. Ownership

SH: Land ownership is transferred to Social Housing Institutions (SHIs) either as freehold or leasehold.
CRU: Must be owned and remain under the ownership of the municipality or province.

d. Financing

SH: Financed through a mix of restructuring grants and institutional subsidies, covering only part of the development cost. The remainder is financed through loans.
CRU: Funded by CRU subsidies, which attempt to cover total development costs within the grant.kzndhs.gov.za

e. Rentals

SH: Based on Economic Cost Recovery (ECR) with both loan repayment and return on investment elements included.
CRU: Based on ECR without loan repayment or return elements, covering only management and administration costs.mayson.co.za

f. Management

SH: Managed by SHIs.
CRU: Can be managed by municipalities, SHIs, or management agents.

3. Development of Appropriate Stock

a. Product-Market Fit

Ensuring the right product for the market within cost constraints is crucial.
Life cycle design considerations are essential to manage long-term maintenance costs and maintain affordable rentals.

b. Development Approaches

Self-Development: Projects developed internally by the managing entity.
Professional Development: Engaging a group of professionals for project development.
Turnkey Projects: Outsourcing the entire development process to external developers.

c. Early Involvement

The management entity must be involved from the early design stage to ensure the development aligns with management capabilities and tenant needs.

4. Management Functions

Effective management encompasses a range of functions:

Tenant Screening and Onboarding: Ensuring suitable tenants are selected.
Rent Collection and Arrears Management: Implementing efficient systems for rent collection and handling defaults.
Maintenance: Both planned and reactive maintenance to ensure property upkeep.
Caretaking Services: Including cleaning, gardening, and general upkeep.
Security: Ensuring the safety of tenants and property.
Tenant Relations: Managing tenant communications and engagement.

Management can be structured in various ways:

In-House vs. Outsourced: Deciding whether to manage functions internally or outsource them.
Centralized vs. Decentralized: Determining the level of central control versus local autonomy.

5. Community and Neighborhood Development

While not part of the formal landlord-tenant relationship, community development activities can enhance neighborhood stability and tenant satisfaction:

Crime and Grime Initiatives: Addressing safety and cleanliness.
Educational and Recreational Programs: Providing learning and leisure opportunities.
Employment Support: Assisting tenants in finding and maintaining employment.
Greening Projects: Such as community gardens to improve aesthetics and sustainability.

These activities are typically financed through sources other than rental income.

6. Special Needs Provision

Social Housing can be tailored to accommodate individuals with special needs:

Integration within SH Developments: Designating units for independent living.
Cluster Homes: Creating group homes within developments, e.g., for children.
Standalone Facilities: Establishing dedicated facilities, such as shelters for abused women.

Management involves collaboration between SHIs for property management and specialized organizations for care provision. Financing remains a significant challenge in these cases.

7. Financing Mechanisms

a. Capital Development

Grants: Government-provided funds.
Loan Finance: Borrowed capital to cover development costs.
Equity: Investments from stakeholders, including land contributions.

b. Rental Income

Rentals are structured based on Economic Cost Recovery (ECR), covering:

Return on Investment
Management and Maintenance Costs
Rates and Utilities
Building Insurance
Caretaking and Cleaning Services
Administrative Expenses
Staff and Office Costs
Transportation
Legal Expenses

8. Challenges in Rental Housing Management

Several challenges impede the effective management of rental housing projects:

Poor Location: Developments in areas with inadequate market demand.
Financing Difficulties: Particularly in securing loan financing.
Affordability vs. Real Costs: Balancing rental affordability with actual development and maintenance costs.
Product Suitability: Ensuring the housing product meets market needs and life cycle financing requirements.
Rental Payment Issues: Addressing non-payment of rentals.
Legal Disputes: Bureaucratic and slow resolution of tenant-landlord disputes.
Rising Utility Costs: Managing the impact of increasing utility prices.
Political Interference: Navigating expectations and interventions from political entities.
Cash Flow Management: Handling initial cash flow shortages and planning for major maintenance expenditures after several years.

9. Stakeholder Roles and Responsibilities

a. Managing Agency (Landlord)

Development Facilitation: Overseeing the development process.
Efficient Management: Providing effective and responsive management services.
Equity Investment: Contributing to the project’s financial foundation.
Risk Management: Implementing systems to mitigate risks.
Communication: Maintaining open lines with tenants and stakeholders.
Maintenance Oversight: Ensuring the property is well-maintained.
Financial Management: Handling finances, including credit control.

b. Tenants

Rent Payment: Fulfilling financial obligations.
Accommodation Enjoyment: Utilizing the housing responsibly.
Legal Rights Protection: Understanding and asserting their rights.
Market Awareness: Being informed about their needs and available options.

10. Applicability to Pakistan’s Housing Context

The insights from this presentation are highly relevant to Pakistan’s housing sector:

Targeted Rental Programs: Developing rental housing programs tailored to specific income groups can address housing shortages.
Public-Private Partnerships: Encouraging collaboration between government entities and private developers can enhance resource mobilization.
Comprehensive Management: Implementing robust management structures ensures sustainability and tenant satisfaction.
Community Engagement: Involving tenants in community development fosters a sense of ownership and stability.
Special Needs Housing: Addressing the requirements of vulnerable populations through dedicated housing solutions.
Financial Strategies: Employing diverse financing mechanisms, including grants, loans, and equity, to support development.
Policy Frameworks: Establishing clear policies and legal frameworks to manage challenges effectively.

By adapting these strategies, Pakistan can enhance its rental housing sector, providing affordable and sustainable housing solutions to its urban population.

Document Download	Download
Document Type	General
Publish Date	27/06/2014
Author	Makcolm Mc Carthy
Published By	Makcolm Mc Carthy
Edited By	Suneela Farooqi

Advisory Center for Affordable Settlements and Housing ACASH

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