Amid a structural rental housing backlog of about 3.7-million units in South Africa, financial services provider Sanlam’s Property Impact Fund aims to address this shortfall, particularly targeting the “missing middle” demographic.

This was a topic discussed during a media breakfast on January 22, hosted by the South African Multifamily Residential Rental Association (SAMRRA), in partnership with Absa.

At the event, speakers discussed how South Africa’s multifamily (institutional rental) sector continues to evolve into a credible, evidence-driven and investable asset class.

Speaking at the event, Sanlam Alternative Investments portfolio manager Kamogelo Leeuw explained that between 23% and 30% of South Africa’s population falls within the “missing middle” income group, which includes, for example, civil servants, nurses, police officers and students.

Sanlam’s Property Impact Fund, launched in the fourth quarter of 2024, aims to address social infrastructure needs in sectors such as education, retail, student housing, affordable housing and healthcare to support socioeconomic development.

With this in mind, Leeuw explained that the fund aimed to address these gaps by offering accessible, quality facilities for underserved communities.

He pointed out that the delivery rate in the affordable housing segment had declined from 75 000 units in 2019 to 25 000 units in 2023.

Hence, he noted that the fund aimed to address the missing middle gap through low-cost, high-density rental units; inner-city building conversions; and integrated developments.

“There is currently a need to increase the volume of units that are being supplied in the market, because the demand is there”.

He also explained that the sector faces various challenges, including municipal constraints and municipal rate increases that inflate operational costs; sporadic informal settlements; and limited access to capital.

He noted that these gaps, however, brought about opportunities to reform regulatory frameworks and simplify approval processes, as well as opportunities to introduce co-production community involvement in planning, building and sustaining projects to enhance ownership and quality.

Leeuw explained that Sanlam adopted a partnership approach through collaboration with aligned partners to ensure financial viability and long-term impact delivery.

In his presentation, Leeuw noted that the multifamily residential sector directly supported the fund’s objective to address South Africa’s critical social infrastructure gaps while delivering resilient, inflation-linked returns.

He said that multifamily served the “missing middle” households that earned too much for subsidised housing but too little for private financing.

He also described multifamily as the foundation asset that enabled education, healthcare and retail assets to succeed by creating stable, well-located residential catchments.

Additionally, multifamily played a role in the fund’s future strategy as an anchor asset in integrated social infrastructure precincts, and served as a platform for inner-city regeneration and densification.

It also offered a base for ownership pathways and long-term household wealth creation and enabled a repeatable, scalable model for capital deployment.

Leeuw, in his presentation, described multifamily residential as a cornerstone asset class that anchored the Property Impact Fund’s strategy, enabling access to education, healthcare and retail for South Africa’s missing middle.

He explained that the fund’s targeted sectors did not operate independently, noting that multifamily was the demand engine that gave the other four asset classes – student housing, private education, healthcare and township and rural retail centres – durable, location-based relevance.