The province is one of three legislatures that have lost a total of R600m earmarked to build much needed houses because they failed to spend it.
North West lost R300m, while Gauteng and Limpopo forfeited R150m each.
According to Keith Khoza, Gauteng's co-operative governance, traditional affairs and human settlements spokesperson, the National Treasury informed the department about its intention to withhold the transfer of the human settlements development grant in September.
"The initial amount was higher. The department initiated a rescue plan to reduce the amount of money that Treasury intended to withhold from R419m to the R150m,” he said.
The money allocated through the human settlements development grant has been returned to the Treasury, which has reallocated it to other provinces, according to Finance Minister Malusi Gigaba.
"In compliance with section 19 of the Division of Revenue Act (Dora) 2017, as amended, the national Department of Human Settlements will stop the transfer of funds to Gauteng (R150m), Limpopo (R150m) and North West (R300m) for the human settlements development grant, following revised allocations by the national Department of Human Settlements,” Gigaba’s notice read.
KwaZulu-Natal will now get its R200m share of the R600m, while the rest will be shared equally between the Eastern Cape, Northern Cape, Western Cape and Mpumalanga.
Section 19 of Dora allows the Treasury to stop transferring funds if, in its discretion or on request of a transferring or receiving officer, there is a "serious or persistent material breach".
It also empowers the Treasury to stop the allocation of funds if it expects that a province will substantially underspend on its allocation.
According to the Rhodes University-based Public Service Accountability Monitor (PSAM), the housing backlog in Gauteng is over 600 000, 237 000 in North West and 157 420 in Limpopo. The total backlog now stands at over 3 million low-cost houses countrywide.
PSAM said Gauteng had the highest housing needs of all the other provinces, but pointed out that the highest number of low-cost houses - over 1.2 million - had been built in the country’s economic hub.
The governance monitor blamed population-migration patterns and people migrating from around the country in search of work.
The human settlements development grant is distributed to provinces to build houses.
The grants are also allocated to develop capacity for metros and other qualifying municipalities to be accredited by their respective MECs to build low-cost houses through the human settlements capacity grant.
Khoza blamed the late conditional approval of its business plan, which meant it could not spend the money in the months of April and May 2017.
Khoza said stopping the allocation of the grants would affect the delivery of houses, but it was important to note that the department could not just spend the money for the sake of spending or compliance, but that it had to be spent in line with its programmes.
The DA spokesperson on human settlements, Mervyn Cirota, said the ANC's recently elected treasurer-general, Paul Mashatile, had ignored the department in his bid to get elected to the governing party’s Top Six officials.
There are 800 000 people on the housing waiting-list in Gauteng, according to Cirota. "It's not only horrifying, but it's sad and extremely disappointing. There is nothing worse than not spending the grant money,” he said.
The human settlements departments of Limpopo and North West did not respond to requests for comment.