Playing the system for a home
Category Property market overview
On the face of it, the South African government has been remarkably effective since 1994 in tackling the housing deficit: it has built more than 2.5 million houses and provided another 1.5 million serviced sites.
Housing spending has soared from R5 billion in 1994 to this year's budgeted R153bn, an increase of nearly 3 000 percent.
The housing subsidy has gone up from R12 500 per household to R160 500, and state spending on housing and community amenities has risen from 1 percent to 3.7 percent of GDP.
Yet, as a South African Institute of Race Relations study confirms, the housing story is a disheartening narrative of mounting insufficiency.
Instead of receding, the housing backlog has climbed from 1.5 million to 2.1 million units.
The number of informal settlements has risen sharply - 650 percent - from 300 in 1994 to 2 225. In addition, the delivery of "free" houses has slowed, averaging at some 118 000 houses a year. At this rate, it will take almost 20 years to build enough houses for the 2.1 million households now on the waiting list.
And even where houses have been successfully completed to match the growing demand, the institute says, the quality is often poor... "so small, badly constructed, and poorly located that the ruling ANC itself describes them as 'incubators of poverty' that do more to entrench disadvantage than overcome it".
In an environment of economic hardship, pervasive discontent reflected in unprecedented levels of "service delivery" protest, and inexorable urbanisation, a faltering, increasingly expensive housing policy needs a thorough revision.
This is the gist of a key section of the Institute of Race Relations' study, penned by its head of policy research, Anthea Jeffery.
"Housing policy needs a fundamental rethink to empower individuals, provide better value for money, and break the current delivery logjam," she argues.
She suggests a new system of housing vouchers, to be provided directly to beneficiaries.
These vouchers, redeemable solely for housing-related purchases, would go to some 10 million South Africans between the ages of 25 and 35, who earn below a specified ceiling.
"Individuals would be empowered to make their own housing choices, while the vouchers would help provide 'more bang for every buck'.
"Accelerated housing delivery via the voucher system would also stimulate investment, generate jobs, and give the weak economy a vital boost."
In the main portion of the study, housing expert Mary R Tomlinson explains that a key weakness in what she calls the "housing conundrum" is that the present openended subsidy-per-household policy at once stimulates an "entitlement syndrome" and guarantees that the waiting list will always grow faster than the rate of housing provision.
"There is no time limit to the constitutional clause (section 26) stating that 'everyone has the right to... adequate housing'.
South Africans born both before, as well as after, the end of apartheid thus take the view that 'they have a right to a free house' if their monthly income is below R3 500 per month. Accordingly, households continually break up into smaller units in the expectation each new unit will become entitled to a housing subsidy."
Tomlinson writes that national, provincial and local government housing officials she interviewed last year "all refer to this as the growth of an "entitlement syndrome" and say it has made the goal of eliminating the housing backlog simply unattainable".
Anthea Jeffrey says the problem is not that housing policy is being poorly implemented, but that it is, in itself, "deeply flawed", and that the solution is to transfer the housing subsidy directly to individuals.
The new approach would mean shifting the government's responsibility to enabling housing development, particularly denser, multistorey housing (not least to help curb urban sprawl), which the private sector - and not the state - should be responsible for building.
"The private sector would also have a clear interest in building such housing (or in revamping existing structures for housing) if millions of South Africans were to be given housing vouchers to spend exclusively on meeting their housing needs."
In this approach, the government's role in delivery would "largely revolve around the speedy identification and release of state and municipal land suitable for these new housing developments", and in "streamining and fast-tracking land re- zoning and town planning processes".
Jeffrey argues that to increase efficiency the government "should outsource these tasks to the private sector through a transparent, nonracial, and cost-effective tendering system".
"Housing development must no longer be held up for three years or more, as is commonly the case, by continued incapacity within the public service."
A voucher system - and the market it would create - would generate economic incentives that would "encourage the private sector to build many more terrace houses or apartment blocks, or to revamp many more existing structures for housing purposes.
Beneficiaries would also find it easier to gain mortgage finance, which would further stimulate new housing developments."
Also, beneficiaries who were already homeowners would be able to use their housing vouchers to extend or improve their homes.
The system could produce new, much-needed rental stock.
"Some might choose to use their vouchers to build backyard flats, which they could then rent out to tenants, also armed with housing vouchers and so able to afford a reasonable rental.
"This too would help increase the rental stock available."
People living in informal settlements would "increasingly have other housing options available to them. Some would move into the new housing complexes and others into new backyard or other flats".
This would mean informal settlements would become less crowded, making upgrading easier.
"Those who choose to remain in them would be able to use their housing vouchers to buy building supplies, hire electricians, plumbers, and other artisans, contribute their own labour or 'sweat equity' to reduce costs, and gradually upgrade their homes."
A further advantage of a voucher system is that it would "do away with the present artificial division between the "free" houses provided by the state to those who earn R3 500 a month or less, and the much smaller "gap" subsidies provided to people who earn R3 501 or month or more (up to a ceiling of R15 000).
"It would also remove the incentive for people to keep their earnings below R3 500 a month, as well as the resentment that many feel at having to pay for their own houses if they earn marginally more than R3 500 a month."
In time, Jeffrey believes, the state's role in housing provision would diminish, and, "in the interim, accelerated housing delivery would help to stimulate investment, generate jobs, and give the weak economy a vital boost".
Author: Weekend Argus
