Property & Wealth

Home ownership making slow but steady progress

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What has and is government contributing to property transformation?

Based on current estimates, almost 20% of South African households are occupants of RDP homes, indicating some progress in post-1994 South Africa.  (Read more)

As flagship programme of the Reconstruction and Development Programme (RDP) after the transition to democracy, the low-cost housing programme is specifically aimed at providing accommodation for the poor and forms the backbone of government-subsidised housing. 

In a nutshell, this scheme caters for South African citizens over 21 years of age. Both individuals and married couples can apply if their single or combined income does not exceed R3 500 per month.

It is strictly for first-time home buyers and there can be only one subsidy per applicant. If an application was previously rejected with good cause, the applicant may not apply again.

To ensure that the most needy are reached (for instance, those earning less than R1 000 per month) application can be made for an additional special indigent subsidy, taking care of the costs of the relevant electricity, water and sewerage services, normally charged to the RDP homeowner.

Special consideration is also given to applicants with disabilities and the design of the house may be changed to accommodate special needs.

Applicants who already own houses under any other scheme, like an existing home loan, are automatically excluded.  

Mixed results

RDP housing schemes are accessible across the entire country. Applications are simply made at the local municipality which manages the process.

Successful applicants may not renovate or extend the homes without permission and are restricted from renting out or selling the home in the first five years of occupation.

RDP schemes are a godsend for many. The waiting lists for housing and issues over the quality of the final product have, however, been the cause of many complaints and the subject of several delivery protests by communities.

In the past, people earning more than R3 500 per month needed to apply for a home loan in order to buy or build a dwelling. This was fraught with difficulties, not least of which was the ability to qualify for and afford a home loan. The lending criteria of banks and bond originators were considerably tightened up following the 2008 financial meltdown.

The question then arose of how to deal with the gap between the R3 500 income threshold for RDP housing and the affordability criteria of banks for mortgage finance?

In 2012 the Department of Human Settlements introduced FLISP – the Finance Linked Individual Subsidy Programme – in terms of which households or individuals who sought to acquire residential property for the first time and qualified for a mortgage loan could apply for a government subsidy.

FLISP was designed to subsidise and reduce the home loan burden of successful applicants and specifically targeted:

  • households with an income of between R3 501 and R15 000 per month;
  • applicants who had not benefited from any previous subsidy;
  • first-time home buyers; and
  • residential properties eligible for the registration of transfer and mortgage bonds.

The special criteria for success are that an applicant must be:

  • an SA citizen with a valid ID or a permanent resident with a valid permit;
  • over 18 years old and competent to contract; and
  • an individual or a couple who have already qualified for a home loan from an approved financial institution.

The once-off subsidy ranges from R10 000 to R87 000, based on the applicant’s income and allows the successful candidate to buy an existing residential home or build on a vacant erf via an NHBRC-registered home builder. 

Additional schemes

In addition to these direct government housing assistance schemes there are several local government initiatives such as the joint Khaya Lam land reform initiative of the Free Market Foundation (FMF) and the Theewaterskloof District Municipality in the Western Cape we referred to in a previous column.

The City of Cape Town has, over the past three years, registered the transfer of over 14 000 properties in the names of beneficiaries who have been living in older local government housing developments.

Despite these initiatives to tackle the current low-income housing backlog, progress on delivering to those still on and being added to the lists, remains painfully slow.

The immediate challenge, it seems, is to develop a cohesive system, binding on all stakeholders, to undertake the nationwide conversion of ‘council owned-’ and ‘traditional community’ land to full and unrestricted ownership being registered with individual title deeds.

Due to the potential of wide-scale fraud and corruption in all matters of public land ownership, it is pleasing to note that several agencies and institutions are primed to assist. Hotlines exist at the following institutions:

  • Department of Human Settlements;
  • Government's Special Anti-Corruption & Fraud Unit;
  • Office of the Public Protector; and
  • Public Service Commission.

Perfect it is not, but it is clear that the government sector has made considerable progress since 1994 in promoting and facilitating home ownership among South African citizens.

by Eve van Basten

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