Housing in Post-Apartheid South Africa: Challenge or Opportunity?

 

by Vuyisa Qabaka

South Africa finds itself at the brink of a variety of issues that don’t seem to ever get resolved. Many qualified and highly educated opinion makers have spoken about issues such as joblessness, food security, the AIDS pandemic, acid mine drainage, electricity shortages, water shortages and youth unemployment (some, including myself, have even called it the ‘ticking time bomb’). I find, however, that the biggest issue that is likely to affect ordinary South African township dwellers over the next 5 years is the issue of sanitation.

Before I delve deeper into the challenges faced by people in informal settlements around sanitation, I would like to take a step back and explore why is it that we find ourselves in this position as a country:

I remember a time in my life, just before the “end” of apartheid, where living in a township felt a little more dignified than what I see around me today.

In hindsight, a true optimist would argue that a positive part of the legacy of apartheid and perhaps the RDP period is that it gave people (from historically disadvantaged areas) homes. My personal assessment of this would go further in saying that it gave families a “free” asset, because the township property market is arguably the most buoyant within the current real estate client. Interestingly, according to the Free Market Foundation executive director Leon Louw, blacks in townships collectively have R1 trillion worth of property wealth and the majority of these properties are unbonded.

At some point, post-apartheid, black South Africans lost their way, lost their dignity and lost their ability to be self-subsistent.

If one looks at the history of what today is called “informal settlements”, what previously would have been known as a ”shanty” town, one would need to look at companies like “Penny Pinchers”, a company whose history dates back to 1981. “Penny Pinchers” started selling second-hand sheet metal or zinc in the mid-to-late 1980s direct to the public, this found a massive market amongst the black population.

Fast forward some 20 odd years, South Africa is facing a massive housing crisis with politicians still promising free housing for votes, yet reality will tell us that it’s practically impossible to continue making such promises as its become to expensive to build (material costs), too saturated or dense where people want to live and the housing waiting lists (coupled with urban immigration) have become “too long” to meet the demand.

South Africa’s ever increasing unemployment, new credit legislation and the cost of property have all conspired to make it even more difficult to afford housing, even for people who have jobs and want to buy property independently (independent of government support).

This combination of factors has resulted in chaotic situation where over crowding is no longer an option, people now would rather build a shack, home owners can earn extra cash by becoming ‘slum lords’ by simply allowing as many shacks to be erected within their property as they fit.

All of this has resulted in even greater density, even greater demand for resources and extreme pressure on sanitation, for an example: a plot that was designed to accommodate a family of 4, will now have 3 families living on it whilst sharing 2 bathrooms and a perhaps a pit-toilet,  with infrastructure that was designed for 1 bathroom.

The situation need not be all doom and gloom. Government still has an opportunity to remedy the situation by implementing various changes to the current housing (human settlement) strategy:

1. Stop building new social housing:

The backlog and waiting lists are far too long to meet the demand, in the Western Cape (for example) the waiting list is over 30 years and they have a 3.2% inward migration into the places like the City of Cape Town. A community like Khayelitsha, which has 1.2 million people, (all things being equal) will have on average 38 000 new residents each year.

2. Invest the money saved from building housing into property education:

The lesson being learnt by the current government is due to a lack of education (in general) and financial education (in particular), many recipients of social housing struggle to maintain their homes and the majority don’t understand or don’t have jobs to pay for municipal services.

Furthermore, there is general lack of knowledge on property from the next generation of first time homebuyers. Property education would help new homebuyers better understand property and also recipients of social housing better maintain their government-issued homes. By improving property knowledge, the government will ensure a steady second-hand property (resale) market, where people will understand that shack undermine the intrinsic value of their property.

3. Increase housing subsidies:

A portion of the money that would have been spent on social housing, could also be redirected at increasing housing subsidies and also extending the reach of such subsidies to all first time homebuyers. This would also give government an opportunity to better negotiate with the major banks around the terms which are issued to home loan recipients.

4. Allow entrepreneurs (developers) to build houses:

When politicians stop making impractical promises on free housing, then entrepreneurs can start building better houses that people are happy to live in. Government would still have influence through incentive schemes, regulation and government policy. This has the added benefit of decreasing corruption (in large-scale home construction and within the human settlements department), increasing government taxes, increasing job creation and increasing entrepreneurship.

5. Focus on developing communities:

Government should also intensify its role of providing communal infrastructure, like street lights, public parks, recreational areas, drainage systems, fire hydrants and traffic control systems. This has the effect of reducing injuries and bringing families closer together, especially families in historically disadvantaged area. The bulk of this budget would come from the public works department, but the creative input on its allocation should be driven through human settlements.

6. Regulate or improve self-regulation amongst property/real estate professionals:

By improving property education, we improve consumer attitudes to the second-hand property market.

Currently this market is grossly unregulated in various township communities. This has created a negative perception of the services offered by real estate agents. What you find (generally) is that the average commissions earned by township agents is anywhere between 12-20 percent of the sale, whereas in more regulated areas its 5 – 7% (and this is generally the industry norm).

Estate agents operating in the township are mostly operating illegally under the country’s laws, in other words, they don’t have the necessary fiduciary certificates that permit them to trade as real estate agents.

An improved property market in our townships could result in an improved home improvement market. The home improvement sector employs various artisans namely, plumbers, electricians, plus other professional services such as handy/maintenance personnel, gardening services. This has another added benefit in that larger communities will attract home improvement shops, tool or equipment hiring services, plant/ nursery shops and building material wholesalers. These industries alone mean massive job creation for various retail professionals, namely merchandisers, sales reps, till operators etc.

An improved property market could also lead to addition job creation in professional services, such lawyers/ conveyances, architects etc and the possibility of a commercial and/or office environment.

This only the tip of the iceberg, there so much more that could change, by simply changing how we’re currently doing things and focussing on how we should do things. The entrepreneur in mind would also support an argument for a holistic approach to unlocking the intrinsic value held within the unbonded property (remember the apartheid legacy I mentioned earlier).

By holistic I mean, that the major banks should be encouraged to support entrepreneurs with affordable business funding which can securitised via an unbonded house, at the same rate of interest as bonded house (in banking practice, mortgage loans enjoy the lowest interest rates in South Africa).

We live in very interesting times, with many challenges, and as we continue to build a better tomorrow, we need not forget who the custodians of that future are, our children. In fact this reminds me of a funny story that I heard from a friend recently: she mentioned to me that her son, who is 5 years old, was watching the glitz and glamour real estate show called “Cribs” on MTV. At the end of the show her son came running up to her saying, “mommy, mommy come look at the house I want to buy for you when I grow up…” she rushed from the kitchen, then he said “…but this one isn’t complete, because it doesn’t have a ‘hokkie’ at the back!” (true story).

I thought this was profound and supremely insightful for a 5-year-old (but picturing it, also very funny).

This article originally appeared at the blog Kasi Economics, on 30 December 2012. by the Kasi Economist