Lee-Roy Chetty
Lee-Roy Chetty

Addressing the housing shortage in South Africa

Access for the poor to urban land and housing is one of the main challenges facing policy makers in South Africa.

Estimates suggest that 26% of households in the six metropolitan areas in our country live in in-formal dwellings, often “illegally” and with limited access to services.

Movement from the informal to the formal sector is also low.

The growth of informal settlement in cities is often the upshot of unplanned urbanisation or lack of coordination. The concept of new urbanism emphasises coordination between long term land use, housing and transportation planning as an essential pillar for smart growth.

It recognises the importance of spatial or geographic proximity, layout and an integrated design of those uses.

Conversely, a lack of efficient integration can throttle sustainable development and eventually leads to an inferior growth path with suboptimal housing, educational, employment and service opportunities.

Our government has set a targeted mandate of housing for all by 2014, as a part of its national spatial development agenda. Much of government effort has focused on the provision of subsidised housing, first introduced under the Reconstruction and Development Program (RDP), commonly known as the RDP Housing program.

However, escalating housing prices, limited access to land and housing finance, land regulations which govern sub-division of land, highly regressive land taxation, and low supply elasticity of subsidised housing has made it difficult for poor as well as middle class households to enter the formal housing market.

Based on these variables mentioned above, informal sector housing is a response to the failure of the formal housing market to meet demand.

When it comes to sub-division regulations, the issue at hand is not so much one of minimum lot size regulations, which exist in many countries and can reduce access to land by the poor. In South Africa the issue arises at an earlier stage in the process of land acquisition.

Large farms are only allowed to be sub-divided with ministerial consent. As a consequence, it is difficult for a land owner to sell off part of the farm for rezoning into residential or mixed use. The up-front lump investment needed to purchase entire farms would require enormous collective efforts by interested communities.

While private developers should in principle enter this market once they have exhausted the currently more lucrative and familiar real estate markets for middle and high-income households, existing sub-division and environmental legislations significantly increase transaction costs.

In addition, the speculative premium on land is driven up by non-existent or, in some areas, even highly regressive land taxes. In anticipation of the implementation of the new Municipal Property Rates Act (currently implemented by only a small fraction of municipalities), municipalities have to implement the old legislation.

Another reason for slow delivery of housing can stem from the limited capacity of some municipalities to engage the market.

Finally, there is a lingering resistance in many municipalities to set aside well-located land for low-income households. The resistance is related to pressure from high-income groups who wish to avoid perceived devaluation of their properties from being near housing for the poor as well as the perceived tax revenue losses when compared to other uses – in particular, up-market gated communities.

An alternative to the housing crisis in our country from a policy perspective would be to provide the poor with access to serviced land on which they can erect a temporary dwelling which, over time, they can improve.

This land needs to be reasonably close to basic services including schools and transport to the main centers of employment. The best incentive to encourage people to build better is to assist the market so that the value of the properties and investments is increased and is visible.

A certification program could be put in place, similar to a Standards Association, which would provide buyers with some security and encourage people investing to ensure that, over time, they meet the standards that will make their homes more marketable.

It is also important for government to address the issue of savings and the ability of the poor to form associations that can provide support to housing projects.

Providing access to serviced land would also reduce the opportunities for the economic and social rents that are currently undermining the housing schemes and the grant system.

However, as long as land remains in short supply, the system will remain vulnerable to corruption. One way to address this is to have publicly posted waiting lists. To make land legally available to most people needing housing will require a massive investment in identifying land, providing services and in providing access. In the interim, however, human and financial resources need to be concentrated on providing serviced land to a significant proportion of the population, rather than on building a limited number of houses for the few.

Tags: , , , ,

  • The Place of Sara Baartman at UCT
  • It is time
  • Pauw’s revelations and democracy
  • The truth about Nkandla
    • http://southafricana.blogspot.com Dave Harris

      “However, as long as land remains in short supply”
      Comparatively, SA is a big country, unfortunately not big enough for the greed of our beneficiaries of apartheid clinging to their ill-gotten gains. See http://southafricana.blogspot.com/2011/06/long-arc-of-history-bends-towards-land.html for a more in depth perspective of our unique problem that becoming an explosive issue because of the slow progress that’s almost come to a grinding halt due to the legal shenanigans by the usual suspects!

    • jandr0

      A strong focus on the supply side, and admittedly a number of valid observations by Lee-Roy.

      However, what about the demand side?

      Feel free to read the demand side as “the ever-growing number of people.”

      Responsible, conscientious citizens should manage their family size. And if they can’t, why should a “government” come and steal from me and others, thereby punishing us for acting responsibly, to give housing for practically free to someone who has not acted responsibly?

      That;s the wrong way around! In a fair society, it should be the responsible citizens that are rewarded, and irresponsible citizens should be expected to shoulder the results of their irresponsibility.

      Admittedly everyone has not had the same opportunities in life (so one has to make exceptions where really deserved), but maybe guidelines such as, if you have more than (say) 3 children, then you go to the back of the line for a house and learn to take some responsibility.

    • Oldfox

      SA is using outdated ideas from 1970s and 1980s for housing in the 21st century. Turkey is housing low income people in attractive looking multistorey apartment blocks, on the outskirts of towns and cities.

    • jack sparrow

      You naughty man Lee-Roy: “to provide the poor with access to serviced land on which they can erect a temporary dwelling which, over time, they can improve.” What will the tenderpreneurs like the Mpisane’s in Durban do?

      I think this is the obvious solution. It is tried but you cannot imagine how many obstacles the local authorities and government theft pits like the NHBRC throw in their path.

    • Pingback: Addressing the housing shortage in South Africa | Thought Leader | Property Finance()

    • Momma Cyndi

      Farm land should NEVER be used for housing.
      SA has a land area of 1.2 million square meters. Our arable land area is 12% of that. Using arable land for housing or golf estates should be a crime as it directly impacts on food security. Of course, rural areas are not the areas that are being put under pressure – it is urban areas that are strained but the urban areas are rapidly encroaching on the rural areas

      Something that bothers me terribly is not the ‘poor’ but the ones who are ‘trying’. SA seems to actively discourage people from trying to better themselves. If you are clawing your way up the ladder, you are on your own. You are more likely to get a piece of property (and a house) if you have no intention of ever working and have 15 children than if you are in a lowish paying job with one child. It often seems like being responsible and ‘trying’ to get ahead is less rewarding than giving up and being babied by the government.

    • Marie

      There wouldn’t be a housing shortage if our beloved prez and the rest of his entourage stoppage pillaging the treasury

    • The Creator

      “Site and service” failed under the apartheid regime.

      Unfortunately, dear Tokyo is bringing it back, with a few added destructive spins.

      Fact is, the best answer is the RDP answer; build a cheap low-cost house on a decent-sized piece of land, and if the recipients can afford to, they can expand it into something more comfortable, but at least they’ve got a solid roof over their heads whatever happens and the shack fires will stop.

    • Lennon

      One just needs to look at the fark-up that is Tableview to see why simply adding on does not work.

      Now I’m going to raise the ire of a few commentators here, but I think that the town building project in Nkandla (the TOWN, not Zuma’s homestead) is the way forward. What we need is NEW urban centres – new economic centres to which we can add new suburbs (i.e. housing).

      I also agree with Momma Cyndi that using arable land (i.e. farmland) for house should not be allowed.

    • Jens Bierbrauer

      Look at a country like China with a rapidly urbanising population and astonishing population density. Very few sane developers here build individual houses within about 30km of a CBD, at least in my city. The housing development structure is the xiao qu… or apartment complex (a more direct translation is “community”).

      A xiao qu has about 12 to 15 blocks of flats, each with two or three entrances. Each new block has 25 – 30 floors with three or four flats per floor per entrance. Even at the smaller end of the scale, that’s accommodation for 1800 families. The land area is not very large but there is enough for a nursary school, gym, small park with ponds and maintenance office in my xiao qu. There is also a dedicated satellite police station. My xiao qu also has its own security personnel.

      I would estimate that the land needed for such a development equals a few rugby fields.

      The perimeter “wall” of my xiao qu has been constructed of small shops and restaurants so the developers get rent for this too and residents don’t need to go far to buy anything but the most exotic things. Underneath the entire area are two basement levels for parking.

      This model of housing development has many advantages. It certainly contrasts with the grim little free-standing RDP houses I saw in South Africa. It would save land, lots of it, and certainly help avoid the use of any but tiny parcels of agricultural land becoming residential land. Can South Africa’s bureaucrats…

    • Pingback: Lee-Roy Chetty – Addressing the housing shortage in South Africa()

    • Dimiatr

      Please can I use the information in your post in a proposal to the Department of Social Development. We are offering eco solutions to the housing agenda