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.