A series of articles by Ronald Eglin on key issues in the sector

Tackling the Trade-offs

South Africa faces two main housing challenges. Firstly, despite the efforts of government to build houses for people, the number of people in need of housing continues to increase. Secondly, the type of settlements being created resemble dormitory residential suburbs rather than mixed use neighbourhoods.

In terms of housing development, more of the same will not change this pattern. Government has acknowledged that radical new thinking is required to house more people and to achieve workable mixed use neighbourhoods. This requires a serious review of what government is trying to do with its housing subsidy and specifically what choices are needed to optimise limited financial resources.

The first trade off is between houses and basic services. Two housing policy options exist in relation to this choice:

• The depth approach is the one currently favoured by government and entails finite government funds being used to provide a few people with land, services and a house. The people who do not immediately get a house have to be patient and wait a number of years until government gets around to building a house for them.

• The width approach involves the same finite government funds being used to provide more people with land and basic services, but not houses. People gain security of tenure to the land and can start to invest in their property by using their own resources to build shelter and accommodation. Over time the government can find ways to incrementally assist them to upgrade their houses through, for example, setting up housing support centres and arranging construction material bulk buying programmes. Effectively, the width approach means that the housing subsidy quantum per unit (at R36 528 for the 2006/7 financial year) is reduced or not increased with inflation.

The second trade off is between houses and facilities.  Again, two housing policy options exist:

• The depth approach is once more the one currently favoured by government and entails finite government resources being used to provide a fixed number of people with more of a house (e.g. bigger roofed area, better finishes) but less public facilities. The public facilities such as schools, clinics, halls, sport fields, market squares, etc. are developed later.

• The width approach involves the same finite government funds being used to provide a fixed number of people with less of a house and more public facilities and public spaces. Again over time, government can find ways to incrementally help people get a better house. The width approach in this context effectively means that money earmarked for housing is reprioritised and redirected towards community facilities, services and spaces. The total national government budget for housing is, therefore, reduced.

In both of the trade offs outlined above, the depth option means that fewer people get more of a house. The obvious downside is that some people have to wait much longer to get a house, and the environments created do not have enough community facilities. In contrast to this, the width option means that more people get land and basic services (as a result of the house and basic services trade off) as well as more community facilities (as a result of the house and facilities trade off) but less of a house. The advantages of this are that people do not have to wait as long to get land and the environments created have more community facilities and spaces. The obvious downside is that many people will be staying in self-built shelters for quite a long time. The positive aspect to these self-built houses is that they’ll be on land to which they have secure tenure and they have access to basic services; and in neighbourhoods with a range of social facilities, services and spaces. These households can also slowly begin to upgrade their houses provided that government introduces new ways to support this form of upgrading.

The following table summarises the shifts that this paper proposes.

Such a shift in approach is in line with the government’s Breaking New Ground (BNG) strategy that emphasises providing everyone with decent housing and building sustainable settlements. It is also in line with section 26 of chapter 2 of the Constitution which states that “everyone has the right to have access to adequate housing” and goes on to say that “the state must take reasonable … measures, within its available resources, to achieve the progressive realisation of this right.”

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Finding a New Housing Story

Is our housing policy based on people helping government to build houses or government helping people to house themselves? The difference may seem insignificant but the implications for change in the South African mindset are enormous.

The existing story being told to low-income communities by most role players is that “government will give you a house.” The gist of this is that you just need to be patient and your turn will come. All you have to do is contribute a small amount in cash or kind to add to the subsidy. This is to show government that you value the house provided to you. The accompanying rationale is that low-income housing development will stimulate the construction sector and the house will provide a base from where you can enter the formal economy. The economy will grow and provide you with the means to stay in this house. When you get more money you can buy a new house freeing up the existing house for another low-income person who is moving up the housing ladder.

The reality, however, is very different. Government cannot afford to provide houses to all who need them. Many people who do get a house cannot afford to pay the rates and services to stay in this house, even with the provision of indigent discounts and free basic services. The only option for people waiting for houses or being “pushed” out of their houses due to affordability constraints, is to revert to shacks or other informal accommodation.

People are reluctant to contribute in cash or kind to the subsidy and appear to expect government to provide everything. There are few incentives for people to solve their own housing needs. By way of example, if a poor household scrapes a little money together and buys some land, they disqualify themselves for a subsidy in the future as their name will appear on the national housing database as a property owner.

What we need is an alternative story, a more realistic story, generated by people who are solving their own housing needs. Such a story might include collective efforts to solve housing needs with an emphasis on own initiative. Government can arrange for the servicing of new land, setting up housing support centres and arranging the purchase of construction materials in bulk. Housing solutions will become more affordable and households will have security of tenure from which to seek income generating opportunities.

Up to now government has looked at this combination of housing subsidies and beneficiary contribution as a system where beneficiaries top up the subsidy with cash or voluntary labour i.e. “sweat equity” to the value R2 479. Cash contributions operate in developer-driven housing projects, whereas material or cash (but usually voluntary labour) constitutes the top up in a Peoples Housing Process (PHP) project.

This conceptualisation of housing needs to be turned on its head. The household initiative should come first and government support should follow. A household initiative could contribute:

• money in the form of savings and/or loans;
• physical labour for actual construction e.g. digging trenches and mixing cement;
• skills in the management of the development process e.g. serving on a steering committee;
• knowledge e.g. providing information on where cheaper doors can be sourced;
• material secured as second hand or stockpiled; or
• land bought or donated.

Government could respond by providing:

• a housing subsidy to buy skills, land, material and labour;
• skills e.g. support from housing officers in municipalities or provincial housing officers; or
• free or discounted land.

The relationship between household initiative and government support is a far more complex arrangement than the simplistic housing subsidy and beneficiary contribution approach of the past suggests and more work will be required to make this relationship function effectively in housing projects. The Peoples Housing Process (PHP) review that has already been initiated by government needs to be prioritised. This must include more demonstration and case study work undertaken to learn from the experiences of communities that have combined resources with government to build houses.

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Fixing the Broken Ladder

Progression from informal housing to steadily improving standards of housing has been likened to a step ladder. The first rung of the ladder is informal housing and is usually occupied by very low-income households living in shacks in squatter camps or in the backyards of existing houses. The second rung of the ladder, called affordable housing, is occupied by low-income households living in government subsidised housing. The third rung of the ladder, market housing, is occupied by middle-income households living in houses bought on the open property market through estate agents. Finally, the fourth rung of the ladder, sometimes referred to as luxury housing, is occupied by high-income households living in expensive accommodation. Rental housing can also be fitted within these rungs.

The Housing Ladder

Rung 4:  Luxury housing
Occupants:  high-income households
House examples

• Luxury gated communities

Rung 3:  Market housing
Occupants:  middle-income households
House examples

• Suburban houses
• Apartment housing

Rung 2:  Affordable housing
Occupants:  low-income households
House examples

• Old subsidised houses
• Newly built subsidised houses

Rung 1:  Informal Housing
Occupants:  very low-income households
House examples

• Squatter settlements
• Backyard shacks

Government intervenes in the housing sector by building subsidised housing in rung two, the affordable housing sector. People from the first rung, the informal housing sector, living in shacks move into these newly built subsidised houses; as well as into old subsidised housing that has been vacated by former low-income households who have now moved up the ladder into the middle-income market housing sector. Some people in the middle-income sector houses move into the high- income luxury houses. As incomes increase, everyone slowly moves up the housing ladder, with shacks “magically” disappearing.

For this to work, a few basic assumptions have to be made. The first is that most people have some form of income and can afford the rates and services to stay in at least an affordable house. The second is that some people in existing affordable houses are able to afford to move into market houses; and the third basic assumption is that government actually has enough funds to build sufficient new subsidised houses in the affordable housing sector.

Practical experiences on the ground suggest that the second rung is, in fact, broken. This leads to a split in the ladder or property market where you find a few middle and high income people on the top of the ladder and many low income and very poor at the bottom of the ladder who are unable to move from rung two to rung three.

Some people are getting onto rung two, affordable housing, but are falling back to rung one, informal housing, as they are unable to afford the living costs associated with formal affordable housing. A few people are also climbing down the ladder from rung three to rung two as they find market housing too expensive for them and they find willing sellers in the affordable housing sector selling at very low prices. At the moment, it is also very difficult for anyone to get an individual subsidy to allow them to buy houses in the subsidised low-income housing market and move from rung one to rung two. The government cannot build enough subsidised houses in the affordable housing sector to cater for all the people in this sector.

For rung two to be fixed we need to understand what type of housing is found in the affordable housing rung of the ladder. The first type of affordable housing is old subsidised housing built by the previous apartheid government and subsidised housing built over the last decade or so. The second type of housing on rung two is newly built subsidised housing as the government continues its subsidised housing programme.  There is also a third type of affordable housing that is not really found in this country at the moment but should be considered. This is self-built incremental housing built on self-bought individual or group owned land.

Using this typology of housing types on rung two, the following solutions for fixing the affordable housing sector become apparent. The first is to reintroduce the individual subsidy mechanism so that it is easier for low-income people to buy and afford to live in old subsidised housing. This will make it possible for people presently occupying affordable housing, who wish to move, to sell their houses to people coming up the housing ladder and not just to people coming down the ladder. The second is for government to increase the supply of newly built subsidised housing so people can move out of shacks. Finally, the third way to fix rung two is for government to put in place mechanisms to encourage poor people to access their own land and build incremental housing with their own resources, while still allowing them to access housing subsidies in future. By introducing this third type of affordable housing, it will mean that the people in the informal housing sector do not have to wait for government to build them more subsidised affordable housing.

Fixing Rung 2:  Affordable Housing

By fixing the housing ladder in this way there will be far more opportunities for more poor people to move from the informal housing market into the affordable housing market.

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Note: The housing ladder concept is based on a presentation by Dr Jeff McCarthy given at the Urban Landmark conference on 15 November 2006 at Ingwenya Country Escape.

Published in The Local Government Transformer February/March 2007 Vol. 13 No. 1