Johannesburg - Managing Director at Sentinel Homes, Renier Kriek, said that with government resources being limited and corruption widespread, it is imperative that private capital is enticed to join the constitutional project of granting all South Africans access to adequate housing.
Sentinel Homes said over-regulation of the housing market in South Africa is discouraging the private sector from investing in formal low-cost housing projects.
The company said it was apparent that for all the government’s initiatives, programmes and subsidies to provide RDP housing, a vast number of underprivileged citizens still reside in informal settlements.
“However, while tax breaks exist for new or improved rental housing, with added incentives for low-cost housing, the rest of the legal and policy landscape is much less persuasive to investors,” it said.
According to Sentinel Homes, housing consumers who earn less than R15 000 a month made up less than 0.6% of the value and 1.7% of the number of accounts granted mortgages in Q1 2023, matching a decade-long trend.
“This is because banks tend to avoid these riskier applicants, even when supported by the government’s FinanceLinked Subsidy Programme (FLISP). The reason is simple: the excessively long and inefficient fore-closure process in South Africa seems bent on ensuring losses for both banks and defaulting consumers.
“In addition, judges are often overly sympathetic to defaulting debtors per case, not considering the overall negative effect this has on banks’ attitudes towards financing the larger underprivileged community,” added the statement.
Krieks said that if the cost of terminating defaulting mortgages were low, banks would be less risk-averse, thereby increasing the likelihood of access for this segment.
According to Sentinel Homes, the time and financial costs of eviction are too high, and the law and courts are too lenient on defaulting renters.
They say that with the supply of formal housing being so low, the cost of eviction should also be low, and the rights of a large number of potential tenants should weigh more heavily than those of a few non-paying tenants.
“If the risk was low, more landlords would emerge to invest in satisfying the obvious demand for affordable accommodation,” said Kriek.
Finally, the company said that housing development in South Africa is inhibited by long or delayed regulatory processes as well as building standards designed around first-world circumstances.
“This is further exacerbated by municipal inefficiency, which affects the delivery of essential services like roads, water, power, and sanitation.
“Authorities have also suddenly become deeply concerned with the lack of affordable housing,” read the statement.
Additionally, it said their response has been to request that developers include affordable housing units in new developments, even in areas not marked for such housing.
“While laudable at first glance, this does not increase the availability of affordable housing, as beneficiaries will often flip the unit at market price to realise a profit,” said Kriek.
Kriek said that given the state of the country’s housing market, urgent legal reforms and business-friendly policies are needed to ensure all South Africans gain access to constitutionally mandated housing.
The Star