Housing vouchers the way to go - report

A housing voucher that allows low-income families to spend the money on contracting professional builders or purchasing apartments – which frees up government to concentrate on servicing stands for water and sanitation – is how South Africa could tackle the intractable housing delivery challenge.

This is according to a research paper by the SA Institute of Race Relations‚ which noted that at the current rate of construction‚ it will take almost 20 years to build enough houses for the 2.1 million households on the national waiting list.

The state has‚ in the past 21 years‚ provided more than 2.5-million houses and a further 1.2-million serviced sites.

From 1994 to 2015‚ the “the housing subsidy has shot up from R12‚500 per household to a staggering R160‚500 per household”‚ the IRR said‚ and state spending on housing and community amenities went from R5-billion to R153-billion budgeted — an increase of almost 3‚000% — in the same period.

“Yet many of the RDP (Reconstruction and Development programme) or BNG (Breaking New Ground) houses built via this subsidy are so small‚ badly constructed‚ and poorly located that the ruling African National Congress itself describes

them as ‘incubators of poverty’ that do more to entrench disadvantage than overcome it‚” the IRR notes.

Despite the rapid increase in resources allocated to the housing budget‚ the IRR said‚ “the delivery of ‘free’ houses has slowed‚ and currently averages some 118‚000 houses a year”.

And the demand‚ with its resultant pressure on government‚ keeps growing: There are now an estimated 2‚225 informal settlements in the country‚ up from 300 since 1994.

Community reluctance to make way for upgrading projects by government has in part contributed to the lengthy delays in service delivery‚ with negotiations getting bogged down in disputes about‚ for example‚ which homes could be demolished or relocated for roads to be built.

A lack of capacity at provincial level – which is the level of government responsible for housing delivery – is another problem. Private sector involvement in low income housing has slowed dramatically as contractors commonly can wait for years to get serviced stands to build on.

A fundamental rethink is required‚ the IRR says.

This should aim to empower individuals and provide better value for money.

 “The Government should shift to a new system of housing vouchers‚ to be provided directly to beneficiaries. These vouchers would be redeemable solely for housing-related purchases – and would go to some 10 million South Africans between the ages of 25 and 35‚ who earn below a specified ceiling.

 “Individuals would be empowered to make their own housing choices‚ while the vouchers would help provide ‘more bang for every buck’. Accelerated housing delivery via the voucher system would also stimulate investment‚ generate jobs‚ and give the weak economy a vital boost.”

This is not an entirely new concept.

Government currently has a Finance-Linked Individual Subsidy Programme – developed to help prospective house buyers who earn between R3‚500 and R15‚000 a month to buy houses at a price of R300‚000 or less – but it has gone to fewer than 800 beneficiaries‚ though some 750 people have also had their FLISP applications approved.

The IRR paper states: “The solution lies largely in what people have been saying for years: that the State should transfer the housing subsidy directly to them‚ as they could use it more efficiently and so make every rand stretch much further.

“At the same time‚ the successful in situ upgrading of informal settlements is extraordinarily difficult and is unlikely to succeed unless more is simultaneously done to increase the housing stock available to the poor.”

The country should focus on three- or four-storey terrace or row houses where each house directly adjoins the next‚ the IRR proposes‚ and also on medium-rise apartment block with five- to six-storeys in general.

“The Government’s main emphasis should shift to housing of this kind‚ which the private sector – and not the State – should be responsible for building. The private sector would also have a clear interest in building such housing or in revamping existing structures for housing purposes‚ if millions of South Africans were to be given housing vouchers to spend exclusively on meeting their housing needs.

“Under this new approach‚ the Government’s role in delivery would largely revolve around the speedy identification and release of state and municipal land suitable for these new housing developments.”

As part of this‚ Government should stream-line and fast-track land re-zoning and town planning processes. “Housing development must no longer be held up for three years or more‚ as is commonly the case‚ by continued incapacity within the public service.”

Explaining how the housing voucher system could work‚ practically‚ the IRR proposed:

- If the vouchers went to South Africans between the ages of 25 and 35‚ at a value of R800 a month‚ or R9‚600 a year‚ and each recipient continued to receive this voucher for ten years‚ each beneficiary would receive close on R100‚000. A couple who pooled their money would receive nearly R200‚000 over a decade.

- This amount could be topped up by their own earnings‚ which means a couple earning R5‚000 a month could devote R1‚000 of that to housing. Over ten years‚ this additional amount would boost their housing budget to close on R320‚000. “Such sums would help substantially in empowering people to build or improve their own homes‚ or obtain and pay down mortgage bonds.”

The proposed voucher option would be slightly less costly than the present system. Due to its simplicity‚ the IRR says‚ “it is also likely to be much more efficient – and much more effective in stimulating housing supply”.

With a payment system in place through the vouchers‚ it notes‚ the private sector would be encouraged to build more terrace houses or apartment blocks‚ or to revamp existing structures for housing purposes. Beneficiaries would also find it easier to gain mortgage finance‚ which could further stimulate new housing developments.