South Africa’s housing sector is not delivering at the rate and scale needed, nor is it serving the diversity of the market given varying levels of affordability and access to credit. The market is constrained because of affordability, determined by household income and high levels of household debt, while the supply of new housing has still not returned to the rates seen in 2008.
The largest supply of housing has come from the South African government, which has built and allocated, to qualifying beneficiaries, two to three million subsidised housing units (38% of the total market), half of which have been formally registered (accounting for 24% of the units on the deeds registry). Few of these units are on the formal resale market, as a preemptive clause of the Housing Act prevents beneficiaries from selling these houses for 8 years. This is because the subsidised houses are intended to address shelter needs rather than income needs, and to prevent downward raiding by higher income earners seeking commercial opportunities.
But the housing delivery market is not be able to deliver houses for households earning between R3,500 – R8,000, perhaps even R10,000—supply has to come from the resale market. If government promoted the RDP resale market, it would unlock the capital of the asset, which could go towards a deposit for another house, allowing households to progress up the housing ladder. And, with measures to mitigate the various risks that this would create, this would go a long in creating the housing supply that will increase access to housing for a wider segment of South Africa’s population.
Download the document for a detailed version of this argument, with suggestions how to make the South Africa’s housing sector deliver at the rate and scale required.