Last week, Mark Napier of Urban LandMark and I submitted a letter to the Business Day, commenting on two letters that had been debating the value of RDP housing and title deeds. Here is the full text of the letter. The edited version of the letter as it appeared in the newspaper can be downloaded here.
Letter to the Business Day, 5 July 2012
Certainly, subsidized housing delivery has been a significant contributor to land reform. Research undertaken by FinMark Trust and Urban LandMark reveals that 24% of all residential properties on South Africa’s deeds registry were subsidized by the state. Between 1994 and 2010, a total of 1,44 million subsidized properties had been legally transferred by the state to beneficiaries. This is a massive transfer of property into mainly black ownership.
However, the research also found a significant backlog in the delivery of title deeds into the hands of the legitimate owners. Anything up to 50% of the title deeds for the subsidized houses had not been transferred to the beneficiaries, many of whom are already living in them. If these beneficiaries had received title deeds, the proportion of subsidized property on the national deeds registry would have been 38% of the total number of properties in the country – not an insignificant proportion. Clearly there is work to be done in addressing the backlog and conferring property rights that have been promised.
But what do subsidy beneficiaries do with their property once they receive titles? Whether they use it, as Daus-van Wyk suggests, as de Soto-style capital to raise finance for small business development (and the research does show that a few people do), or sell it for less than the government paid, ‘cashing out’ so to speak, as Gottschalk suggests is the norm, is surely a choice that arises from the information available to people, and the inherent value in the asset they’ve been ‘given’.
Our research found that most households who had received formal title deeds do invest in their housing, extending or otherwise improving the house so that it better suits their needs. While some do this to improve financial value, others are simply seeking to improve comfort. In this, investment choices are not dissimilar from other South African property owners. While the research on ‘cashing out’ is not conclusive (respondents said they were fearful to confess to transactions which government classifies as illegal!), it appears that the choice to sell is not, as Gottschalk suggests, for immediate consumption income, but rather to facilitate mobility for job searches, or to respond to other life needs.
The low prices associated with such transactions are a result of the limited finance available, the informality of most of the transactions, and the generally low levels of affordability of the buyers. Ironically, in some places it may also be because of how plentiful RDP houses are! Even if individual households move out, as Gottschalk says is common in the southern Cape, the housing stock still exists on the ground, and houses rarely stand empty. But government does need to find a better way to enable the building of housing where people really need it.Surely Gottschalk’s taxpayers’ value challenge (the cost to society “of each new cycle of shantytown building”) is better directed at government which should be creating the enabling environment for a housing market to operate effectively for all South African residents? This would include unblocking the delayed titles to allow people to use their housing as an asset, even if buying and selling houses only starts happening more widely in the next generation. Protecting the rights of new property owners happens best by empowering those owners with information and tools, not by criminalising the resale of houses in the short term as the state has been doing. Nor does it help if municipal officials frown on people’s efforts to run home businesses (except perhaps shebeens) which provide much needed income for many households where formal employment remains elusive.Where we agree with Gottschalk is in his appeal for data. We desperately need regular and better data that helps us all understand the impact of policy we’ve already implemented. This would help us better address the constraints that current policy puts in the way of the poor participating in the market in an empowered way. Just better data would bring us a long way towards changing the property landscape for especially the poor and realising the transformation objectives that the government’s housing subsidy and land redistribution programmes seek.Kecia Rust, FinMark Trust
Mark Napier, Urban LandMark