The Transaction Support Centre (TSC) in Khayelitsha has been operational for just over six months and, as at 13 December 2018, has received over 100 cases from clients looking for assistance with property-related issues. While the vision of the TSC is to support property transactions, most of our cases deal with administrative failure – title deed backlogs and housing administrative issues, and poor engagement with formal processes – informal cash sales and intestate issues.
This case study series aims to document the real-lfe challenges faced by TSC clients as well as the process we have followed to try find a solution to their problem. In doing so we aim to highlight the policy, legislative and administrative issues that require attention in order to make high-potential property markets, like that in Khayelitsha, investment ready.
Lost in administration – Patricia* and the idle FLISP
Patricia* (not her real name) approached the TSC asking for assistance to buy a property in the Delft area. She is 35 years old and works as an office cleaner earning around R6 500 per month. In order to afford a property in Delft, Patricia would need to access the “Finance-LInked Individual Subsidy Programme”, or “FLISP” subsidy. However, Patricia faces two challenges, neither of which can be easily resolved, and both of which undermine her ability to participate in the housing market:
Challenge 1: Administrative issues with Housing Subsidy System (HSS)
On investigation we discovered that Patricia did not qualify for a FLISP subsidy because she had already received one in 2005 in the Eastern Cape. Patricia disputed this; she had applied for a subsidy but was never informed that her application was approved and therefore never actually took possession of the property.
The TSC approached the Eastern Cape Department of Human Settlements (EC DHS) and the Senqu Municipality to lodge the dispute and clear her name from the Housing Subsidy System (HSS). Senqu Municipality confirmed that according to their records, the property assigned to Patricia on the HSS is in fact registered in the name of someone else. In addition, the Senqu municipality has no record of Patricia in respect of this housing project. We therefore requested that the EC DHS remove her from the HSS. After waiting four weeks we received a confusing response from the EC DHS which did not address our request (see correspondence in Figure 2). Thus, this matter is still unresolved, and Patricia remains on the HSS system as having received a subsidy when she has not thereby making her ineligible for a FLISP subsidy (even though she faces other subsidy eligibility challenges, discussed in more detail below).
Table 1: Summary of communication between the TSC and relevant government departments
|12 June 2018||
|14 June 2018||
|22 June & 25 July||
|26 July 2018||
|27 July 2018||
|27 August 2018||
Challenge 2: Client’s poor credit standing
In addition to a challenge with subsidy eligibility, Patricia also faces a challenge with credit eligibility. Patricia scored 588 out of 600 on The Ooba Bond Indicator (OBI) with 600 being the minimum score required to be mortgage eligible. She has a total outstanding debt of R20 500 – all for store cards and personal loans, and, according to her credit record she is over two years in arrears on some accounts.
Problems associated with credit eligibility are not unique to this client; half of the 18 clients for whom we have submitted OBI applications have failed to qualify for mortgage finance due to poor credit histories or due to limited capacity to take on addition debt. This is a well-documented challenge in the FLISP eligible market in South Africa; according to the Quarter 2, 2018 Credit Bureau Monitor published by the National Credit Regulator, 39 percent of credit active South Africans have impaired records. Likewise, the Office of Disclosure in the Department of Human Settlements reports that the two main reasons banks decline home loan applications are lack of affordability and unacceptable track records.
While we were not able to continue assisting Patricia with the property transaction due to her poor credit standing, we are continuing with the process to resolve the HSS dispute and have subsequently referred Patricia to debt counselling. Should Patricia manage to clear her credit record, she may once again find herself in a position wanting to purchase a property but unless the HSS dispute is resolved, she will forever be excluded from receiving the FLISP subsidy she otherwise would qualify for.
Figure1: Correspondence between TSC and Senqu Municipality
Figure 2: Correspondence between TSC and Eastern Cape Department of Human Settlements