Housing assets can play a critical role in the resilience strategies of lower-income households. This is, in fact, one of the goals of the national housing programme which, since 1994, has completed an estimated 3.5 million housing units and handed these over to the lowest income families in the nation. An estimated two million of these houses are formally registered on the deeds registry, and subsidy housing stock now accounts for just under one third of all formally registered residential properties in South Africa, according to an analysis of deeds registry data conducted by CAHF. For the households who were fortunate enough to receive a subsidised house, it is probably the most valuable asset they will ever own.
In the context of Covid-19, this asset could provide valuable support to low-income households, improving their resilience and broadening their options for responding to the crisis. It could also be the key to unlocking productivity growth and private investment in a post-Covid-19 economy – something we will very clearly need.
Except, in many cases, this value is inaccessible. Too many housing assets are “dead capital”, as a result of an array of barriers that impede formal housing market transactions. These barriers have very significant repercussions for property-owning households, for the development trajectories of lower-income neighbourhoods and, by extension, the transformation of South African cities.
These issues – and how to overcome them – are outlined in detail in a new report, launched by consulting company 71point4 and the Centre for Affordable Housing Finance in Africa (CAHF). The report documents the first two years of the Transaction Support Centre (TSC), an action-research pilot project established by 71point4 in partnership with CAHF to support formal residential property market transactions in Makhaza, Khayelitsha, a lower income neighbourhood of Cape Town. Operating as a walk-in advice office, the TSC assists clients to formalise tenure and / or resolve other property-related issues. Beyond assisting clients, the TSC’s partners, 71point4 and CAHF, document client case studies, explore mechanisms to optimise existing processes and identify systemic constraints that impede formalisation. These are shared with various public and private sector partners in an effort to improve client experiences and outcomes and to drive systemic change. The TSC was established initially with a grant from National Treasury’s Cities Support Programme. Over the past year it has been funded by TUHF21. It has also received project funding from the Mastercard Foundation and Cities Alliance.
“We started the TSC because we witnessed first hand the almost-insurmountable obstacles lower income households have to overcome to buy and sell property formally, and to access subsidies and mortgage finance” says Illana Melzer, founder of 71point4. “By providing assistance to households, we could identify the broader interventions needed to create functioning, well-governed property markets in low income areas”.
“The problems are widespread”, says Melzer, “ It would be fair to say that the way in which the deeds registry reflects property ownership in Makhaza and many other lower income areas in cities across South Africa is simply not aligned with reality on the ground”.
“This has profound implications” says Rust, CEO of CAHF. “Local property markets are unstable, with competing systems to record and enforce property rights; local government is unable to identify and engage with property owners, impeding citizen-centric governance; and the financial sector is unable to support secured, housing-led investment, blocking a critical pathway for transformative financial inclusion. Critically, property owners are unable to realise the value of their housing assets and their wealth levels remain low. This is a tragic outcome at the best of times, and all the more so now in the face of the Covid pandemic. Housing can play a critical role in supporting household resilience but only if markets can operate efficiently.”
Perhaps the most important lesson is that while cases are complex and take time to resolve, the majority of clients can be assisted. “That is not to say it is easy. Far from it. The work is painstaking and cases can take many months to resolve. But it can be done, and we’ve already been able to help a number of families secure their title deeds and formalise their transactions. More than that, the work must be done. The longer we wait to fix the problem, the worse it will get” says Melzer.
The report sets out in detail the solutions required to create an affordable, accessible, secure and trusted formal property transfer system. “They are entirely do-able” says Rust. “We have so many of the critical pieces already in place in South Africa, including a near universal digital ID system, and a largely sound cadastre in urban areas.”
The TSC has worked very closely with local and provincial government. “We also have found real willingness on the part of so many officials and service providers to assist. We have a network of officials at the City of Cape Town and within the Provincial Department of Human Settlements who actively support the pilot project even though it is not on anyone’s list of KPIs” says Melzer. “Our conveyancing partners Norton Rose Fulbright, Abrahams and Goss and STBB provide assistance pro bono, with the TSC team preparing cases so that conveyancing time is kept to a minimum. We also work closely with lenders, including FNB and TUHF’s uMaStandi. They are actively looking for ways to participate in the market.”
The pilot project has also demonstrated potential to scale. As part of the work of the TSC, the team enumerated over 1000 government-funded RDP properties where primary registration has not taken place. Data generated by that process was verified against administrative data and loaded onto a blockchain-based property register built by Seso Global, the first such system in South Africa. Beyond creating a verified record of ownership at a point in time, the solution allows households to keep their data up to date through the TSC so that when transfer does go through, any changes can be reflected and records updated accordingly.
Driving scale is the focus of the next phase of the TSC. The project has recently been awarded a grant by Oppenheimer Generations Foundation to scale up its operations locally and replicate its work in other parts of the country. “This will require us to formalise our relationship with the City of Cape Town and the Province so that we don’t have to rely only on the goodwill of officials. Ideally we would like to integrate with key systems to streamline the transfer of data between official systems and the TSC. We will also build out the blockchain solution with Seso Global so that it can handle all TSC cases, not only primary transfers. This will go a long way in reducing elapsed time to resolve cases and allow for automation of activities that are currently manual.” says Melzer.
More than ever poor households need to be able to leverage housing assets to see them through what is likely to be a prolonged period of financial stress. Some households might need to draw down on equity as a temporary measure, while others might need to sell their properties and relocate. In these times, the current blockages in the market feel particularly harsh. The TSC has found, however, that even in our current, operationally constrained environment, there are ways to address the issues.
No doubt the government has its hands full dealing with the Covid-19 crisis. But it is critical that it allocates some capacity to implementing the recommendations set out in the report. They will materially assist households in managing their own personal crises resulting from the pandemic. Beyond the immediate need, they would unblock critical pathways for household- and private sector- led investment in the future, particularly in lower- income areas. Given the very significant investment made by government in housing to date, and the role of housing on the balance sheets of income-poor South Africans, such action would support South Africa’s affordable residential property market and enable the development of an inclusive, growing economy post Covid-19.
The report is available on 71point4’s and CAHF’s websites:
A public webinar will be held on 28 July 2020 to present the findings of the report and share news about the way forward.
The Centre for Affordable Housing Finance in Africa (CAHF)
The Centre for Affordable Housing Finance in Africa (CAHF) is a not-for-profit company with a vision for an enabled affordable housing finance system in countries throughout Africa, where governments, business, and advocates work together to provide a wide range of housing options accessible to all. CAHF’s mission is to make Africa’s housing finance markets work, with special attention on access to housing finance for the poor. We pursue this mission through the dissemination of research and market intelligence, supporting cross-sector collaborations and a market-based approach. The overall goal of our work is to see an increase of investment in affordable housing and housing finance throughout Africa: more players and better products, with a specific focus on the poor.
71point4 is a Cape Town-based strategic research consultancy specialising in consumer-focused, data-driven research. We help clients drive change in transformational sectors that contribute to economic development in South Africa and the continent as a whole, and improve the well-being of consumers. Our team of data scientists, economists and marketers work across a wide array of data types and sources from ‘big data’ including administrative and transactional data sets to small, thick data from in-depth interviews and focus groups.
Click here to register for the webinar on 28 July 2020 Download the report