CHAPTER 6: HOUSING POLICY AND PRACTICE
6.9 A comprehensive plan for the development of sustainable human settlements settlements
6.9.2 The emergence of Breaking New Ground
6.9.2.2 Challenges facing the implementation of the BNG
BNG has placed an explicit focus on the creation of sustainable human settlements with its intention to combat segregation, to overcome poor quality housing, which characterised the provision of low-cost housing over the first 10 years and to unlock economic opportunities of poor households (Landmark, 2005). However, analysts such as Charlton and Kihato (2006) point out, that the way BNG will achieve these particular objectives are not articulated. Napiers (2005) observes that in the BNG there is a
confusion between the role of State and the residents, in the commitment to urban restructuring and furthermore, he points out the lack of consideration for better public spaces. In addition, Todes (2006) argues that while the principles of densification, desegregation and urban restructuring were overlooked over the first ten years of housing delivery, unfortunately these principles reappear and the commitment to such changes in the implementation of BNG remain very weak. The further debate related to post Apartheid challenges facing the implementation of BNG, will analyse two challenges namely; informal settlements upgrading and the access to housing finance for the low-income households.
Given the proliferation and the extension of informal settlements, despite the significant State financial intervention through housing subsidies, one may argue that informal settlements in South Africa is a complex issue (UN Settlements, 2003; Smit, 2006) and strategies to deal with them have been limited and inappropriate (Huchzermeyer &
Karam, 2006). Informal settlements upgrading as one of the strategies adopted by the BNG have obviously had a direct impact on the living conditions of poor people (Baumann, 2000) and have received support by many important authors (Baumann &
Huchzermeyer 2004; Baumann, et ai, 2004; Bolnick & Meyer-Prentice, 2004;
Huchzermeyer, et ai, 2004; Roux, 2004). International experience of upgrading programmes reveals that this practice must be incorporated in the global perspective of alleviating poverty, lessening vulnerability of poor households and promoting social inclusion.
However, Charlton (2006) observes that BNG has not learnt from the previous experiences of upgrading programmes. This has resulted in limiting the positive outcomes of this practice. In addition, Baumann and Huchzermeyer (2004) have raised concern about the capacity of BNG through the post Apartheid informal settlement- upgrading programme to empower inhabitants of informal settlements in addressing their human and socio-economic needs. The challenges facing South Africa to date is to change the perception of informal settlements as a lack of house or title deed or unlawful occupation (Huchzermeyer, 2004) which requires a housing solution, as an expression of certain socio-economic realities, which necessitate a global and an integrated solution. It can be argued that the authors cited above, who support informal settlement-upgrading agree that by ignoring the complexities surrounding the issue of informal settlements will undoubtedly result in the perpetuation of informal settlements.
Related to the informal settlements upgrading, concern was raised about the criteria in the choice of informal settlements, which should benefit from the upgrading programme. Although the integrated development plan (lOP) should lead the choice that informal settlements which are most affected by crime, poverty and unemployment, should benefit from the programme, political motivation seems to guide the choice and as a result, the outcomes of upgrading programme is limited or jeopardised (Napier, 2005). Like informal settlements, access to housing finance may be considered as one of the stumbling issues facing BNG.
Although there is an existing financial product available for low-income households, research conducted by Finmark Trust (2005) concludes that for many poor households, the prerequisites for loans and the long period for re-payment (20 years) overcomplicates their access to housing finance. Pillay (2006) also observed that low- income households are not enthusiastic about the existing finance product put in place for them. According to Pillay (2006) these financial products do not take into account the behaviour, preferences and experience of low-income households who may need a loan not to acquire a house, but for improving their homes. There is a wide consensus in South Africa that access to finance in general and to housing finance in particular can improve housing conditions of the poor and thus eliminate unemployment and stimulate black economic empowerment (Finmark Trust, 2006a, Tomlinson, 2007).
Although, the importance of finance is recognised, Collin (2006) observes that the majority of poor people do not have access to housing finance in South Africa and the financial needs of poor households are not well understood by the formal financial institutions. In other words, financial product design, more specifically mortgage credit put in place by the formal institutions are inappropriate for low-income households (Smit, 2003; Tomlinson, 2007). The challenge facing the BNG is to improve the access to housing finance for the low-income households and to make the housing market work better for low-income groups.
Problems are identified in both supply and demand sides. From the supply side, lenders, especially formal financial institutions find it risky to work with low-income households as the past experience reveals that this market is unprofitable and the risk of defaulting is very high, given the high rate of unemployment that characterises this segment of population. The low-income households however point out that the financial product in their disposition is simply unaffordable. Consequently, many authors have remarked that low-income households rely on micro loans to supply them with the credit that they need to improve or to build their homes.
The failure of the formal and private housing institutions to design products that efficiently works for the low-income group increases their preference to work with middle and upper income groups. As a result, there is actually the existence of two housing markets. The first housing market generally composed of the middle and the upper income groups prosper and witness a boom. BASA (2005) observes that in the last years, properties costing R 200 000 upward, double their prices and in some cases even triple. However, the second market costing less than R 70 000 generally constituted of RDP houses and houses in former black townships, slump. In fact, trade in this sector is very slow. This does not stimulate the private sector to invest in the second market.
The biggest challenge for the BNG is to break the existence of the two housing markets and to increase the incentive of the private sector to invest in the construction of adequate and affordable housing, defined by BASA (2005) as houses costing less than R 100 ODD, as it is engaged in the first housing market.