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Why we need a master plan for property owners

South Africa needs a multifaceted effort to solve the housing crisis that threatens to overwhelm the country.

So says Rudi Botha, chief executive of mortgage originator BetterBond, who says of the 14.5 million households recorded in the latest census, at least half live in homes they do not own. Some live in accommodation provided by employers, some in rented homes and backyard shacks and more than 1.3m in squatter camps.

"No one has actually quantified how many millions of people this involves but clearly it is a recipe for serious political and economic instability," he says.

All over the world, says Botha, it has been proven that home ownership has a stabilising influence because it pulls people out of the poverty trap and provides the basis for individual financial security and wealth creation.

"Home ownership is at the heart of a healthy community and... research has shown that it is also a major influence in lowering crime rates, substance abuse rates and teenage pregnancy rates.
"But the reverse is also true when the ownership of even a modest home becomes increasingly beyond the reach of ordinary, hardworking families - and totally out of the question for the poor. People lose hope, and their protests at the unfairness of their situation are apt to become increasingly violent."

Botha says the problem is too big for any one player to solve. The government, banks and the private sector needed to get moving on a unified plan to get all South Africans properly housed.
"The banks, for example, are being hamstrung by the imminent implementation of the Basel III banking regulations, which provide for them to hold much bigger reserves on long-term lending like home loans and will almost certainly result in them pulling back on home loans.

"So perhaps it is time for Treasury or the Reserve Bank to reassess those regulations now and evaluate whether they are actually appropriate for South Africa."

On the other hand, he says, household debt levels are too high - and getting higher because of the ease with which consumers can get unsecured short-term and personal loans at high interest rates.

He says banks need t o reassess their role in helping to create the situation in which so many people who earn enough to buy their own home can't qualify for a home loan because they have too much debt.

"Meanwhile, one might well ask what has happened to the g ap housing s ubsidy plan announced with such fanfare earlier this year?
"Similarly, where is the R1 billion mortgage default insurance plan that has been on the cards for several years now? Will there be a new tax incentive for developers of affordable housing in the next Budget, and will the Urban Development Zone tax incentive be extended?"

Big business and other employers could get more involved, Botha says, by helping to educate employees about the dangers of short-term lending and the advantages of saving towards the goal of home ownership.

"And in the provision of housing for those who are poor and unemployed, government should be actively seeking out and motivating the most capable developers and builders to do this at scale, on the understanding that such activity would also provide much needed employment and skills development."

There is a mountain to climb, he says, and consumers need to play a role in achieving their home ownership aspirations, whether they provide sweat equity in the construction process, perhaps, or have earnings from which they can save for a deposit.

(Weekend Argus - Saturday Edition)


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