Home ownership subsidy programmes
In 1994, government defined vulnerable households who qualify for
a subsidy (free) home as households earning a gross income of up
to R3 500 per month. This income ceiling has never been increased,
as government’s focus has been to address the housing needs of
the most vulnerable. In today’s terms, a gross monthly income of
R3 500 in 1994, if increased by Consumer Price Inflation (CPI) would be
R11 144 per month, and if this was increased by the Building Cost
Index (BCI) this would be R16 961 per month.
On average a 45m2 entry-level bonded home costs approximately
R350 000. It is therefore not surprising that households earning less
than R14 000 are unable to afford a starter home and they therefore
constitute the gap market.
In 2007, the Department of Human Settlements introduced its
Finance linked Individual Subsidy Programme (FLISP) to close
this affordability gap. The intent of FLISP was to provide a subsidy
to reduce the actual loan amount that such households required,
improving affordability. Regrettably, this programme has been
unsuccessful for the following reasons:
• The quantum of the FLISP subsidy has been insufficient to close
the affordability gap.
• Government has been unable to increase either the number of
FLISP subsidies it makes available and/or the quantum of such
subsidies, as it would have to reduce the monies allocated for
subsidy (free) housing commensurately. Given growing housing
backlogs for the most vulnerable households, this has not been
a viable option.
• The Department of Human Settlements has capped the purchase
price for a gap market home at R300 000, which is below the cost
of a starter home.
budget for other socio-economic priority areas such as education,
health or social services, which is not a viable option. A sustainable
solution must therefore be t