SA Affordable Housing May - June 2019 // Issue: 76 | Page 38

INDUSTRY MATTERS
The unaffordable ‘affordable’
housing market – Part 2
South Africa has a housing crisis. There is an estimated
housing backlog of 2.1 million units, which is almost double the
housing backlog in 1994 when it was about 1.2 million units.
By Pierre Venter, Banking Association South Africa
This article is a continuation of part 1, published in the
previous edition.
I
n 1994 government’s RDP programme was targeted at
indigent households earning up to R3 500. The graph
below indicates annual consumer price inflation (CPI) since
1994. In 1994, R3 500 equates to R14 834 in 2018 in terms
of purchasing power (purchase price parity). However,
government’s subsidy programme for free housing has not
been adjusted by CPI given fiscal affordability constraints
and the growth of the housing backlog within the
indigent segment.
Therefore, it can be argued that if government had
continued to follow its incremental housing approach and
had adjusted its target market by CPI annually, there would
not be a ‘missing middle’ (previously illustrated in graph 3
where there is a FLISP subsidy
shortfall). Importantly, this further
suggests that government has
created a paradox within its
housing programme. By not
aligning its RDP programme (now
termed Breaking New Ground
policy) it has created
a significant segment of
marginalised households.
Given the housing backlog and
a shortage of suitable stock, an
overview of the residential
property market highlights that
the excess demand for affordable
housing is causing the price of
affordable property to increase
well ahead of inflation and
building cost increases. Based on
the Lightstone Property
affordable housing index, ‘The
annual price increase for homes
under R250 000 is 26.8%, while
it is only 0.4% for homes over
R1.5 million’.
In addition, the Lightstone
index report finds that, ‘Both the
low value and mid value wealth
segments continue to buck the
trend by growing at more than
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MAY - JUNE 2019
6% annually while the high and luxury wealth segments are
inflating at rates below 4% (which is indicative of a growing
middle class and an over demand for affordable housing).’
The lack of affordable housing stock is a major cost driver of
affordable housing itself. The disjuncture in the property
market is so apparent that it is visible in the urban
environment. Affluent areas of South African cities are
dominated by housing estates while the urban poor are
relegated to live in the periphery of the city or less desirable
areas of the city. Informal settlements and inadequate
housing are more likely to be found on well-located land
than formal affordable developments.
The Human Sciences research Council (HSRC) 2018
highlights that ‘More and more households fall into this
income bracket, but fewer houses are being built within their
price range.’ This disjuncture is rooted in apartheid spatial
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