The latest research into the provision of affordable housing in the so-called gap market in South Africa shows that it not only brings with it improved welfare and social cohesion, but is also an important facilitator of opportunities and wealth creation.
The latest research into the provision of affordable housing in the so-called gap market in South Africa shows that it not only brings with it improved welfare and social cohesion, but is also an important facilitator of opportunities and wealth creation.
The study found that those who obtain homes in this sector move beyond viewing them as a mere shelter.
Instead, their homes become assets and through appreciation of these assets entrepreneurship, job creation and/or access to higher levels of education are stimulated.
The research was conducted by a team led by University ofCape Town associate professor Francois Viruly.
It is the second such study commissioned by International Housing Solutions (IHS), a global private equity investor which has pioneered the financing of numerous affordable housing projects in South Africa with a total value of almost R8 billion to date.
The primary focus of the research was to assess the direct and indirect benefits to tenants and owners of housing units provided by IHS, to assess the social and economic benefits of living in developments like these which are changing the face of SA suburbs.
The study also aimed to establish whether such affordable housing developments meet the objectives of government policy regarding sustainable human settlements.
The research was expanded this year to include some 500 households across more than twenty different developments.
The survey also considered the views of students who this year made up 17 percent of the respondents.
Affordable housing refers to households with an income between R3 500 and R18 000 per month.
People in this segment earn too much to qualify for government’s low-cost subsidised housing and too little to afford the cheapest standard private sector houses or to qualify for bonds. This is why it is known as the gap market.
The report points out that according to Absa’s March 2013 House Price Index report, small houses (80-140 square metres) have the highest price appreciation at 17.5 percent nominal growth annually.
Houses in this category (and smaller) make up the majority of IHS units with households falling in the affordable housing band having incomes of between R7 500 and R15 000 per month.
Among the major reasons listed by respondents for moving to an IHS funded development was a desire for better access to their places of work, an improved and safer environment, proximity to schools, and financial considerations.
This year’s study also corroborated last year’s findings that the construction of houses in the affordable housing developments of IHS created over 51 000 direct and indirect jobs.
Looking at the welfare improvement of respondents, the study found that overall 72 percent thought their quality of life had improved while only 3 percent of respondents believed their life had worsened to some degree.
The biggest improvements were noted in respect of leisure time, social life, health, access to education and employment opportunities.
An important factor impacting on people’s decision to move to one of the developments included in the research was the ongoing discriminatory impact of apartheid-era spatial planning on household transport spending.
In Gauteng, research shows people spend 21 percent of their income on transportation, which is among the highest in Africa and more than double that of most other major African urban areas.
Commenting on the research findings, IHS managing partner Soula Proxenos says while government’s RDP housing initiative has been a unique and successful programme, there was a need to fix the whole housing spectrum.
“Housing is like a ladder, if there are rungs missing, the ladder is broken.”
Proxenos says creating housing stock in the gap market gives previous RDP households housing to move up to.
If there is nowhere for these families to go to then they are not able to improve their lot and new families then are not able to move into previously used RDP housing.
“Government cannot fix the whole housing ladder and the gap market is ripe for private sector development, especially of the right kind of sustainable initiatives which allow more people to join the formal housing ladder in the affordable housing sector”.
She says traditionally housing in the lower end of the market offered only a shelter role, but housing in the affordable sector enables a broadened role.
“Housing becomes an asset that appreciates, stimulates economic activity and creates wealth. In the USA it is the single biggest source of funding for new business creation.”
She points out that the units play a role as a financial asset and a majority of those interviewed during the research believed the value of their assets had indeed increased.
Viruly says that increasing the affordability of housing as an asset together with the appreciation of this asset should in turn stimulate increased entrepreneurial activity as well as access to higher levels of education.
Viruly says that increasing the affordability of housing as an asset together with the appreciation of this asset should in turn stimulate increased entrepreneurial activity as well as access to higher levels of education.
According to the Global Entrepreneurship Monitor Extended Report – 2011 published last year, 9.1 percent of adults aged 18 to 64 in South Africa are involved in early-stage entrepreneurial activity with 2.3 percent being established business owners compared to 12.3 percent and 9.1 percent respectively in the US.
Increasing entrepreneurship in South Africa through affordable housing will also lead to increased employment as entrepreneurship has been shown to be a key contributor to job growth globally.
In the US it has been the primary source of job growth for the past 30 years.
This year’s study also corroborated last year’s findings that the construction of houses in the affordable housing developments of IHS created over 51 000 direct and indirect jobs.
Over the 10-year life of the IHS fund some 100 000 man years of employment will have been created.
During the past two years affordable or gap housing was given increased prominence by government. Various programmes and subsidies have been established and many related issues – also those covered by Viruly’s research – are included in the National Development Plan.
Government’s “Breaking New Ground” policy is focused on increased housing delivery; housing as an asset, creating sustainable human settlements where housing developments are integrated with social infrastructure, creating employment; and creating social cohesion.
Viruly’s research supports government findings that massive urbanisation was constantly adding to the housing backlog which includes the gap market. Gauteng’s population, for instance, could increase by a further 10 million people over the next 30 years.
A specific need for affordable housing for the urbanised and urbanising middle class has thus been identified, which government alone cannot address and for which private sector participation is crucial.