In 2001, the backlog was estimated to be 1.8 million houses; by 2011 it had risen to 2.1 million, and three years later it's still on the increase.
"The reasons vary, but are mainly due to affordability and availability constraints. Although most banks offer home loans for the affordable housing market and are willing to provide finance to those who qualify, there are limited properties available in this range. And, due to their scarcity, their prices are high," says Nolwazi Nzama, Head of Affordable Housing at Standard Bank.
For example, the biggest shortfall of properties is for households earning a combined income of between R3,500 and R15,000 a month. There are only a limited number of properties within the R100,000 to R500,000 price band in South Africa. Fortunately the Department of Human Settlement, has recently removed the R300,000 cap on what it used to consider affordable housing, allowing more options that will alleviate the housing backlog.
"Public-private initiatives (PPIs) can go a long way in addressing these challenges, as they can help reduce costs, paving the way for more lower-income entrants to the housing market. An example of these initiatives is the Finance Linked Subsidy Programme (FLISP), in which Standard Bank is a leading partner with government as the largest lender in the Affordable Housing market," says Nzama.
"FLISP, which provides assistance to households to access mortgage finance for residential property, is important. It provides an incentive for more developers to participate in the market. Banks are also enabled to review some of their lending criteria. It is aimed primarily at assisting first-time qualifying householders with a gross monthly income of between R3,501 and R15,000. This band is what government has defined as the gap market and where the real shortage and challenge to provide housing is."
FLISP assists qualifying beneficiaries who want to obtain mortgage finance from a lender to:
The households covered in this band typically have a high degree of financial commitment, making it harder for them to get mortgage finance but, at the same time, have a monthly income that exceeds the maximum income limit applicable for qualifying for government's "free basic house" housing subsidy scheme, also known as an RDP house.
FLISP reduces the initial mortgage amount, making the monthly repayment installments affordable over the loan repayment term. It also accommodates shortfalls between the qualifying loan amount and the total house price by providing a once-off down payment.
"Initiatives such as FLISP do not only increase the number of customers in the affordable housing market; they also fulfil the dreams of countless people who assumed that their wish of owning their own homes would never be realised," concludes Nzama.
