After almost 10 years Servcon, the low-cost housing finance venture between the government and banks, which, controversially, could evict bond defaulters, will cease to exist.
This week Minister of Housing Lindiwe Sisulu announced that Servcon’s mandate, which expires at the end of March next year, would not be renewed. ”Servcon is already wrapping up business. Most of the work that needed to be done has been done. The environment in which Servcon was needed will be over,” she told the Mail & Guardian.
A key factor in the move is the banks’ pledge to provide the R42-billion for the low-cost housing market by 2008, in terms of the Financial Services Charter.
Touted as ”a new direction in low-cost housing financing” by housing officials, it comes eight months after Sisulu launched the Sustainable Integrated Human Settlement Plan. This envisages safe housing provision with a range of tenure and size options.
Talks between housing and bank authorities are under way to create regulatory measures to curb bond defaulting. The envisaged national home loan code of practice will be finalised by September.
In addition, Sisulu said an education campaign targeted at low-cost home-owners would be launched so that ”people will understand their [bond] responsibilities”.
Although 1,8-million low-cost houses have been built in the past 10 years, there remains a backlog of 2,2-million, which increases by 204 000 units every year.
Financial institutions have been loath to enter the low-cost market and drop the ”red-lining” of problem areas. The government’s 2002 Community Reinvestment (Housing) Bill was fiercely resisted for trying to legislate a ban on such practices, with the banks citing defaulters as a key concern.
In 1998 Servcon Housing Solutions was restructured to deal with low-cost bond defaulters. It was initially established as a private-public partnership after the October 1994 Botshabelo Summit called by then-minister of housing, Joe Slovo.
Servcon could ”right-size” defaulters to smaller or rental accommodation, reschedule loans or, as a last resort, evict the inhabitants and resell the property. In August 2003, it had 33 384 defaulting loans, worth almost R1,3-billion, under administration. According to its website, by March 31 last year it had ”satisfactorily disposed of” 18 467 houses: 1 470 through ”successful evictions”, 3 434 by right-sizing and 2 850 by loan rescheduling.
The demise of Servcon means other national housing institutions will have to accelerate low-income earners’ access to finance. The National Housing Finance Corporation has ensured access to only 11 766 low-cost homes in the past financial year, according to its 2004 annual report.