/ 31 July 2014

State to tackle housing title deed mess

State To Tackle Housing Title Deed Mess
Equal distribution of resources will not close the access gap. Instead, resources must be deployed where they are needed most - and low-cost housing must move from the urban periphery too

The government has set itself the ambitious target of trying to eradicate the state’s 2.3-million housing backlog in the coming years, after which it may end the provision of free state housing.

Alongside this herculean task, it also plans to eradicate the backlog in issuing title deeds to existing housing beneficiaries, to realise what Human Settlements Minister Lindiwe Sisulu called “the dead assets” in people’s hands.

Research shows that more than one million RDP homeowners don’t have title deeds for their properties.

The government aims to complete 1.5-million houses in the next five years, Sisulu said before her recent budget vote speech. The provision of homes to the elderly, the indigent and child-headed households will be prioritised and the practice of having 18-year-olds on the list will be ended. This will allow the government to set a cut-off date and address the question of the sustainability of providing free housing, she said.

According to Ndivhuwo Mabaya, the spokesperson for human settlements, the state believes that the 2.1-million housing backlog in 1994 may already have been cleared and that the current 2.3-million backlog is made up of new entrants.

He said the younger, economically active people on the list could be assisted with alternative forms of social housing, such as subsidised rental accommodation, subsidised stands on which they could build, and employer-supported housing.

Housing ‘opportunities’
According to state statistics, more than 3.7-million housing “opportunities” have been delivered since 1994, which includes more than 903 000 serviced sites and more than 2.8-million housing units.

There is a substantial amount of wealth potentially available to existing housing beneficiaries but without title deeds they cannot access it. Research done by the FinMark Trust and Urban LandMark in 2011 showed that, at that time, more than one million owners of subsidised homes had no title deeds.

Mark Napier, the former programme director of Urban LandMark, who is now at the Council for Scientific and Industrial Research’s built environment unit, said there were a number of key factors that contribute to the delays in registration.

A primary cause was the failure of developers to complete the process of township establishment, which delayed the creation of a register needed for each new neighbourhood or housing area.

The problem was aggravated by changes made to payment processes for developers. Before 2004, the bulk of subsidy payments to developers could only be made once the title deeds for beneficiaries had been registered. But this was changed, resulting in developers simply forfeiting the final, smaller payment tranches to avoid having to complete the registration of title deeds.

This fell to the municipalities and provinces, which did not have the capacity to do it once a backlog built up, Napier said.

Although an RDP house cannot be sold for eight years, where sales have taken place informally without title deeds there is no record of the transfer or of the new owner. There is a similar problem when housing beneficiaries die and their homes are left to family members.

But, according to earlier research, the number of subsidised houses that are sold is very low – about 11% every five years. Of this, informal sales make up only 5%.

Yet the problems go beyond the registration of title deeds, Napier said. The cost of surveying, conveyancing and transfer of homes is often too expensive for poor people.

Similarly, the cost of building planning requirements when occupants extend their homes can be too high, leading to lapses in compliance.

This makes banks reluctant to issue loans against these homes and, in the short term, many people cannot unlock the financial gains that come with formally owning a home.

Higher real figure
Mabaya confirmed that more than one million homeowners, including recipients of houses before 1994, did not have title deeds, but added that the real figure could be much higher because it excluded rural areas.

He said the reason for changing the requirement that developers finalise title deed registration was that it had delayed final payments being made to small contractors and to the occupation of the houses by beneficiaries.

The department is setting up a dedicated unit to fast-track the issuing of title deeds, which will be led by the Estate Agency Affairs Board.

The department has also approaching the Congress of Traditional Leaders of South Africa to reach rural communities.

“We have noted some progress where municipalities are working with chiefs to zone land and then give people title deeds,” Mabaya said.

Big strides
Meanwhile, projects such as the Ngwathe Land Reform Project, run by the Free Market Foundation in conjunction with several private sector partners, such as First National Bank, has already made big strides in transferring the titles of former council homes in the Ngwathe municipality in the Free State to some of its 33 000 residents.

According to Leon Marincowitz, the project manager of the foundation, there were many pre-1994 provisions, such as various forms of lease agreements, that barred black people from owning homes.

Similarly, home ownership has been undermined by the restrictions on recipients of RDP houses from selling them and by the many cases in which recipients of RDP houses had no title deeds, which sat “at municipalities, in drawers somewhere”.

At a cost of about R1 850 each, the project provides owners with full title to their homes and with no restrictions.

Marius Marais, the chief executive officer of FNB Home Loans, said it was difficult to calculate the amount of capital lying dormant in cases like these. But he estimated that, in the Ngwathe municipality, a 60m2 house was conservatively valued at R300 000, which meant that, in total, about R10-billion could be accessed.

But, he said, homeowners still faced many challenges to unlock the value of their homes. Key to this was educating them about both the importance of their title deeds and how much they could afford to borrow, and preferably for long-term reinvestment in their homes rather than short-term consumption.