Title deeds backlog trips up RDP housing
South Africa’s RDP housing project is the largest government-subsidised housing project in the world – it has delivered three million units in the past 20 years and property values have boomed. But a persistent backlog in issuing title deeds, estimated to be more than 900 000, mars these successes.
The department of human settlements’ strategic and annual performance plan for 2016 was presented in Parliament last month. In a drive spearheaded by the Estate Agency Affairs Board, the department aims to clear this by 2020, starting with 100 000 this year, and has ring-fenced R276-million to do so.
The primary cause of the backlog is the failure of developers to complete the establishment of townships, delaying the creation of a register needed for each new housing area.
But the backlog of transferring titles of pre-1994 housing stock has to do with resolving difficult cases under the discount benefit scheme, in which some old township stock still needs to be transferred to the new owners, according to Mark Napier, a principal researcher of built environment at the Council for Scientific and Industrial Research.
The transfer of title is imperative to unlock value for home owners.
According to research prepared by the Centre for Affordable Housing Finance in Africa (CAHF) for the Estate Agency Affairs Board, the most rapid growth has been in the lowest market segment – properties valued at less than R300 000 – which are mostly government subsidised. This segment accounted for 44% of the total housing sector in 2013. The aggregate value of government-sponsored housing was R200-billion – 5% of the total R3.8-trillion value of residential property.
The research, which analysed deeds data from 2009 to 2013, found that both the number and the value of this market segment has also grown faster – by 38% – than any other segment each year since 2009.
FNB housing data shows that, in the fourth quarter of 2015, house values in the former black townships of the major metros had grown by 8.3% year on year, more than the 5.6% growth in the value of properties in other parts of the metros. But the average house price in those areas – R493 000 – is well below the average price of R627 000 for the rest of the major metros, FNB data showed.
As most properties valued at less than R300 000 are RDP houses, this category has a higher number of new properties to be registered at the deeds office than resales, “reflecting a housing market still in development in which more new stock is being added than stock being traded”, the CAHF report said.
Recipients of an RDP house cannot sell the property for the first eight years. Even so, the research showed that the resale of homes below R300 000 outnumbered new transfers in the metros in 2011 and 2012, reflecting a dip in government construction and a consistent level of formal resale activity year by year. The average resale price of residential property under R300 000 nationally is R150 000, 15% more than the average property value.
“The growth of property value outpaces interest on savings, salary increases and most businesses, and shows homeownership is among the most powerful ways of moving up the economic ladder,” the CAHF’s report stated.
The importance of title is often seen as an asset against which homeowners can raise secured financing. But Napier said the targeting of the RDP housing programme had reached many poor households, and these poorest households would not necessarily seek to use the house to get bank finance, he said.
“There is this idea in some commercial and legal quarters that if you get this magical piece of paper [the title deed] that tomorrow you will be granted a secured loan like a mortgage,” said Napier.
“That you have a title deed means, theoretically, you can go and raise finance using the property as collateral, but practically it doesn’t necessarily mean the bank will have an appetite to grant you a loan.
“Banks are working on extending their operations to reach further down-market but they also have to monitor their risks and need to comply with lending legislation.”
A building loan, for example, will only be considered by a bank for properties valued at R600 000 or more, even with title.
In practice, the more immediate benefits of title are, for example, being able to leave your property to your children or spouse in the event of death, reducing conflict and contestation, Napier said. Other benefits are being able to extend the house and knowing that the property will remain yours, and being able to move house and officially transfer the property.
“That being said, having the title deed on day one when you move in is hugely beneficial for raising finance, even if it is the next generation that mortgages the house or sells it … It may not always be seen as wealth but it is an important asset.”
But the problem remains that the transfer of title is an expensive and difficult process that is not set up with the poorest in mind, Napier pointed out.
Adelaide Steedley, a director at the Centre for Affordable Housing Finance in Africa, agreed that security of tenure and having an asset are the most important advantages of title. But a third advantage is having an asset that can be used as collateral.
“It’s an important way for people to get into the economic mainstream,” she said.
Backyarding offers an opportunity
RDP houses are meant to be starter homes that recipients can build on to. But the emergence of backyard rentals, known as backyarding, has become common in low-income areas.
According to census 2011, an estimated 1.25-million households, or 8.7% of all households, live in backyard or second-dwelling units.
The South African Local Government Association (Salga) told Parliament last year that backyarding meets the needs of households who are unable or unwilling to get formal accommodation. Landlords provide it because of the additional income, or to accommodate friends or family.
Fifty-six percent of these backyard residences are shacks and the rest are formal structures.
Although some local governments disapprove of it, often for health and safety reasons, “backyarding is a multibillion-rand submarket of the rental sector, which can play a positive role in city building and the development of sustainable human settlements if municipalities focus their interventions on utilising, guiding and facilitating its positive aspects”, Salga said.
It added that municipal responses to backyarding have ranged from zero tolerance to not approving structures in all areas – or, as seen in Cape Town, providing improved services, such as installing separate connections, prepaid electricity and refuse removal.
Salga recommended that services to existing backyard tenants should be improved, and municipalities should create an enabling environment and incentives for landlords to improve living conditions. It said a draft policy on the provision of basic services to backyard residents, still under discussion, was aligned to its proposals.
Politicians cash in on a long-running issue
Land ownership in South Africa is an emotive issue. So it is not surprising that a persistent title deeds backlog of an estimated 900 000, with some dating back to before 1994, has become a matter ripe for political picking in the run-up to local government elections.
In Gauteng, the MEC for human settlements, Paul Mashatile, has made it a central focus of his administration. Herman Mashaba, the Democratic Alliance’s Johannesburg mayoral candidate, earlier this year reportedly promised Soweto business owners he could deliver their long-awaited title deeds overnight.
Earlier this month in Limpopo, the MEC for co-operative governance, human settlements and traditional affairs was interrupted by members of the DA and the Economic Freedom Fighters and accused of campaigning for votes when handing over title deeds.
Mashatile’s spokesperson, Mogomotsi Mogodiri, said the province aimed to clear up its existing title deeds backlog by the end of the 2018-2019 financial year. The backlog of title deeds predating 1994 are estimated to be 1?200, and those since 1994 is estimated to be 130 000, Mogodiri said.
“The MEC has directed officials to revise implementation plans to fast track completion,” said Mogodiri. “R2.6-million has been budgeted for the financial year to complete this.
“Everyone who is a rightful property owner will receive a title deed.”
A national task team, driven by the Estate Agency Affairs Board, is acting in parallel, said Mogodiri. “It is a complementary process but we are not waiting on them.”
The move to eradicate the backlog has been around since Tokyo Sexwale was the human settlements minister, said Mark Napier, a principal researcher of built environment at the Council for Scientific and Industrial Research. He noted it was not easy to deliver and required a great deal of effort and personnel. “Restoring title to neighbourhoods that don’t have it seems to be an easy thing to promise, but requires a co-ordinated programme by municipalities to achieve,” he said.