Transforming human settlements and the national spatial economy receives significant attention as a national priority in the NDP, in order to respond to entrenched spatial patterns that exacerbate social inequality and economic inefficiency. For this reason, the NDP proposes a strategy to address the legacy of apartheid spatial patterns and geography and the creation of more human and environmentally sustainable living and working environments.
It is noteworthy that the South African banking sector is a significant player in the market for commercial, industrial and residential property finance and development at varying scales and degrees of specialisation in relation to high value commercial property and low-income social and gap housing. This includes both individual banks and industry wide compacts entered into between The Banking Association and government.
The NDP’s focus on human settlements and the spatial economy therefore emerges as an interesting national priority focus area for greater banking-state collaboration, with potential benefits cutting across multiple NDP priorities, namely infrastructure and the green economy.
Housing delivery within the Affordable Housing market segment remains a vital area of focus within the Financial Sector Code (FSC). It is expected that in respect of the FSC targeted investment target for the banking sector of R48bn at least R24bn (50%) will be achieved through the provision of housing finance. This will require lenders to originate loans of approximately R60bn over the next five years.
Housing finance interventions by banks to achieve this stretch target could include the following:
Nevertheless, there are still two primary challenges that require urgent attention to take critical mass to a level to address housing backlogs estimated at 600 000 within the “affordability gap” market and a further 150 000 within the affordable market, namely:
This relates to both the profile of end-users as well as product type and there have been a number of interventions by government to attempt to improve affordability, including:
Supply constraints continue to bedevil both the subsidy and affordable housing market segments. The current offering is neither sustainable (fiscal affordability), nor has the required critical mass been achieved, with the result that housing backlogs within both the subsidy and affordable market segments have almost doubled since 1994.
Moreover, the number of informal settlements have increased from 300 to almost 3 000 over the past 19years. Whilst urbanisation and smaller family units are a core cause of this deterioration, we must address a number of policy and institutional issues urgently, namely:
South Africa needs to address both the affordability and supply constraints as outlined above. Without that, housing backlogs will continue to grow and current levels of delivery will prevail. Our understanding of housing policy is that there has been an informal shift towards greater levels of:
There has been limited interest in leveraging private sector capital to enhance these goals; municipalities instead preferring to source funding from National Treasury. We are keen on exploring the participation of the banking sector in these products.