Affordable housing construction lags
The lack of suitable affordable housing stock continues to bedevil the banking sector's ability to increase primary market end user finance, according to FNB chief executive Jacques Cilliers.
Unless we overcome supply side challenges for new builds, lenders, despite their willingness and ability to provide end user housing finance to new homeowners, will continue to be hamstrung by insufficient housing supply, Cilliers told a banking summit on Friday.
The theme of the summit was A Partnership for Housing Delivery.
Cilliers referred to the problem with the GAP market where households earned too much to qualify for a BNG (Breaking New Ground) free house, but too little to qualify for an entry level home.
He said there were about 700 000 families in this position, including 20 percent of civil servants.
In regard to the lack of suitable stock, Cilliers said developers were unable to provide a 45m unit on a 125m2 site at less than R400 000, because the cost of a serviced site had now reached 33 percent of the overall cost of a unit and delayed township establishment/development processes were causing substantial and unnecessary additional costs.
Cilliers stressed the challenge to satisfy the gap market was more significant than providing finance.
If more loans were granted, prices would keep increasing because of the shortage of supply to the point where the cost was closer to the mainstream market.
Cilliers said alternative building methods or architecture might be needed to keep building costs down, but developing on cheaper land further from cities with the increasing cost of transportation simply negatively influenced travel costs and productivity levels of low-income earners.
Finance Minister Nhlanhla Nene said the National Development Plan made it clear the country's current urban growth path was not sustainable.
Nene said cities and towns had been built that remained segregated and exclusionary and the country could not keep building houses in new dormitory settlements on the outskirts of cities.
In our recent medium-term policy statement we were very clear that public expenditures remain constrained. We cannot afford to pay for the long-term subsidy associated with locating our people far from jobs, he said.
Nene said it was generally accepted there was insufficient construction of affordable housing.
He said moving from land to stand could take between 31 and 43 months due to regulatory bottlenecks, which the Banking Association of South Africa in 2009 estimated added 20 percent to the cost of a house.
Nene said municipalities must become dedicated partners in ensuring that affordable housing developments remained free from red tape and bureaucracy.
Taffy Adler, the chief executive of the Housing Development Agency, said the human settlements minister and cabinet had set a target of building 1.5 million houses over the next five years.
Achieving this target would require a huge amount of co-ordination and a range of mechanisms to unlock the various problems being experienced in the affordable housing sector.
Adler said the two biggest blockages that had to be overcome were the provision of bulk services and the turnaround time because of the regulatory framework.
He said affordability was of crucial importance and probably the biggest challenge.
One of the challenges for the banking sector is to take some risk and find a way of making finance to this sector of the population accessible and affordable. It can and has to be done.