Public Policy Analysis National Housing Policy and Subsidy Programs

13

PublicPolicy Analysis: National Housing Policy and Subsidy Programs

PublicPolicy Analysis: National Housing Policy and Subsidy Programs

Theshortage of proper residential houses is a common challenge affectingmany households in different countries. However, the housing problemis worse in the developing countries that lack effective policies andresources to build houses for their growing populations. The role ofaddressing the human settlement problem is assigned to specificdepartments and guided by public policies (National Department ofHuman Settlements, 2010, p. 2). This paper will provide an analysisof the “National housing policy and subsidy programs”, with afocus on how the South African National Department of HumanSettlement has used the policy to help the low-income households aswell as individual citizens to access proper houses. In addition, thepolicy analysis paper will identify the policy area to beinvestigated, key problem addressed by the policy, vision as well asthe mission of the policy, quantifiable objectives, offer adiscussion of two alternatives that can be used to address thehousing problem, provide a recommendation of the most viablesolution, and an outline a monitoring and evaluation framework.

Background

Thecurrent National housing policy and subsidy program is an outcome ofintense negotiations that started in 1994, following the firstdemocratic election in South Africa. These negotiations culminated inthe development of the Housing White Paper of the year 1994 thatpassed the responsibility of increasing the ability of the low-incomehouseholds to access proper housing to the state (Ojo-Aromokudu,2013, p. 1). However, these policies and strategies have beenreviewed with time, leading the development of the housing policyreferred to as the National housing policy and subsidy programs,which was formulated in 2010.

Policyarea: Housing the poor citizens and low-income households in SouthAfrica

Themain purpose of the National housing policy and subsidy programs isto help the low-income households have an access to adequate housing.The constitution of the South Africa, which was inaugurated in 1996,gave all citizens the right to access adequate housing (NDHS, 2010,p. 1). The constitution gave the responsibility of ensuring therealization of this right to all citizens to the government. Thegovernment of South Africa has a constitutional mandate toformulating legislations alongside other measures to ensure aprogressive realization of the right to adequate housing. The aspectof progressive realization was introduced in order to allow thegovernment to provide housing to the low-income households andindividual citizens within its resource capacity. Therefore thehousing policy is among the strategies taken to implement theconstitution progressively.

Previousstudies have indicated that most of the households with housingchallenges reside in the urban areas, where they believe that thechances of finding jobs are higher. This created the need for thedevelopment of a more robust and comprehensive housing policy thatcould ensure that houses and stands are constructed in areas wherethe demand is higher (NDHS, 2010, p. 2). In addition, there has beena need for the housing policy to address emerging challenges,including the level of sanitation, water, security, and comfort. Thisimplies that the scope of the housing policy has been extended toinclude the need for social cohesion and the overall quality of life.The policy divides the housing program into two parts, where thefirst phase will focus on the provision of serviced stands to thequalified households and individuals (NDHS, 2010, p. 4). During thesecond phase, the department will construct new stands for thelow-income families and citizens. However, the large number of thelow-income households and citizens makes the effectiveness of thehousing program questionable. This makes it necessary to investigatethe key objectives of the National housing policy and subsidyprograms, explore the alternative solutions that can be included inthe policy to increase its success, and recommend the most viableoption.

Keyproblem that the National housing policy and subsidy programs seeksto address

Shelteris considered as among the basic needs that every human beingrequires in order to lead a fulfilling life. However, many householdsand individual citizens in the republic of South Africa either livein substandard houses or remain homeless for a better part of theirlife. Most importantly, the challenge of housing has been gettingworse with time, instead of reducing. For example, studies have shownthat about 1.4 million households in South Africa lived in theinformal dwellings in the year 1996, but this number had increased to1.9 million households by the year 2011 (Wilkinson, 2014, p. 1). Thenumber of households living in informal dwellings represents about 13% of the national population. Although the government of South Africahas adopted several strategies that seek to provide affordable anddecent houses to the low-income households, but the issue has notbeen addressed adequately. The national housing policy and subsidyprograms seek to address the pressing challenge of inadequatehousing.

Thelack of proper houses is a complex challenge that can be attributedto multiple causes. The first and the primary cause of poor housingin South Africa is apartheid. During the apartheid period thenon-white employees were forced to live in the outskirts of town andform what was commonly referred to as “townships” (Findley, 2016,p. 1). These townships were made of iron sheets or other locallyavailable materials. The non-whites who were the majority were deniedaccess to land and houses by colonial laws (such as the Natives’Land Act, enacted in 1913) that reserved approximately 90 % of theland in the entire country to the whites. This increased poverty andthe inability of the native South Africans to buy or build decenthouses. The second cause of poor housing in South Africa is a drasticincrease in the rate of urbanization as people travel to towns andcities to look for jobs. South Africa recorded an urbanization rateof about 61 % (Ruhiiga, 2014, p. 613). The number of people movingto urban areas exceeds the number of houses that are constructed eachyear, which force the majority of them to live in slums.

Visionand mission

Thevision of the Department of Human Settlements regarding the HousingPolicy is to establish “a nation that is housed in sustainablehuman settlements”. Similarly, its mission “to facilitate anenvironment that provides sustainable human settlement” indicatesthat the department intends to use the policy as a vehicle toincrease the number of low income households living in qualityhouses.

Objectivesof the policy

  • The Department of Human Settlement intended to use the human settlement policy to achieve the following objectives

  • To facilitate the establishment of more integrated human settlements in areas that offer a convenient access to amenities (such as employment) within the urban settings (NDHS, 2010, p. 4).

  • To use the Informal Settlement Program as a tool for upgrading the living conditions of millions of poor people access the basic services, housing, and secure tenure (NDHS, 2010, p. 6).

  • To provide social and economic facilities (such as clinics, schools, recreational facilities, and community halls) in all regions that lack alternative funding.

  • To increase the department’s capacity to re-house households during emergency cases as they wait for the services to be installed and formal houses to be built on sites that were occupied by informal housing structures (NDHS, 2010, p. 9).

  • To use the Social Housing Program as a tool for developing affordable rental houses in urban areas where a bulk of infrastructure (including transport, water, and sanitation) is underutilized, thus increasing urban efficiency (NDHS, 2010, p. 11).

  • To provide capital grants to existing social housing institution through the Institutional Housing Subsidy Program in order to enable them to build rentals that are affordable to poor households within the first four years (NDHS, 2010, p. 12).

  • To provide stable rental tenure for all lower income households and individuals who are currently living in overcrowded and substandard backyards through the Community Residential Units Program (NDHS, 2010, p. 13).

  • To provide subsidy to households that wish to acquire residential stands that has been serviced or an existing house, but lack adequate funds to do so (NDHS, 2010, p. 15).

Twoalternatives to address the housing problem in South Africa

Provisionof subsidy assistance

Themajority of the poor households and individuals living in the crowdedurban areas of South Africa (31.1 %) live below the poverty line,which implies that they cannot afford decent houses (Dietiens, 2015,p. 131). Some of them earn a living through casual labor, which is anindication that they have no sustainable source of income. This makesthe government funded subsidy program a viable solution to the SouthAfrican Housing problem. The housing subsidy scheme should focus oncitizens who cannot satisfy their basic needs without theintervention of the government or other well-wishers. Through thesubsidy program, the poor households should be able to accessfinancial support to buy stands and houses that are being repaired orconstructed by the Department of Human Settlements each year, wherepart of the price is paid by the government. The households shouldthen be allowed to settle the balance in installments that arecommensurate with their earning capacity.

Oneof the key strengths of the subsidy program is the fact that it willreach even the poorest households. This is because funds given in theform of subsidies are not repaid (Fessler, 2014, p. 7). This impliesthat the low-income households will only be required to pay a littleamount to acquire permanent houses. Therefore, the subsidy programwill provide a permanent solution to the housing problem. However,the subsidy program may not be sustainable since its going concerndepends on the ability of the government to allocate funds forhousing the poor households each year. In addition, the subsidyprogram will be an extra burden to the taxpayer. Additionally, thesubsidy program will be expensive to administer. The program ishighly vulnerable to fraud, which creates the need for implementationof controls that might make it expensive to run in the long-term.

Mobilizationof the housing credit

Themobilization of the housing credit is an alternative solution to thechallenge of the lack of access to affordable and decent houses. Thisprogram involves the provision of cheap credit and affordablemortgages to needy households and individuals. The mortgage financingcan be provided directly by the government agencies (including theDepartment of Human Settlements) or the private agencies that aresupported financially by the government (NDHS, 2010, p. 40).

Thecredit program has four strengths. First, the credit program is moresustainable because the households and individuals who get thehousing assistance are required to pay back the money (Moulton, 2013,p. 3 and Pivo, 2013, p. 3). Other households and individuals canborrow the amount that is repaid by the current beneficiaries.Therefore, the idea of mobilizing the housing credit can benefit manypeople in the long-run. Secondly, the interest charged on the housingcredit program (such as mortgages) is lower compared to the interestcharged on other forms of borrowing. The interest also increases theabout available for other potential beneficiaries, which makes thecredit housing program progressive in nature. This means that thenumber of households that will benefit from the housing program willcontinue growing over the years. Third, the housing credits aresecured by the stands or the low cost houses, which implies that eventhe households or individuals who lack collateral security to accessother forms of financing will benefit.

However,the option of mobilizing the housing credit might face two majorchallenges. First, the households that live under extreme levels ofpoverty may not be able to repay the credit. Most of the householdsand citizens who are targeted by the South African Housing policycannot meet their daily needs, which means that they may not be ableto repay the housing credit (NDHS, 2010, p. 40). This might limit thenumber of people who will benefit from the housing policy. Secondly,charging an interest to households and citizens who already poormight be an extra burden on them. This will discourage some of thelow-income households and citizens who are targeted by the housingprogram from taking advantage of the government’s housinginitiative.

Recommendation

Thispolicy analysis paper recommends that the South Africa’s Departmentof Human Settlements should adopt the option of mobilizing thehousing credit as the most viable solution to the housing problem.The purpose of this strategy is to help the low-income households aswell as individual citizens` access cheap housing credits that do notrequire collateral security, besides the house itself (NDHS, 2010, p.40). The strategy is founded on the notion that the majority of thelow-income households lack fixed assets that they can use to secureloans to buy or renovate their houses. The government will use twoapproaches to implement the idea of mobilizing the housing credit.The first approach will involve the provision of a special fund thatwill be managed by the Department of Human Settlements. This fundwill boost the ongoing program that focus on the construction of newstands and houses. These houses will then be sold to the low-incomehouseholds in the form of cheap mortgage.

Thesecond approach will involve the use of incentives (such as taxexemptions) to providers of mortgage facilities, who invest in theconstruction of low-cost houses. This will attract more players inthe private sector, who will partner with the Department of HumanSettlement in addressing the housing problem in South Africa.

Themain benefit of the credit strategy is that it is a long-term programthat will not run put of funds as long as the current beneficiariesare able to repay the credit (Moulton, 2013, p. 3 and Pivo, 2013, p.3). Therefore, the program will not only assist the households thatare currently experiencing the housing challenge, but also the futuregenerations. Although a few households may shy away from the programdue to a requirement for repayment of the credit and a smallinterest, the sustainable nature of the idea makes it most viablesolution to the South African housing problem.

Monitoringand evaluation framework

Theeffectiveness of the National housing policy and subsidy policy willbe monitored using a framework of five steps as follows

Identificationof purpose of monitoring and evaluation: The initial step willinvolve the determination of the purpose of conducting a monitoringand the evaluation process (International Federation of Red CrossCrescent Societies, 2011, p. 27). An example of the purpose ofmonitoring and evaluating the current housing policy could be thedetermination of its effectiveness of the housing programs inincreasing the number low-income households that can access decenthousing.

Definitionof measures and indicators of success or failure: The second step thespecific factors that will be used to determine whether the policy isimplemented as expected or the anticipated outcomes are achieved willbe determined (IFRCCS, 2011, p. 32). For an instant, the decline inthe number of households living in informal dwellings from thecurrent 1.9 million each year will be an effective measure of whetherthe policy is effectively addressing the housing problem (Wilkinson,2014, p. 1).

Assignmentof responsibilities: In the third phase of the framework, thestakeholders should assign roles and responsibilities to individualsand groups, who will be expected to monitor and review theeffectiveness of the housing policy.

Datacollection: In the fourth phase, the stakeholders will collect dataabout the progress of the implementation of the housing process. Anexample of the anticipated data includes the number of low-incomehouseholds that will be have accessed proper houses within a periodof one year.

Assessmentof the framework: In the fifth phase, the department will use thedata collected in phase four to determine whether the objectives ofthe housing policy will have been achieved. The outcome of thisassessment will be used to make the necessary adjustments in theimplementation process.

Conclusion

Thelack of access to proper houses is a significant challenge affectingthe Republic of South Africa, but it can be addressed successfully bymobilizing the housing credit. The ideas of mobilizing the housingcredit should be included in the national housing policy that isdeveloped by the Department of Human Settlement. The main causes ofthe housing problem in South Africa include the race-baseddiscrimination in access to property (such as land), which occurredduring the apartheid. The non-white people working in the urban areaswere required to stay in unmaintained townships, which resulted inthe development of slums that have continued to grow to-date. Inaddition, the state has failed to establish new stands and houses tocater for the large population of citizens who immigrate into theurban areas in search for employment opportunities, which hasexacerbated the shortage of houses, especially in the urban areas. Bymobilizing the housing credit, the Department of Human Settlementwill be able to establish a sustainable solution to the housingproblem.

Listof references

Dietiens,V. Meny-Gibert, S., 2012. In class? Poverty, social exclusion, andschool access in South Africa. Journalof Education,55 128-144.

Fessler,P., Rehm, M. and Tockner, L., 2014. Theimpact of housing non-cash income on the unconditional distributionof household income in Austria.Kaiserstrasse: European Central Bank.

Findly,L. and Ognu, L., 2016. South Africa: From township to town. PlacesJournal.[Online]. Available at&lthttps://placesjournal.org/article/south-africa-from-township-to-town/&gt[Accessed 17 June 2016].

InternationalFederation of Red Cross Crescent Societies, 2011. Project/programmonitoring and evaluation (M&ampE) guide.Geneva: International Federation of Red Cross Crescent Societies.

Moulton,S., 2013. Accessand sustainability for first time homebuyers: The evolving role ofState Housing Finance Agencies.Cambridge, MA: Harvard University.

NationalDepartment of Human Settlements, 2010. NationalHousing Policy and Subsidy Programs.Pretoria: Sub Directorate.

Ojo-Aromokudu,T., 2013. Housingsubsidy criteria and the housing backlog in South Africa.Durban: University of Kwazulu Natal.

Pivo,G., 2013. Theeffect of transportation, location, and affordability relatedsustainability features on mortgage default prediction and risk inmultifamily rental housing.Tucson, AZ: University of Arizona.

Ruhiiga,T., 2014. Urbanizatio in South Africa: A critical review of policy,planning and practice. Supplementon Population Issues,28 (1), p. 610-622.

Wilkinson,K., 2014. Factsheet: The housing situation in South Africa. AfricaCheck.[Online]. Available at &lthttps://africacheck.org/factsheets/factsheet-the-housing-situation-in-south-africa/&gt[Accessed 17 June 2016].