CHAPTER TWO LITERATURE REVIEW
Chapter 1 laid the foundation in terms of a discussion on the impact of government housing subsidies in Alexandra, Gauteng from 1995 to 2012. The chapter also focused on the background of the study, outlining the rationale, objectives and the research problem statement; including the research objectives, scope and limitations, and the significance of the study, as far as how the outcomes contribute to the existing knowledge and who will it benefit.
The main focus of this chapter is the literature review of the government housing subsidies, specifically the impact in delivering (low-income) houses through government subsidies; and the improvement processes in terms of effective and efficient management of the HSS for the benefit of poor communities or beneficiaries.
In 1994, the ANC government adopted the White Paper on Housing after the historic 1994 democratic elections, with the aim to “create viable, integrated settlements where households could access opportunities, infrastructure and services, within which all South Africa’s people will have access on a progressive basis” (National Housing Code, 2009). This was intended to further provide a permanent residential structure with secure tenure, ensuring privacy and adequate protection against the elements.
Huchzermeyer (2001) argues that well informed government policies are an important aspect for determining housing outputs. Subsidies as an instrument to implement housing policies are supposed to enable the improvement and increase in housing delivery. But what happens if these housing subsidies are ineffective in delivering a maximised housing output or creating no impact at all. Huchzermeyer (2001) further points out that the adverse effect of such policy failure is on the lost opportunity to improve the lives of poor people in terms of the standard of living and quality of life.
Tissington and Royston (2011) remind that it is critical to note the White Paper (1994) on Housing. The latter describes how the government’s overall approach to the housing challenge is aimed at mobilising and harnessing the combined resources, efforts and initiative of communities, the private and commercial sector and the state. The White Paper postulates that despite the constraints in the environment and the limitations on the fiscus, every effort should be made in order to realise this vision for all South Africans while recognising the need for general economic growth and employment (Tissington and Royston, 2011).
The argument above suggests that every sector, including government and communities, must contribute to the attainment of adequate housing for poor people despite the constraints in the fiscus. The argument, however, falls short by not elaborating on the mechanisms to improve economic growth in order to generate employment opportunities to enable housing affordability and achieve an efficient subsidy mechanism to reach the poor. In other words, the impact of such subsidy schemes has to be aligned to public interest, poverty reduction and the principles of equal opportunity and allocation efficiency. As Collins (2013) argues, current policies by governments are at best, inefficient and inequitable and at worst, ineffective.
This is so because the lure of owning a home remains part of the socio-economic fabric of families and communities ; yet policy discussions often include the role of home buying in stimulating the economy, but less concern about how to best aid low-income first time homebuyers (Collins, 2013). The latter assertion is that subsidising homeownership for low-income buyers stems from numerous rationales and justifications (Andrew and Sanchez, 2011). The efficiency and equity performances of particular types of housing subsidies have received little attention for a long time (Drew and Herbert, 2012).So, there has always been a need to essentially analyse how the different types of subsidies fit together, where the leakages are, and who captures the subsidies, often with the purpose of reforming the housing subsidy systems. Such studies are in a position to make abundant use of public finance criteria to assess the performance of housing subsidies. It is generally possible to assess the “quality” of particular types of housing subsidies based on simple notions of use of public finance (Lerman, Steuerle and Zhang, 2012).
Fundamental Principles of Housing Policy Development and Implementation
The National Housing Code (2009) connotes that the Constitution is the supreme law of the land and all housing policy must comply with the Bill of Rights. Section 26(1) of the Constitution stipulates that “everyone has the right to have access to adequate housing” (on a progressive basis). Therefore, the policy principles as contained in the White Paper on Housing (1994) are fundamental to the achievement of this right. These principles are based on the following policy deliverables:
- People-centred development and partnership;
- Skills transfer and economic empowerment;
- Fairness and equity;
- Right of choice;
- Transparency, accountability and monitoring; and
- Sustainability and fiscal affordability (National Housing Code, 2009).
Napier (2005) pointed out that the housing policy envisaged certain outcomes when it was introduced in 1995 and came out of a clear set of developments in the 1980s. The vision of the South African housing policy outlined in the White Paper on Housing (1994) was pitched at two levels, the one addressing the delivery of adequate housing (and secure tenure) to the needy, and the other addressing the nature and location of the settlements so created.
The South Africa’s government housing programme has, for the last decade, been the implementation platform of the National Housing Programmes. In addition, a set of technical provisions has been provided to ensure the achievement of certain minimum levels of standards and specifications in respect of the housing products to be delivered through different programmes. The Urban Development Framework released in 1997 went further by outlining the urban vision, which was that by 2020, South African cities and towns would be:
- Spatially and socio-economically integrated; 24
- Centres of socio-economic opportunity;
- Centres of vibrant urban governance;
- Environmentally sustainable;
- Planned in a highly participatory fashion;
- Marked by adequate housing and infrastructure and effective services;
- Integrated industrial, commercial, residential, information and health, educational and recreational centres; and
- Financed by government subsidies and by mobilising additional resources through partnerships (National Housing Code, 2009).
Meaning of Government Subsidised Housing
According to Koeble (2004:18), subsidised housing is government-sponsored economic assistance programme aimed towards alleviating housing costs and expenses for needy people with low to moderate incomes. Forms of subsidies include direct housing subsidies, non-profit housing, public housing, and rent supplements. Hoek-Smit (2008) pointed out that nearly all governments intervene in housing finance markets, primarily for social and political reasons. The availability of debt finance for housing is a critical component of a housing system.
The key argument is that housing is one of the largest investments in an economy, often, a key barometer of social well-being. When societies urbanise and real incomes increase, housing expectations and standards also increase. Hoek-Smit (2008) further laments that standard housing is expensive relative to household incomes or investor resources; and the degree of access to long and medium-term financing to pay for a house over time is especially important unless the State assumes that responsibility or pays for the housing asset directly.
Rosen (2005:379) argues that housing subsidies can be rationalised in terms of redistribution goals; meaning that by providing subsidised housing for the poor, more egalitarian income distribution can perhaps be achieved. It is further pointed out in this context that if the government’s sole objective is redistribution, and the recipients’ preference are paramount, then using cash to redistribute income is more efficient than a subsidy (Rosen, 2005).
The lack of an efficient system of housing finance that includes existing and unfinished houses impedes low and moderate-income housing markets in particular. Without access to debt finance, whether long or medium-term, households have to finance their homes from savings or family support (Jones and Datta, 2000). The argument above is that there is an expectation that people in general must build their homes over long periods or settle for a lower quality structure, often informal, which normally translates to inadequate access to clean water, sanitation and community services.
The Effectiveness of Government Housing Subsidies to Address Housing Needs
The assumption as captured in the National Housing Code (2009) is that government housing subsidies are designed to cover a big area and range in assisting poor people to access housing subsidies to provide for shelter (Jenkins,1999). The reality, as this study shows, is that not many people, especially, the poor receive these subsidies. The reasons are speculated, but among many reasons cited is that housing subsidies are not effective in adequately addressing the housing needs in South Africa, because:
- Housing subsidies are poorly designed.
- Not enough financial resources are available to the government to cover the costs of housing subsidies.
- Housing subsidies are not properly spent; they are mostly diverted to unintended use.
- Poor quality assurance in terms of measuring the impact of housing subsidies when distributed and spent (Hyden, 1998).
Figure 2.1 illustrates the ineffectiveness of housing subsidies in a sense that if the system was perfect, cells out of the diagonal of the table would be void; and on the contrary, the presence of people or households in the upper right cell of the matrix indicates problems of leakages. For example, people or households not included in target population may benefit from the subsidy. In addition, the presence of people or households in the lower left cell of the matrix indicates problems of coverage, that is, population included in the target are not reached by the subsidy.
- Leakage issue
- Coverage issue
- Not reached
- Source: Coady, Crosh and Hoddinot, 2004
Coverage in this instance refers to the proportion of the target population effectively reached by the subsidy. Buckley and Kalarickal (2004) suggested isolating coverage from targeting because the two notions are different and good targeting and high coverage may be somewhat difficult to achieve simultaneously.
It should be difficult to achieve perfect coverage for well-targeted subsidies, whereas loosely targeted subsidies could cover relatively well the target population, at the expense of higher costs and leakages to non-targeted groups. Coverage may also be related to horizontal equity issues, that is, does the subsidy imply different treatments for different types of households/people in the target population? Or which sub-categories in the target population benefit most and least from the subsidy?
CHAPTER ONE: INTRODUCTION AND BACKGROUND TO THE STUDY
1.2 BACKGROUND AND RATIONALE
1.3 RESEARCH PROBLEM STATEMENT
1.5 RESEARCH OBJECTIVES
1.6 RESEARCH SCOPE AND LIMITATIONS
1.7 THE SIGNIFICANCE OF THE STUDY
1.8 DEFINITION OF TERMINOLOGY
1.9 OUTLINE OF THE STUDY
CHAPTER TWO: LITERATURE REVIEW
2.2. INSTITUTIONAL ENVIRONMENT IN HOUSING DELIVERY
2.3 THE HOUSING SUBSIDY PROGRAMME IN SOUTH AFRICA
2.4 The Effects of Inadequate Housing
2.5 THE RELATIONSHIP BETWEEN HOUSING AND POVERTY IN SOUTH AFRICAN HOUSING POLICY
2.6 THE IMPACT OF HOUSING SUBSIDIES IN IMPROVING LIVES OF BENEFICIEARIES
2.7 BREAKING NEW GROUND: A COMPREHENSIVE PLAN FOR THE DEVELOPMENT OF SUSTAINABLE HUMAN SETTLEMENTS IN SOUTH AFRICA
2.8 HOUSING FINANCE
2.9 THE HOUSING SUBSIDY SYSTEM
2.10 THE CURRENT SUBSIDY STRUCTURE
2.11 THINKING OF THE POOR IN HOUSING DELIVERY
CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY
3.2 RESEARCH DESIGN
3.4 ANALYSIS SAMPLE
3.5 DESCRIPTION OF DATA
3.6 RELIABILITY AND VALIDITY OF THE RESEARCH
3.7 ETHICAL CONSIDERATIONS
CHAPTER FOUR: ALEXANDRA TOWNSHIP – A CASE STUDY
4.2 THE HISTORY OF ALEXANDRA
4.3 KEY LESSONS-HOUSING DEVELOPMENT IN ALEXANDRA
4.4 THE FUNDING MODEL FOR LOW COST HOUSING IN ALEXANDRA TOWNSHIP
4.5 HOUSING CHALLENGES
4.6 HOUSING DEMAND IN ALEXANDRA
4.7 UNEMPLOYMENT, POVERTY, INEQUALITIES
CHAPTER FIVE: HOUSING SECTOR PERFORMANCE SINCE 1995
5.2 SOUTH AFRICA’S HOUSING OUTCOME
5.3 GOVERNMENT’S ECONOMIC POLICIES
5.4 EXPENDITURE ON HOUSING SUBSIDIES COUNTRYWIDE
5.5 POLICY SHIFT FROM HOUSING TO HUMAN SETTLEMENTS
CHAPTER SIX: DATA ANALYSIS AND FINDINGS OF THE STUDY
6.2 STATISTICAL MATCHING TO CREATE COMPARISON GROUPS
6.3 SUCCESS OF STATISTICAL MATCHING
6.4 KEY RESEARCH FINDINGS
CHAPTER SEVEN: DISCUSSION
7.2 KEY ARGUMENTS
7.3 POVERTY AS KEY DRIVER FOR GOVERNMENT SUBSIDIES
7.4 EFFICACY OF GOVERNMENT HOUSING SUBSIDIES
CHAPTER EIGHT: CONCLUSIONS AND RECOMMENDATIONS
8.2 PERCEPTIONS: HOUSING BENEFICIARIES IN THE ALEXANDRA TOWNSHIP
8.3 AFFORDABILITY AND SUSTAINABILITY OF GOVERNMENT HOUSING SUBSIDIES
8.4 ALTERNATIVE TO GOVERNMENT SUBSIDIES
8.5 RECOMMENDATIONS FOR FURTHER IMPROVEMENT
LIST OF SOURCES
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