The Department of Human Settlements is on an ambitious drive to crack down on the resale of RDP houses, which it believes is exacerbating homeownership challenges.
RDP houses are typically small and low-cost – and subsidised by the government or free to indigent people.
The department states that since 1994, three million RDP houses have been built and delivered benefitting about 20 million people.
Yet the department has not been able to control the number of people who sell their RDP houses, despite the Housing Amendment Act of 2001 prohibiting the sale of government-subsidised houses in the open market for eight years after issue.
It is believed that RDP homes are largely sold below market value and without any formal transfer of the title deed to the new owner in the informal market.
Due to the transfer of properties not being recorded, it’s difficult to calculate the exact number of RDP houses that have been sold. Some recent estimates are that the number of RDP houses that are sold is low – at about 11% every five years. Other estimates are conservative – concluding that about 3 500 properties (of the approximate three million delivered since 1994) have been sold by beneficiaries to private owners.
Human Settlements Minister Lindiwe Sisulu says the department is dealing with both the illegal and legal sale of RDP houses. Illegal sales of properties are sold at cheap rates before the eight years has lapsed.
“I have also said [on many occasions] that I do not encourage poor beneficiaries to sell their homes, unless they have moved on in life and can afford a bigger house,” Sisulu tells Moneyweb.
She adds: “The issue is that a house is an asset for the family [and] it is protection for the whole family. In some cases, the husband sells the house, and the wife and kids suffer. There has to be a balance and constant education of the importance of the house, and beneficiaries must not sell a house for short-term benefits”.
Sisulu says beneficiaries can use properties as collateral to access bank loans to start a business or build rental rooms for an income source.
Arguably, there isn’t much the department can do to curb property sales. The Housing Amendment Act doesn’t have punitive measures for individuals who sell their properties, leaving a wide lacuna in the law. But the department hopes to close this gap.
Industry players have suggested that the eight-year occupation period of an RDP house before it can be sold, should be reduced to about two years. This, as argued, would allow people to sell their properties at market-related values.
At stake is a growing housing backlog in South Africa – currently pegged at two million – if the government doesn’t deal with the illegal and legal sale of RDP houses. The department has set a herculean task of delivering 1.5 million housing opportunities in the next three years. Sisulu says the backlog the department found in 1994 has been cleared and she believes that the backlog it’s dealing with now is “new demand”.
On the other hand, the resale of RDP houses can be seen as a panacea to the housing backlog and shortage.
The Centre for Affordable Housing Finance in Africa (CAHF) in a report titled ‘Understanding the challenges in South Africa’s gap housing market and opportunities for the RDP resale market’, suggests that the desperately-needed housing supply must come from the resale of existing and old RDP houses – only if the seller is able to achieve a market-related sale.
RDP houses could sell for anywhere between R70 000 and R250 000 or more, depending on refurbishments to the property and its location.
Beyond increasing housing supply in the market, CAHF notes that a number of benefits can be realised if government promotes the RDP resale market. Among the benefits the report lists is that “subsidy beneficiaries would be able to realise the asset value of their housing and use this to climb the housing ladder, improving their asset wealth”.