The provision of affordable housing in the so-called gap market in South Africa not only resulted in improved welfare and social cohesion, but was also an important facilitator of opportunities and wealth creation, according to a new study.
The research, conducted by a team led by UCT associate professor Francois Viruly, found that those who obtained homes in this sector moved beyond viewing them as a mere shelter but saw them as an asset, and the appreciation in the value of these assets stimulated entrepreneurship, job creation and access to higher levels of education.
Soula Proxenos, the managing partner of International Housing Solutions (IHS), a global private equity investor that pioneered the financing of affordable housing projects in South Africa with a total value of almost R8 billion to date and commissioned the research, said housing in the affordable sector enabled a broadened role and became an asset that appreciated, stimulated economic activity and created wealth.
“In the US it is the single-biggest source of funding for new business creation. The units play a role as a financial asset and a majority of those interviewed during the research believed the value of their assets had indeed increased,” she said.
Viruly said increasing entrepreneurship in South Africa through affordable housing would also lead to increased employment as entrepreneurship had been shown to be a key contributor to job growth globally and had been the primary source of job growth in the US for the past 30 years.
Viruly’s research also supported government findings that massive urbanisation was adding to the housing backlog, which includes the gap market.
Affordable housing or the gap market refers to households with an income between R3 500 and R18 000 a month, who earn too much to qualify for the government’s low-cost subsidised housing and too little to afford the cheapest standard private sector houses or to qualify for bonds.
Among the major reasons listed by respondents for moving to an IHS-funded development was a desire for better access to their places of work, an improved and safer environment, proximity to schools and financial considerations.
In addition, 72 percent of respondents said their quality of life had improved while only 3 percent believed their life had worsened to some degree.
Proxenos said housing was like a ladder and if there were rungs missing, the ladder was broken.
“Creating housing stock in the gap market gives previous RDP households housing to move up to,” he said.
Proxenos stressed that the government could not fix the whole housing ladder and the gap market was ripe for private sector development.