SA Affordable Housing September / October 2017 // Issue: 66 | Page 6

NEWS
Solutions to address
South Africa’s housing crisis
Since the dawn of democracy and the introduction of the RDP housing
programme in South Africa, the government has constructed upwards of
three million housing units. In 2011, state-subsidised housing stock was
estimated to make up 24% of all residential deeds registered in the country.
4
SEPTEMBER - OCTOBER 2017
AFFORDABLE
SA HOUSING
I
n a report published by the Centre of Affordable
Housing in Africa, 3.8 million households or 28.8% of all
occupied units earned a household income between
R3 500 and R10 000 a month. This figure represents those
who fall squarely in the housing ‘gap’, with many still
waiting to enter the formal housing space.
For the three million more people who do not have
access to formal housing, their salaries deny them the
opportunity to qualify for an RDP house, and yet they do
not earn enough to be approved for a 100% home loan.
Pension Backed Housing Loans (PBHL) is an alternative
form of housing finance where the loan is secured by the
member’s retirement fund savings instead of a mortgage
bond. The Pension Funds Act allows employees to use their
retirement fund credits as security for mortgages on
existing or new property, with the option to ‘self-build’ or
improve existing dwellings.
PBHL is an interesting solution to address the housing
shortfall as there are trillions of rands in pension funds
which could be used as collateral, with only a fraction of
PBHL (about R20-billion) floating in the bond market.
In many cases however, employees apply and are
approved for loans to be used for ‘self-built’ and
renovations, often referred to as incremental housing.
Sometimes money is misused or not used at all for its
intended purpose which could lead to financial distress for
the consumer. The days of bankroll big-ticket items under
the guise of PBHL will be short-lived as more responsible
financial institutions back the product and ensure proper
protocols are in place to guarantee that funds are
used appropriately.
The positive case for PBL is that if an employee has been
working for a 15-year period, he would have built up
between R200 000 and R300 000, due to a ‘compulsory
savings’ model of pension fund participation. The
collateral is sacrosanct, meaning that under no
circumstance should these savings be touched other than
for use in leveraging a bond on a fixed asset.
Collateral in such a situation is not helpful to the man
who has reached retirement, having gone through three
cycles of moving after having children and downsizing
again. It is more useful at 40 years, when he’s built up
R100 000 and wants to add onto his existing home, or
apply for a traditional home loan where he could use the
PBHL proceeds as a deposit or cover closing costs that the
traditional bank will not finance.
William Jimerson, Musa Group CEO.
Instrumental to the Musa Group business model is their
desired outcome to ‘Do good and do well’ in the
communities in which they operate. This, coupled with the
Department of Human Settlement’s premise on the
constitutional mandate that ‘everyone has the right to
have access to adequate housing’, saw to the beginnings of
an impactful partnership between Musa and the Gauteng
Partnership Fund; resulting in Musa being the first
intermediary to receive funding for the provision of
Pension Backed Housing Loans (PBHL).
Musa, in their continued effort to expand on their home
loans division, will use the funded amount of R15-million,
towards transforming the lives of low to medium income
earners. This model will, in addition, positively impact on
various retailers, currently operating in partnership with
the group; providing beneficial housing solutions for
employees within these businesses.
When comparing an average micro funding loan to the
funding model of PBHL, the variation in repayments for a
R30 000 home improvement loan is about R20 000 in
savings, for the borrower, over the life of the loan.
Supporting the expansion of the use of PBHL as a funding
tool will, therefore, enable home ownership to become
attainable to previously excluded individuals.
Institutions such as GPF and Human Settlements, in
providing funding to intermediaries like Musa Group, are
vital to further establishing PBHL and providing an
environment conducive to sustainability and long-term
growth for the South African housing landscape.