Tag Archives: housing policy

The Historical Evolution of South Africa’s Housing Policy, Exemplified in Cato Manor

By Ellie Leaning, Analyst

This is the first of a series of blog posts on the historical evolution and uniqueness of South Africa’s housing policy as seen in Cato Manor. This initial post aims to provide a historical overview of the political, economic, and cultural factors at play in Cato Manor.

Cato Manor is one of South Africa’s most historically significant townships. It sits on Durban’s periphery, tucked out of the public eye amongst the hillside, about a ten minute drive from the waterfront. I have a particular affinity to Cato Manor because I lived there for eight-weeks in 2013 with a Zulu family. This was where I had my first exposure to affordable housing projects and became acutely aware of the significance of my family’s Reconstruction and Development Programme (RDP) house in their quest for opportunity in a world of pervasive inequality (tune into the next post in this series for a discussion of RDP houses!).

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Gardens Drive in Cato Manor with RDP houses as far as the eye can see and a mini-bus taxi parked along the street, waiting for customers. These taxis are constantly running back and forth, honking and blasting music, trying to attract a new client. While perhaps intimidating for a foreigner, these taxis are very inexpensive and very efficient (although perhaps not very safe), connecting the township to the greater Durban area.

 Fun fact: As the buses do not have signs indicating their destination, the drivers (or a driver’s assistant who sometimes rides along) and passengers use hand signals to indicate where the bus is going. For instance, lifting your index finger in a circular motion will get you a ride to South Beach. This stems from Apartheid-era innovation when the government did not supply any public services to these areas – yet another example of a creative response to a market failure! 

Cato Manor’s role in the monumental political, economic, and cultural changes of 20th century South Africa make it a useful and relevant case study. It was one of the main areas where the African National Congress (ANC) focused re-development efforts post-1994, and today it is frequently considered Durban’s equivalent to District Six in Cape Town. While this is a specific township with its own history, the lessons learned and the complexity of that history are representative of the rest of South Africa.

Cato Manor has a unique history that is deeply rooted and very important in its culture today. The Nqondo clan occupied the area as early as 1650, until the Ntuli clan took over about a century later. It is unclear what happened to these tribes, but in 1815 the British established Port Natal (the Portuguese word for Christmas, as Natal was first found by a Portuguese explorer on Christmas Day 1497). The Brits lived primarily on the coast, while the Zulu King Shaka controlled the interior. In 1845, George Cato became the first mayor of Durban and was given the land of Cato Manor, which he subdivided and sold to Indian market gardeners (Durban is also home to the world’s largest Indian population outside of India) who decided to remain in South Africa after their terms as indentured slaves ended. Africans began to set up shacks and informal settlements along the periphery of the area, and as more and more Africans settled in, a unique mixture of vibrant Indian and African culture appeared. These Africans were primarily Zulus, who previously ruled large parts of present-day KwaZulu Natal (KZN) and had an incredibly strong empire. The long-lasting periods of conflicts and consequent colonization were brutal and oppressive, but resulted in a strong sense of identity and pride in the Zulu Kingdom, one that is still evident today in Cato Manor and elsewhere in KZN.

In 1932, Cato Manor was officially brought into the Durban municipality, and the (mostly native African) shack-dwellers were declared illegal occupants. Regardless, Africans continued to rent homes and land from Indians (under the law at this time, Africans were not allowed to own land or build homes in urban areas), with established tenure and amicable relationships for a time. Around 1945, historians estimate that Cato Manor was home to over 50,000 Africans, who began accusing Indians of rent-hikes and overcrowding. This occurred simultaneously with the rise of the Afrikaaner National Party in 1948, which imposed a legalized racial segregation system, infamously known as Apartheid. Racial tensions exacerbated existing divides, leading to a brutal “anti-Indian war” on 13 January 1949 that left 137 dead and thousands injured.

After this, Indians began to leave Cato Manor, returning only to collect rent from Africans, who were busy building more shacks and sub-letting to more Africans. Indian landowners then sold a large portion of their land to the Durban City Council, which then developed the land as a largely unregulated and overcrowded emergency center for homeless people. This became one of the main points of unregulated production of shimeyane, a homemade distilled liqueur, and consequent chaos.

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Cato Manor forced removals and police brutality in mid-1950s.

In 1950, National Party passed the Group Areas Act, the Population Registration Act, the Immorality Act, and the Suppression of Communism Act – the infamous laws of Apartheid. The 1950s marked significant increases in brutal legalized segregation and horrific race-based violence. Apartheid’s opposition, the ANC, was gaining immense power when it was forced to go underground by laws prohibiting political groups and defining anti-apartheid sentiments as equal to treason. The ANC had various underground hubs in the different provinces, and Durban’s branch was based in Cato Manor. The ANC women’s league was also largely prominent in Cato Manor around this time.

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Cato Manor: October 1959.

The apartheid regime responded to this by attempting forced removals (within the law, under the Group Areas Act) to place residents in racially exclusive Indian and Black townships, such as KwaMashu and Chatsworth. These efforts were met with massive resistance and violent conflicts, but eventually the bulldozers and police forces won.

Cato Manor was mostly vacant from the late 1960s, aside from a few Hindu temples and avocado trees, a sad ghost of its vibrant history. As the anti-apartheid movements gained strength in the later 1970s, people began trying to move back, but violence plagued the region again in the 1980s. Soon after, people began proactively reclaiming their land and returning to Cato Manor. The first area which people resettled was along the ridge of Cato Manor, an area called Cato Crest.  In 1994, the ANC won the national elections in a remarkably peaceful power transfer. The Zulu Kingdom was incorporated in the Province of Natal in a deal which recognized the power and presence of the Zulus in Natal while stably bringing them into the Republic of South Africa. Natal was renamed as KwaZulu Natal, in which “Kwa” denotes ownership-of or possession: the Zulu’s Natal.

The ANC, left with a broken country, attempted to implement broad changes, including a brand new constitution containing Section 26: the Right to Housing, where “Everyone has the right to have access to adequate housing”. A unique aspect of the South African constitution is that is does not only apply to South African nationals; anyone living in the country is entitled to the same rights as a citizen. In this unique aspect of the constitution, the state took on the responsibility of providing access to adequate housing for both its citizens and permanent residents. In a country of legally enforced geographic segregation of races and consequent socio-economic divides, this was no easy task. Accordingly, since 1994, South Africa has devoted a lot of time and resources to pro-poor housing initiatives, most of which were implemented in Cato Manor with varying levels of success.

Residents of Cato Manor and the larger eThekweni (Durban) municipality established the Cato Manor Development Association to upgrade and redevelop the area. Soon following this, Cato Manor was identified as a Presidential Lead Project of the Reconstruction and Development Programme (RDP), which awarded R130 million ($11.2 million) for specific upgrading schemes to be explained in the next South Africa post.

Mama Ngini House

The RDP house that I lived in for eight weeks with my homestay family (my little sister is at the front door)!

Today, Cato Manor is a very large and partially well developed area, yet is still plagued with violent crime, unemployment, and poor health. Cato Crest, one of the six informal settlements on the outskirts (the ‘crest’) of Cato Manor, is a place of extreme poverty and violence. Parts of Cato Manor are formally owned by their dwellers, with homes attached to the grid with relatively steady electricity and functional plumbing, while others, as in Cato Crest, are completely informal with no legal land ownership, no financial mechanisms for home improvement, no connection to grids, no sanitation, etc. The different mechanisms of housing are at play in Cato Manor, from the 1994 RDP houses, to “green streets” of solar power and efficiency upgrades, to basic slum upgrading schemes attempting to solve the dilemmas of the informal settlements.

South Africa’s, and Cato Manor’s, unique history has led to a regeneration process that is both very difficult and vitally important to get right as the country struggles for socio-economic equality. As we stress here at AHI, there is not one sector of life that housing does not touch. Housing is the keystone species of development, and Cato Manor has been a guinea pig for a lot of these initiatives.

The next blog post in this series will discuss the different regeneration and redevelopment programs at the national level and the local level – stay tuned!  

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Moving Forward: Alternative Forms of Subsidy in the GCC

By: Maysa Sabah Shocair, Managing Director, GCC Region

 

All GCC countries use a combination of non-cash and cash housing finance subsidies. Non-cash subsidies include: (i) making land available for housing either through land grants or directly producing residential projects on allocated land; (ii) housing grants to needy groups including families with limited income, families with special needs, and divorced, widowed, or unmarried women, and (iii) subsidizing water and electricity. On the other hand, cash subsidies include: (i) grants to purchase, build, repair, or expand a house given to those with limited income; (ii) interest free housing loans to buy, build, repair, or expand a house, ranging in value from USD 52,000 in Oman to USD 350,000 in Qatar with a repayment period ranging from 25 years in all GCC countries, with the exception of Qatar, which offers loans up to 35 years.

 

However these subsidy programs are not getting people into housing fast enough, resulting in long waiting periods and extensive waiting lists for government housing services. Indeed, government subsidy programs in most GCC countries are facing many challenges, including: (i) increased demand for housing due to local population growth; (ii) rising cost of housing, mainly due to rising cost of land reflecting the increased demand for housing from the growing expatriate population; (iii) lack of coordination between different government entities which is negatively impacting housing supply and affordability; (iv) complexities and red-tape involved in the present subsidy programs; (v) lack of clear eligibility and priority rules leading to friction (when some are denied and others helped), game playing (where some maneuver themselves to become eligible), and political subterfuge (where those who should not be eligible use personal connections and favors to try to wriggle into eligibility); and (vi) specific challenges to each program to be discussed in detail in another blog.

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Moreover, these subsidy programs heavily promote home ownership at the expense of rental housing. Even in countries such as Bahrain and Kuwait, which provide rental apartments, governments are unintentionally stigmatizing rental housing by offering rental assistance to the “least fortunate”, such as those who have been on waiting lists for more than 5 years, divorced or widowed women, or to households with very low incomes. However, quality affordable rental housing is an integral part of a well-diversified housing stock because it better serves many households, including: (i) young couples just starting out, who need a place of their own but lack the assets to buy a house and may not know how large their family will be; (ii) singles who wish to live independently but may be married in the future; and (iii) older couples whose children are grown and who no longer want the responsibility of maintaining and improving their home.

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Villa housing units

Furthermore, housing authorities are advocating living in villas by predominantly building villas, allocating apartments, in the rare event that they are built to the “least fortunate”, granting land to build villas, and mandating large residential plots. Although the desire for a villa is universal, the health of our cities and hence of our economies and nations, depends on diversifying beyond villa, mainly because (i) villas are ecologically stressful, adding to our rate of land and energy consumption; (ii) higher density resulting from greater diversity of housing types can lower average costs and incentivize developers to enter the affordable housing market; and (iii) diversifying housing types enhances social cohesion by allowing people in different stages of their lives to move to larger or smaller homes without leaving their community.

Governmental resources must be made to go farther through reforming the current subsidy programs and exploring new ones. Reforming current subsidy programs may include initiatives such as: (i) revising eligibility and priority rules, which need to be available only to those who cannot succeed in the open market, based on principles of ‘common sense equity’, clearly state who is in-or-out, and self-adjust with changing economic conditions; (ii) reinventing the land grant system. For example it could be a grant of a plot of land sufficient to hold a villa within a preapproved subdivision, to be built by a private developer according to specifications, with a loan on favorable terms. People who own a plot could have the option to turn it back for cash or credit.

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Products of the Sheik Zayed housing program


Governments can promote rental housing through programs, such as: (i) a supply-side program, probably through non-profits or religious associations.  For example, Waqf land is grossly underused in the GCC and could be the source of land for rental or charitable housing; (ii) a demand-side housing subsidy that eligible households may use to pay part of their rent on accommodation found in the marketplace.

Moreover, governments can encourage diversifying beyond the villa, through strategies such as: (i) redefining the subsidy. Instead of asking “would you like a villa or an apartment?” ask “You have this amount of subsidy, how would you like to spend it?” Those who spend less can reserve the money for future use, or receive cash rebates. In other markets, when faced with such a choice, some voluntarily consume less; (ii) letting people move into apartments via rent-to-own and start enjoying their new home while saving to buy it. This will help those not in a position to purchase a home to do so and build equity; and (iii) letting people stay on a waiting list for a villa, while moving them into an attractive apartment now.

Other tools that governments may want to consider include non-cash tools, such as: (i) limiting density, which creates a renewable and monetizable commodity that government or the private sector can sell or trade; (ii) providing trunk and on-site infrastructure, a tool to improve the quality or affordability of housing and offer significant value to the developer or owner; (iii) assuming risk or enhancing credit to encourage private banks to participate. Governments can take the credit risk associated with lending to affordable households or properties through purchasing loans originated by others, insuring loans originated through approved intermediaries, and guaranteeing a government or private sector entity; and (iv) exempting eligible projects from government imposed fees to reduce overall costs and increase affordability.

 

Cash tools include: (i) soft debt – a government entity lends money to a developer or property owner, and takes a subordinate lien position to other lenders to encourage the development of new affordable housing; (ii) hard equity – to encourage the development of affordable housing, the government gains an ownership stake in the property, or the organization developer/ operator and seeks an economic return on its capital; (iii) operating subsidythis can be on the supply-side when given to property owners who then charge residents low rents or on the demand-side when given directly to householders or residents to help defray their costs; and (iv) re-directive subsidy – government can capture revenue from another income stream and direct it to housing, through, for example, payroll deductions, ore revenues from transportation or utilities. 

 

In other nations that we have looked at successful policy instruments have evolved during an extended period of trial and error that led to the evolution of a mixed system of low-income housing policy with a much diminished national role in program design and outcomes, an ascendant role for local governments and the private sector, and the opportunity for the recipients of housing vouchers to scout the private market for the best deal they can find. The permanent nature of housing inspires caution on the part of policymakers.  Homes can be the physical and enduring expression of policy, and as a result, every city in the world has some properties that are the reminder of a previous experiment that either failed or outlived its utility. Thus, giving stakeholders clear information and access to technical expertise can help them proceed with confidence.

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Housing in Oman

Addressing the Housing Finance Gap in Tunisia

By: Josie McVitty, AHI Associate

 

Tunisia has undergone major social and political upheaval in the past two years since the Revolution in January 2011 set off the Arab Spring in the rest of the region. Significant unrest remains, as protests and strikes continue and Tunisians fight to claim their rights to fundamental civil liberties and socio-economic equality. There is a lot of pressure for the government and institutions to respond to the demands of the population, who are becoming impatient as poor living conditions and unemployment remain.

 

Housing is a critical building block toward a strong society and restored stability, particularly during a period of transition. There are many social benefits associated with increased housing production, finance, and home-ownership, including job creation, improving the asset base, and providing formal sector homeowners a legal stake in their community. Lastly, having a long term financing mechanism for housing is essential for any urban development strategy, which enables government to focus on upgrading of collective public services and infrastructure.  

 

Home ownership is of particularly high importance in Tunisia where the population has one of the highest home ownership rates in the world, up to 80 percent. Most of this housing is realized by self-construction. However, a major bottleneck slowing the speed and quality of construction remains, lack of access to finance. Households, without the possibility to take loans for housing construction and improvement must build incrementally as they collect savings or remittances from extended family. This process takes place over extended periods, meaning that many households live in unsanitary conditions, and must suffer a long time until they can improve the quality of their housing enough to make it habitable. As the price of land, and construction materials increase, and housing supply from the formal market becomes inaccessible – with price rises of 8 percent per annum averaged over the past 20 years – enabling access to finance to base of the pyramid becomes an even more important issue.

 

Tunisia has a long history of progressive housing policies and innovative programs. Since 1977, they have developed a program for government subsidized finance for housing, known as FOPROLOS, for salaried workers. However, the loan ceilings have not been increasing with housing prices and an applicant must be formally employed, so it excludes the majority of the most vulnerable and needy groups, which are precisely those that most need assistance.

 

The demand for housing microfinance to fill this gap is clear. In 2008, the largest microfinance institution in Tunisia, ENDA-Interarabe launched a new product called “Eddar” specifically for housing improvements, responding to the continued demands of their clients. Most loans are given from US$321 to US$1000, usually over a period of 12 – 18 months, and most clients take out subsequent housing improvement loans to complete a series of projects. At the end of 2009, the Eddar loan made up 6% of their total loan portfolio, with 3452 active clients, $2 million outstanding, average housing loans were for $900 and 15 months duration. Enda aims to increase the number of loans toward housing improvement to 13 percent of their total loan portfolio in 2012. Yet, this is still only a drop in the bucket.

 

With 800,000 to 1 million unserviced microfinance customers, as estimated by a 2011 European Union study, there is clearly extensive financial exclusion and untapped market. At the same time, there is the possibility of more financial competition to ENDA on the horizon. The restrictive Microfinance Law from 1999 was revised in November 2011 and is currently awaiting enforcement of the Decree. This will lift the interest rate cap (of 5 percent), which has previously made it financially infeasible for other microfinance institutions to operate in Tunisia. There are many established MFIs that are preparing to start operations in Tunisia, and the EU is offering grant funding to insure the start-up period of new MFI entrants. Once operational, these MFIs could too decide to offer housing improvement loans as part of their product base. The rapid growth of the MFI sector, and availability of housing microfinance, experienced in Morocco, could prove an example of what awaits Tunisia.

 

Another approach to encourage downstream lending can be drawn from Morocco, where partnerships between banks and the government makes lending more accessible through the Fogarim program. Fogirim is a mortgage guarantee fund for households with small and irregular income. Launched in 2004, outstanding guarantees amount to 11 billion dirham (US$1.3b) as of 2011, with 1200 new beneficiaries each month, and a total of 80,000 beneficiaries up to now. Key features of Fogirim are to guarantee 70% of a loan that a bank makes to a household with informal income. The loan must require low monthly payments of less than 1500 dirham (US$176) and have a fixed interest rate. Risk premiums were also introduced in 2009. The average housing loan offered on the programme in 2011 was at a fixed interest rate of 6.1% with a LTV ratio of 75%, average duration 21 years and repayments of 1150 dirham per month (US$130). These benefits are accessible to people who earn a monthly income up to US$566 per month, even from informal sources.

 

With one third of the Tunisian population restricted from any form of formal housing finance, either due to their lack of formal employment, access to formal land title, or low incomes, more innovative mechanisms for households to finance their dwelling needs to be introduced. As this article explores, there are examples of microfinance and government incentives that have elsewhere proven to be effective. It is just a matter of an entity taking the initiative to target this market, and investing into the economic and social value that is there waiting to be supported. The demand and opportunity is clear.

 

Incremental self-construction in Tunisia’s quartiers populaires

Urban sprawl and housing failure in Nicaragua

By: Noel Sampson, AHI Intern, Nicaragua.

 

The expansion of urban areas is a common and historical phenomenon in Latin American cities. Nowadays, poorly planned urban expansion has led to marginalization of city inhabitants. In the case of Nicaraguan cities, housing projects and urban sprawl are clearly promoted by policy makers. In this publication I will present two cases, including both low and middle income housing developments that are clear examples of urban sprawl and failures in housing delivery.

 

The Urban Expansion Plan of the city of León known as León Sur-Este had as its general objective “to develop a model of urban expansion with spatial and socioeconomic sustainability” (City of León, 2000) intended to reduce the housing deficit and prevent illegal occupations. The plan León Sur-Este was conceived as a sustainable development, including adequate infrastructure and services provision according to population needs and facilitating the conditions for economic development. León Sur-Este nowadays has failed in archiving these objectives.

 

Urban sprawl. Private development in León Sur-Este, León, Nicaragua.

 

The project strategically oriented urban expansion to the South-East area of the city of León and involved the community in planning processes and in the provision of land which was bought at preferential prices. The sale of housing units was subsidized by the government. Sister-cities programs such Utrecht-León and international agencies also played an important role in the early steps of the project.

 

Sketch of the Plan of urban expansion León Sur-Este, León, Nicaragua.

 

However land speculation led to the increase of prices in neighboring land, blocking the future expansion of the project. The sale of land for private developments strained the already insufficient urban infrastructure and potentiated a gentrification process, disadvantaging the low income inhabitants of the original project.

 

“Se vende casa” (House on sale). LIH unit in Leon Sur-Este.

 

The development now has a very poor connection to the main urban infrastructure networks, including water, sanitation and transport. The creation of socioeconomically homogeneous neighborhoods in city outskirts, such as Leon Sur-Este and many other cases in Managua, creates poverty islands where urban problems are exacerbated and presented all at the same time. In the case of León Sur-Este housing abandonment, housing resale, illegal land occupation, lack of basic services, unhealthy conditions, lack of access to education and strong social exclusion are clear symptoms of the project failure.

 

Street in Leon Sur-Este lacking urban infrastructure and services.

 

Similar phenomena are evident in private developments for middle income families in the outskirts of Managua.  Housing projects outside the city are a fashionable investment for  developers and it is no surprise that they are appealing for many home buyers as well. Middle income gated communities include features such as internal security guards to increase sales, adding value to the life in the “new city”, while making profit from social disintegration and marginalization.

 

This consumption of land, lack of access to resources and services, new patterns of social exclusion, increase in the demand of infrastructure and transport, losses in the ecosystem, disrespect of urban development plans and land use lead to a very expensive failure, with social, ecological and economic implications.

Examples of this are the developments in the periphery of Managua, in the Pan-American Highway, where houses in private developments are seen as a single product, not as the basic unit for a community and city. Nor do they include the physical, social and environmental elements where the essentials of life, including social relationship and community sense of living develop.

 

Vistas de Momotombo. Gated community in the periphery far from the city of Managua, Nicaragua.

 

Heinrichs (2008) put forward two theories to explain the popularity of housing projects outside the city. The first supposes a preference of families to live in the periphery. In this case suburban development and urban sprawl are largely a consequence of private investors trying to satisfy that demand. The second argument states that urban sprawl is a result of poor governance and public policies. In the case of Nicaragua both arguments are applicable, which could be seen as a voluntarily and intentional attempt to exclude and be excluded from the city. All this is influenced by media, weak governance and the lack of sustainable habitat alternatives.


To prevent the disintegration of society and improve the way in which municipalities govern cities we need to modify the concept of city radically, since it is misunderstood by many municipalities and local governments. At the same time there is an inconsistency in housing policy and the mechanisms by which these projects are implemented.

 

However, there are promising alternatives for reducing the deficit of 900,000 houses that exists in the country. More important than numbers, these alternatives might prevent social segregation, urban sprawl and marginalization. In the country the demand is for both home improvement and new housing. In this case, new houses should be built as intentional and sustainable communities. INURBA is one company which has taken on the challenge of providing housing for the middle class in emerging and developing economies, promising to create well-designed urban communities supplied with infrastructure that includes clean water, sanitation, and power to provide the conditions for an integrated social community and might become a good practice model that can influence the housing ecosystem.

 

Existing infrastructure and close proximity to urban economy activities must be seriously considered as an opportunity for housing delivery in the inner city. Community organization in popular neighborhoods, land tenancy and access to services set the conditions for a massive program oriented to home improvement and neighborhood upgrading. It is time to think creatively, and promote sustainable housing solutions to stop the proliferation of poverty islands and set the conditions for long term social integration and sustainability.