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Patrick Bond critiques an earlier article in SAR by our own Barry Pinsky on the ANC's housing strategy. Bond points out ". . . that notwithstanding some significant advances beyond the apartheid-era approach, the HWP's [Housing White Paper's] deviations from the RDP [Reconstruction and Development Programme] are so serious as to ensure continued conflict, ineffectual delivery, inefficiencies associated with oligopolistic practices (by banks, developers, construction industry suppliers, estate agents), and inequity in the housing sector. Since so few of the HWP's flaws have been publicly discussed, explaining those flaws, then, will be the essence of the following ten questions and answers, which compare the divergent RDP and HWP approaches to housing policy.

vol 10 no 5

Undermining the RDP: A reply to Barry Pinsky
Patrick Bond

Printable Version
Southern Africa Report

SAR, Vol 10, No 5, July 1995
Page 23



Patrick Bond lectures in social policy at Johns Hopkins University in Baltimore. In 1994 he served as an editor of the RDP and the RDP White Paper.

The March 1995 issue of Southern Africa Report carried an endorsement of the South African Department of Housing White Paper which was understandably couched as a tribute to the late South African Housing Minister, Joe Slovo.

But if the most sincere tributes to Slovo are inspired by and draw upon his life-long commitment to the interests of poor and working people on the subcontinent, and if such tributes are to meaningfully advance the ideals for which he stood, and if those ideals are being translated into their opposite in practice by demonstrably inept capitalists and a stable of white bureaucrats, then the policy debate requires a more critical perspective.

After all, Slovo had promised that in his first year as housing minister, 90,000 houses for low-income people would be built. Figures recently released by government show that during the eight months he served, plus the four preceding months, fewer than 5,000 houses were actually delivered.

Much of this time, of course, was spent in formulating the new policy and in implementing a market-oriented compromise policy struck between the multi-party National Housing Forum (NHF) and Slovo's predecessor as minister, Louis Shill (an incompetent and irascible insurance executive, by even the judgment of Business Day newspaper). The ANC had okayed the February 1994 agreement at executive level (including Slovo).

That deal's profound failure is self-evident, but inexplicably, the Housing White Paper (HWP) seems to endorse and build upon this shaky foundation: "Policy positions were developed through a process of bilateral negotiations between the Department of Housing [under Shill] and the NHF, representing the most inclusive process of policy development ever undertaken in South Africa in respect of housing." In fact, however, it was the RDP housing policy that was far more democratic and representative, unburdened by the NHF's excessively technocratic, conservative and unaccountable processes.

A critical assessment of market-oriented housing policy is important especially if South Africa's progressive forces want to celebrate and reaffirm Slovo's socialist inclinations (which by all accounts were less in evidence during the 1990s). The new housing policy also deserves more attention because of an overriding problem now apparent in recent progressive strategy and tactics: the Reconstruction and Development Programme (RDP) vehicle so arduously wheeled into place during 1993 and early 1994 is being held up and possibly hijacked.

Too many movement leaders and activists are sitting by the side of the road, choking in the dust as the RDP vehicle speeds off to the right with big business and apartheid-era bureaucrats at the wheel. Able to respond primarily through mass action, they now find themselves coming under blunt attack from President Mandela. Worse, the mainstream media regularly hints that blame for the little-altered system's failure to deliver the goods will be allocated largely to township anarchy, to ineffectual ANC political leadership (especially the alleged "radical populists") and to the so-called culture of non-payment.

I would propose, in contrast, that the Left apply its own spin control, particularly to those who give the RDP lip-service and then blatantly violate its provisions. One of the best places to start is with housing policy, where RDP promises have been definitively broken notwithstanding this HWP vow: "The RDP sets out a clear vision for housing in the future. It is therefore imperative that future housing policy and strategy be developed in accordance with this vision and guidelines."

To highlight the many shortcomings in the HWP requires taking what may appear as an excessively hostile position. To be sure, various positive features of the HWP (which Barry Pinsky recorded in the last SAR) are not emphasised in this article, for the purpose, instead, of alerting comrades and housing policy wonks to what I perceive as its most serious political and technical problems.

My conclusion is that notwithstanding some significant advances beyond the apartheid-era approach, the HWP's deviations from the RDP are so serious as to ensure continued conflict, ineffectual delivery, inefficiencies associated with oligopolistic practices (by banks, developers, construction industry suppliers, estate agents), and inequity in the housing sector. Since so few of the HWP's flaws have been publicly discussed, explaining those flaws, then, will be the essence of the following ten questions and answers, which compare the divergent RDP and HWP approaches to housing policy.

1. What is the cause of the housing crisis? The HWP Preamble traces the housing crisis to the "bureaucratic, administrative, financial and institutional framework inherited from the previous government." In contrast, the RDP also blames "the limited range of the capitalist housing markets." In failing to acknowledge limits to the market, the HWP advocates a system for housing delivery and financing which is bound to reproduce market failure. Indeed, the HWP affirms "the fundamental pre-condition for attracting [private] investment, which is that housing must be provided within a normalised market." Taking an entirely different approach, the RDP advocates both a housing bank (to attract private resources such as pensions out of the stock market and luxury real estate and into a state-controlled institution for on-lending) and that the subsidy be provided via non-speculative housing (ie, it must be repaid upon selling the house, or is invested in public housing or a housing cooperative).

2. Why can so few South Africans afford housing provided by the market? The primary reasons the black housing market was never as "normal" as the white market, of course, were enforced geographical segregation and lack of affordability. Setting aside the inherited apartheid-capitalist income distribution and continuing economic stagnation, the most crucial determinant of housing market affordability today remains the interest rate on home loans (also called "bonds"). If the average rate were 3%, then all South Africans could afford to pay for housing; instead it is over 16%. When the interest rate for housing loans soared from 12,5% to 20,75% from early 1988 to late 1989, the unprecedented affordability crisis led to massive numbers of involuntary defaults. Yet inexplicably, the interest rate is completely missing from the HWP's long list of "economic issues" which "militate against a massive increase in effective demand" for housing. The HWP authors appear anxious to avoid any confrontation with the ultra-conservative bureaucrat who sets the interest rate, Reserve Bank Governor Chris Stals.

3. What prevents government from resolving the affordability problem? The HWP contends that "budgetary constraints do not allow sufficient subsidy money per household to enable the construction, at State expense, of a minimum standard complete house for each household not able to afford such a house." (It is assumed that a minimally-decent house costs approximately R25,000, and that SA's income distribution requires an average 50% subsidy.) Compared to the previous policy, the HWP does allow a slight increase in the maximum housing subsidy to the very poor, but it is still R10,000 too little and the average subsidy is also too low. More to the point, the HWP fails to consider the actual cost to the budget of meeting the RDP goal of one million new houses over five years (an average of 200,000 per year). At an average cost to the state of R12,500 per house - not including the other R12,500, which should come from private sector resources such as pensions via the national housing bank (to be repaid at the market rate of interest) - the main RDP housing subsidy would cost the government just R2,5 billion per year. Consistent with the RDP, the HWP's - and government's - stated goal for resource allocation is to acquire 5% of the budget for housing by the year 1998. In constant rand terms based on the present budget this would be R7 billion, far in excess of the R2,5 billion the RDP requires. Simple mathematics shows the inaccuracy of the fiscal constraint argument.

4. What kinds of housing subsidies? Not merely the amount, but the character of subsidies, has been hotly contested. The HWP mostly ignores the RDP insistence that housing subsidies be non-speculative in nature (with the exception of a very minor cooperative subsidy programme which is still not operational). Moreover, the HWP's neo-liberal commitment to the up-front capital subsidy approach (rather than lower interest rates spread over time) is a direct violation of the RDP, which insists that "Interest rates must be kept as low as possible." (Worse still, the HWP seems to endorse a bank plan to charge "a higher interest rate on bonds [for low-income borrowers] than the prevailing bond rate"; the Department of Housing may actually reward this despicable form of class discrimination with administrative support.) Finally, the HWP rigidly announces, "it is not envisaged that subsidy mechanism or level variations on a provincial or local/metropolitan basis will be possible."

5. What are the financial market constraints? When considering private sector financial resources, the HWP explains that declining rates of personal savings "reduced the availability of savings for investment in housing." This is nonsense, given the massive increases in credit granted by banks during the late 1980s (when savings rates were extremely low). Indeed, the SA financial system has shown an impressive ability to disregard savings and instead to create housing credit (mainly for the white market) based on factors such as the property market cycle, financial deregulation, interest rate levels and inter-bank competition. The failure of the HWP drafters to recognise this again reveals a very conservative economic bias and bodes ill for future interventions in housing finance markets.

6. On what terms is private housing finance to be provided? The flaws in the October 1994 insurance scheme between the Department of Housing and the commercial banks are too numerous and serious to be discussed in depth here. In short, however, the scheme disempowers communities (by taking away their sole leverage to prevent foreclosure), ignores the underlying reasons for bond boycotts or defaults, gives too much leeway to banks, and hence will simply not make much of a difference to the availability of housing credit in areas where it is most needed. (The scheme also directly violates the RDP provision that "Unemployment bond insurance packages and guarantee schemes with a demand-side orientation must be devised.") Moreover, the HWP proposal for a National Housing Finance Corporation rejects the RDP suggestion that "Government funds and private sector funding must be blended in order to make housing finance affordable." And by serving as "a conduit for international investment" the Corporation will also violate the RDP warning to "use foreign debt financing only for those elements of the programme that can potentially increase our capacity for earning foreign exchange." Moreover, the HWP's emphasis on mobilising consumer savings is misplaced given the limited disposable income of poor people. Finally, the HWP ignores the RDP insistence that " `redlining' and other forms of discrimination by banks must be prohibited"; indeed, discriminatory behaviour by banks continues virtually unchecked.

7. What kind of housing tenure (individual ownership, rental, cooperative)? First, the HWP does not even consider rental stock, and even omits public housing stock from a list of housing functions to be fulfilled by local government. The RDP, in contrast, proposes that "Sufficient affordable rental housing stock should be provided to low-income earners who choose this option." Though the HWP gives lip service to cooperative housing, the inner-city Johannesburg pilot project Slovo selected in September 1994 has still not been launched or even fully financed. So while the HWP claims that "Government rejects the elevation of the individualised private homeownership above other forms of secure tenure," HWP policies and practices are geared to precisely that. As a result, the HWP subsidy policy encourages churning, speculation and downward-raiding, instead of permanently affordable housing protected from market vicissitudes.

8. What role for community organisations? Though households, Non-Governmental Organisations and "communities" (not organisations) are given passing mention, nowhere are township civic associations and other community groups specifically cited as partners. In contrast, the RDP housing guidelines declare that "capacity building and funds for community-based organisations must be made available." Dozens of opportunities in the HWP to support civics and CBOs are ignored.

9. What role for small housing developers? The HWP disparages black developers - "the growth and support of the emerging construction sector is not seen as a primary housing responsibility and therefore does not justify the allocation of housing funds" - even though the RDP urges, "The development of small, medium-sized and micro enterprises owned and run by black people must be incorporated into the housing delivery programme."

10. What regulation for the building materials and construction industries? The HWP relies upon self-regulation. In contrast, the RDP states, "Cartels, price agreements and market share agreements must end, and consideration must be given to public, worker and community-based ownership where the market fails to provide a reasonably priced product. Community-controlled building materials suppliers must be encouraged, possibly with government subsidies to enhance competitiveness. An enforceable Code of Conduct must be established to guide developers." The HWP falls far short in addressing anticompetitive practices in these industries (such as inordinate price inflation), which are known to be virtually impossible to self-regulate. And there are no firm HWP commitments on consumer protection.

These ten comparisons (there are many more) illustrate how the HWP distorts or contradicts the RDP. The HWP also ignores the RDP's more proactive suggestions, such as preparing new legislation to protect tenants' rights, squatters' rights, and the rights of people living in informal settlements, and addressing evictions and exploitation in rentals. The HWP is silent on gender discrimination, whereas the RDP demands that "All legislative obstacles and constraints to housing and credit for women must be removed." And while the RDP suggests that "Locally controlled Housing Associations or cooperatives must be supported, in part to take over properties in possession of banks due to foreclosure," the HWP simply ignores such a solution.

Perhaps most worrisome of all, the HWP Preamble states, "The time for policy debate is now past." While no one denies that mass housing construction is already long overdue, this is an unnecessary closure of debate and threatens to shut out those social forces which will have fundamental objections to the HWP as its shortcomings are recognised. Hopefully, as land invasions, occupations of vacant buildings, rent strikes and other legitimate forms of popular resistance continue, there will be time again for revisiting policy.

In sum, the HWP directly violates many of the analytical underpinnings, the philosophical commitments, and the detailed policy provisions worked out by the many Mass Democratic Movement forces who contributed to the RDP in 1993 and 1994. It is as if the RDP's pages on housing were torn from the document and used as loo paper. If this is the RDP's only contribution to what may well become known as the HWP "toilet policy" - more reminiscent of the apartheid era than of the New South Africa - it would be a tragic legacy of Slovo's months as minister.

If progressives within the state and civil society fail to recognise these policy distortions in the interests of a mythical social contract harmony model or in memory of a socialist leader who must have been, at best, only indirectly responsible for the HWP's most retrogressive provisions, the tragedy would be greater. And if poor and working people in South Africa fail to mobilise pressure to restore the RDP and hence to dispense with faith in capitalist housing markets and the apartheid-era bureaucracy most responsible for the HWP, that tragedy will be multiplied many times.

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