many renters and homeowners in the largest cities of the GN are paying much more. However, where incomes are very low in real terms, as in most of Africa, it is understood that the opportunity cost of paying another 10% or 20% or more of your income for housing does not mean setting aside meals in restaurants or new clothes, but cutting out some food altogether, taking children out of school, or leaving the purchase of medicines so late that a sick family member will suffer unnecessarily or even die. In other words, when people are really poor, the welfare losses imposed by increasing payments for housing can be very serious and potentially life-threatening.
It is worth noting that, unlike a mortgage for an already constructed house, the sort of housing loan made in Glen Norah (and in thousands of similar projects across the urban GS) did not provide any actual housing in the first instance – just access to a bare plot. Until something is built, the borrower has nowhere to live (or they must rent somewhere else, compounding the affordability issue). For those on the minimum income level applied at Glen Norah C, the maximum loan they could get covered the cost of the plot but not much else. In other words, there was no provision for the cost of building most of the actual house but they would already be paying out 30% of their income to service their loan. This is something of a dilemma, evidently.
But what housing loan could typical residents living in Glen Norah C actually afford? The 1988 survey collected data on household incomes and it turned out that the average income of the 227 migrants interviewed was almost identical to the average for beneficiaries of the programme. In other words, they were good proxies for the households living in the area. Many of Harare’s low-income households are from other parts of Zimbabwe and, in the 1980s, most worked in the formal sector, as did the rest of the city’s workers. Unemployment levels were low. The survey data were used to construct housing affordability curves (see Figure 2.1), which showed how many could afford the housing payments needed to actually build a house, even if gradually. Not many, it turned out. Based on the household head’s income, only 8% could afford the monthly payment of Z$141.20 that was necessary to repay the size of loan required both to buy and occupy their plot and then to build the minimum type of house required by local regulations. The average loan provided by the building society was thus completely insufficient to build the required house. This was also obviously problematic. Yet half the migrants were even too poor to borrow that amount. A third had incomes below the minimum required for the scheme. The affordability curve based on total household income, including income earned by other household members, was slightly more favourable, with about 19% able to build the minimum house. This would still have left four-fifths unable to build a house – and anyway, in practice, loans were based solely on the household head’s income.5
Figure 2.1 Housing affordability curves for households in a private-sector-financed scheme in Harare
In some ways, the scheme was smoke and mirrors. It was officially meant to be addressing the city’s critical housing shortage for those on lower incomes. However, the ideological turn towards cost recovery and the involvement of private-sector profit-oriented housing finance meant that the costs – which, it must be remembered, were on a site-and-service basis with no actual house at the start and no allowance for labour costs – were far too high for the vast majority of the groups for which it was intended (which, in this case, was most of Harare’s population, excluding the remaining white residents).
The construction of affordability curves for housing is sobering. The concepts were used in South Africa to provide insights into the constraints on future housing policy in the run-up to the final attainment of democracy in 1994. As is often the case for a new political force that has long struggled against the problems it is now faced with solving, and where class and financial interests in maintaining the status quo are not so entrenched, there was a moment of clarity and relative openness in policy circles. A government White Paper on housing published in 1994 was clear: although there were various constraints, ‘all of them are dwarfed by the single most significant constraint to the housing delivery process, that of affordability’. There were two sides to this issue: one was the need to recognise ‘limitations imposed by the State fiscus and macro-economic realities’. However, ‘of more significance and concern is the grinding poverty of such a large proportion of the South African population. This provides the single most important limitation on the housing programme. The resolution of this problem is something that a sustainable housing programme can significantly contribute to, but cannot remotely seek to solve on its own.’6
The White Paper contained various summary data illustrating the affordability problem. The total monthly income of 40% of all households was estimated to be under R800 and 70% had less than R1,500. But it was found that there was ‘almost insignificant’ provision of formal-sector loans for housing to any household with less than R3,500 per month. A housing dilemma indeed if it were hoped that the formal private sector would play a role in solving the housing crisis – since a mere 14% of households earned more than that. Even if some families with less could borrow something, albeit not enough for a completed house, as in the Zimbabwean example of Glen Norah C, it was estimated that 45% to 55% of South African households were simply not going to be able to borrow any housing finance at all, or afford to pay it back if they did. This group was going to be entirely dependent on its ‘own (limited) resources and State subsidisation’.7
The new South African government tried very hard to encourage and cajole local building societies and banks to become seriously involved in low-income housing and appointed one of the African National Congress’s (ANC’s) most senior members, Joe Slovo, to the Housing Ministry. But they refused to lend to households with less than R1,500 per month,8 thereby excluding 70% of families. The South African situation was a microcosm of the urban housing dilemma across the world – of the circle that cannot be squared by talking up either the need for more urban land or the efficiencies to be derived from profit-oriented private-sector housing delivery. In different countries and cities the figures will play out differently, and they also change over time (currently usually in directions that make the situation worse), but there is always a segment of the housing ‘market’ which is too poor to be reliably profitable for private-sector finance. The South African White Paper had put this problem up front, for once. Caught between a radicalised urban population with high expectations for housing, and the gimlet eyes of the International Monetary Fund (IMF), World Bank and international credit-rating agencies assessing their public finances, the ANC opted for a compromise. In a radical departure from other African countries, it introduced a one-off means-tested cash housing grant payable to any household earning under R3,500 per month. This could be used in various ways but its primary purpose, according to the White Paper, was to provide ‘security of tenure and access to basic services as well as possibly a rudimentary starter formal structure to the poorest of the poor’. The top grant was R15,000 for the poorest households on less than R800 per month, decreasing to R5,000 for those with R2,501–3,500, and it was to be increased in line with inflation.
The South African approach has been evaluated and analysed endlessly since then. There have been well-founded criticisms relating to, for example, the location of most housing schemes in areas too distant from areas with jobs – although unless land costs are subsidised in some way this is a depressing inevitability for ‘low-cost’ housing projects for low-income people in a free-market urban environment anywhere in the world. Housing quality and size are seen as problems. Many schemes received higher levels of subsidy than the limits theoretically set or they would never have been completed. There is still a significant housing shortage and many still live in unplanned settlements and/or are squatters. The idea of ‘incrementalism’ embedded in site-and-service approaches, whereby the poor provide ‘sweat equity’ on a bare plot, as in
