The current homeownership finance products are prohibitively expensive for many government employees, particularly those in the gap market, says the the Department of Public Service and Administration(DPSA).

The gap market refers to households that earn too much to qualify for government-subsidised Reconstruction and Development Programme (RDP) housing but not enough to secure traditional bank-financed homes.

There is therefore an urgent need, says Moses Mushi, the spokesperson for DPSA, to develop market products tailored specifically for this segment of employees to facilitate their journey towards homeownership,

“This initiative requires collaboration between government entities, development finance institutions, and the commercial housing finance sector to create products that cater to these employees,” Mushi said in a recent interview with Independent Media Property.

In 2015, the government and labour signed the Public Service Coordinating Bargaining Council (PSCBC) Resolution 7 of 2015, which aimed to establish a Government Employees Housing Scheme (GEHS).

Prior to this resolution, public servants had been receiving a housing allowance as part of their service benefits for many years.

However, the DPSA noted that many employees were not utilising this allowance to purchase homes.

Significant strides made

Since the signing of the PSCBC Resolution 7 of 2015 and the Determination and Directive on Housing Allowance for Employees in the Public Service of 2018, significant strides have been made in the Housing Allowance benefit for government employees.

Previously, eligible government employees (Levels 1 to 10) received the Housing Allowance benefit regardless of their homeownership status.

However, following the implementation of the PSCBC Resolution 7 of 2015 and the Determination of 2018, tenants still receive a portion of their Housing Allowance benefit. The remaining amount is saved for them in the Individual-Linked Savings Facility (ILSF), which is administered by the GEHS in collaboration with the National Treasury.

The signed agreement included an increase in the housing allowance from R900 to R1,200, with an annual adjustment based on the Consumer Price Index (CPI) for eligible employees.

Employees appointed after 2015, who do not own homes, have their entire Housing Allowance benefit saved in the ILSF each month. They can withdraw these savings when they become homeowners or upon retirement, fostering a culture of savings within the public service.

Increase in benefit

Reflecting on the progress made since 2015, Mushi highlighted that the Housing Allowance benefit has increased from R1,200 to R1,784.55, with adjustments made annually in July.

As of 31 December 2024:

* 1,160,635 employees are eligible for the allowance.

* 989,021 employees currently receive it, with 821,788 being homeowners — a significant rise from 569,000 in 2015.

* The number of tenant recipients has decreased from 569,000 in 2015 to 164,806.

Each month, R164 million in Housing Allowance funds (ILSF savings) is processed, including withdrawals due to retirement, medical boarding, contract termination, death, or reversals.

Since the establishment of the Individual Linked Savings Facility (ILSF) in 2016, the cumulative savings for employees who are not homeowners have surpassed R28 billion, while R11 billion has been withdrawn through 555,892 transactions.

The DPSA emphasises that the Housing Allowance benefit is just one of the measures introduced to tackle the homeownership challenge among government employees.

The Department of Human Settlements (DHS), through its entity the National Housing Finance Corporation (NHFC), has also introduced subsidies that extend to qualifying government employees.

The PSCBC Resolution 7 of 2015 mandates the GEHS to pursue structured partnerships with various government spheres, public development agencies, development finance institutions, and private entities to enhance efforts and investments aimed at achieving the Scheme's objectives. The DPSA has signed agreements with the National Treasury and the NHFC to further this cause.

Empowerment

Mushi noted that the GEHS has identified key stakeholders within the government sector to address the supply of housing stock and empower government employees to become homeowners.

The Department of Cooperative Governance and Traditional Affairs (COGTA) has been recognised for its strategic role in assisting with Permission-to-Occupy (PTO) matters, which are essential for government employees wishing to build homes in rural areas.

Additionally, the Department of Public Works and Infrastructure (DPWI) has been identified as a crucial partner due to its role as custodian of the national government’s immovable assets and management of rental units occupied by government employees across various sectors.

The NHFC is also a vital stakeholder in providing First Home Finance subsidies to government employees, while the Housing Development Agency (HDA) plays a key role in ensuring the availability of serviced sites in municipalities.

In a recent thought leadership piece, Zeph Nhleko, a leading expert in development finance, emphasised the importance of partnerships between development banks and civil society organisations in unlocking sustainable solutions.

Big challenges

He pointed out that the high levels of unemployment, particularly among the youth, pose significant challenges.

With general unemployment across the continent at around seven to eight percent, South Africa's rate exceeds 30%.

Other pressing issues include lack of access to relevant education and healthcare, as well as infrastructure challenges such as inadequate housing, limited access to electricity, clean water, and transportation networks.

Despite these challenges, Nhleko believes that opportunities exist for development finance institutions to collaborate with civil society and other stakeholders to identify and address the most pressing issues in each country, ultimately leading to the development of effective financial solutions.

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