By Vivian Warby

In a small office in Khayelitsha, Cape Town, South Africa, a woman is poring over some documents.

The documents belong to another woman who bought a home informally, paid cash for it with money she had diligently saved as a nurse over the years, then she renovated the small place, adding on rooms and renting them out. She now wants to get the title deeds for the property into her name but is being told by the original seller, who still has the title deed, to pay him more money since the property is now worth more.

It’s a dire situation and the woman’s life savings, which she ploughed into fixing the property, are threatened.

This is one of thousands of stories that the team at the Tenure Support Centre in Khayelitsha, whose main job it is to solve the title deed problems through legal formal channels, hear.

Some people wait up to 20 years to get the title deeds in their names. This means that the home has to be traded informally and for cash, often at well below market value, or it sits as dead equity unable to be traded in the formal sector. It also means that these homes cannot be used as collateral.

Sadly, people at the lower end of South Africa’s property market, because of issues such as lack of title deeds, among others, just can’t get their foot on the formal property ladder to use their homes as viable assets, earn a sizeable income and return from their bricks and mortar and build generational wealth for their families.

If they could, the results would be bigger than any broad-based black economic empowerment (B-BBEE) project to date to create wealth for South Africans left out of the economic fold, say the experts.

The situation, however, is bad, with many RDP and other homes lacking title deeds. While the RDP homes are seen as subsidised homes, as soon as they are sold they become part of the affordable housing market, broadening supply to this sector where it is in critical need.

The market is thus further stymied by laws that prohibit the selling of RDP homes for the first eight years.

Some homes are also being built and renovations done without approved plans - you can’t get approval to build without a title deed - putting this market further out of the formal structures where these properties could realise their true value and where there could be economic progress. All these stumbling blocks also keep the market out of formal financing.

Players in the sector say the government and many big players just don’t see the lower end as part of the property market even though the affordable market makes up well over 70% of the entire property market.

The informality is well and good until someone disputes ownership, and many have lost their homes because of this.

Yet the government is missing out on what could be their biggest B-BBEE effort to date - giving people at the lower end of the property market, through better laws and title deeds, the right to use their homes as an asset and accumulate wealth, says housing specialist Kecia Rust, executive director and founder of the Centre for Affordable Housing Finance in Africa (CAHF).

Property economist Professor Francois Viruly, who has spent over 25 years in the analysis of the South African property market, says “a lot of value is sitting in these segments of the property market that is just not being unleashed”.

Rust says that what the government’s housing policy fails to do, and continues to fail to do, is engage with the housing market. Rust has been working in the sector since the early 1990s.

The housing sector, she says, is an asset to the country in terms of job creation and economic growth and is more than merely “roofs over heads”.

“A house should be an asset where owning it raises some appreciation and an inheritance for your children. It should also have a financial benefit as an income earning opportunity in a country with high unemployment. And if people are able to access mortgages, they can convert savings accounts into growth of capital.”

If 4 million unencumbered households could use their homes productively for economic activity, says Rust, it would go a long way towards the nation’s goals of B-BBEE. “We need to get our heads away from just delivery ... it is critical.”

Eight-year wait

But some things have to change to get the lower end of the market to work. For instance, waiting 8 years by law to be able to sell an RDP home “distorts the market”, says Viruly. “If you can’t sell your home, it restricts your ability to move up the housing ladder and further restricts the flow in the property market,” he says, adding that RDP homes should be freed up for sale sooner to allow flexibility and to make the market work more efficiently.

“The president says we are asset poor and yet there is great value that sits in those markets that has not been unleashed.”

Professor Ivan Turok, a professor of City-Region Economies at the University of Free State who has also worked in the sector for decades, says the 8-year rule “sounds great when you draw up a policy - but the government needs to get its feet on the ground - they are not connected to the everyday lives of people”.

“The 8-year rule stops the markets from working well. People’s circumstances change and they may want to sell their RDP home to move to a bigger home, or they may get a job in another province. “The rule creates rigidity in what should be a flexible market where there is also natural evolution.

“The minute a person sells their RDP home before the eight years is up they have broken the legal system and have to do the sale informally and are unable to pass on the title deed, and so the home - most people’s biggest asset - immediately becomes an inferior product.

“If the government would use its common sense it would see how certain rules create informality.”

While new builds are needed to address the affordable housing crisis, the sale of second-hand homes also go towards solving the problem, making getting this right crucial, says Turok.

Development Action Group (DAG) programme manager Zama Mgwatyu says the government needs to look at the township market with new eyes, “because some of the rules they have in place, and the backlog of title deeds, is preventing the market from flourishing”.

The property ladder

Instead billions of rands that could be circulating in a formal property market are lost.

Ideally, says Rust, the property ladder should start right at the bottom where someone who lives in a shack identifies an old RDP house for sale which they can afford in an existing township.

They then sell their shack for R10 000 - an informal transaction - and the person now has a deposit to formally buy the RDP home which could be R200 000 and under. They may even be eligible for a Flisp subsidy and mortgage finance.

The person who sold the RDP home now has R200 000 in their pocket, having benefited from getting an RDP home, and can now buy an improved RDP home, for say R400 000. Now the seller of the improved RDP home has a substantial deposit - equity - to go up the property ladder.

“If we could see the residential property market as a single market from right at the bottom upwards, it would work. However the split in South Africa - so well described as a house with two floors and no stairs to the second floor - creates a bifurcated property market where housing for some cannot be treated as an asset,” says Rust.

Khayelitsha estate agent Zola Wilfred Mekula, owner of agency Zolam Properties, says things are getting worse, not better.

“Most of the houses on the market need cash buyers. You will find the owner may have extended the home without getting approved plans, or they dealt with a dodgy architect who told them the plans were approved when they weren’t, and now while a buyer may be able to get a bond, they can’t get it for a home that doesn’t have approved plans.

“It then becomes a very expensive exercise to go the formal route. We have even seen people who paid bribes to officials to turn a blind eye to their building, now unable to sell their homes because they don’t have the right documents.”

Ädded to that the backlog with title deeds hits the market - “it is killing the property market in the townships”.

“Townships can’t just be dormitory areas, we need to get them working as part of the formal economy and the government needs to come to the party to understand the township market,” says Mekula.

Both sellers and buyers are compromised in an informal transaction – but ultimately, it is the buyer who is most at risk.

Title deeds

The issue with title deeds is one of the biggest stumbling blocks to formalising the lower end of the property market. The government is aware of this and the Department of Human Settlements has made as one of its priorities a title deeds programme to ensure security of tenure for many South Africans who have never before owned a property.

It took DAG’s Mgwatyu, himself, 17 years to get the title deed to his RDP home.

“There are formalities built into the system, however, the very people making the laws are also the ones that gave RDP homes without title deeds. It is as though some parts of the market have been set up for informality.

“What really needs to happen is that there has to be a massive education roll-out by the government to people in the townships of how the property market works,” says Zama.

He says the informal market is fraught with deceptive “professionals” and when people try to do the right thing, they are often hoodwinked by these unscrupulous people, further cementing in their minds that it is easier to work with a street committee than go the formal route.

Viruly says with no title deeds it is, in effect, “denying South Africans the asset class components of properties. This has wide ramifications - people can’t get bonds to buy homes that have no title deeds and the city can find it difficult to bill for services”.

The Tenure Support Centre

One beacon of hope in acquiring a title deed is the Tenure Support Centre (TSC) situated in a First National Bank branch in Khayelitsha.

The TSC began as an action-research project between the Centre for Affordable Housing Finance in Africa (CAHF) and 71point Consulting.

It has now been set up to help clients formalise tenure, regularising informal property market transactions that have taken place in the past, transferring properties out of deceased estates and securing primary transfer on properties that have never been formally transferred from the government to housing subsidy beneficiaries.

TSC attorney Lisa Hutsebaut and TSC client administrator Sona Nongqayi say in the short time it has been open, the TSC has assisted over 2 200 Khayelitsha residents with their title deeds issues.

“This is a difficult job,” says Nongqayo, who meets face to face with those seeking help, “Some days the painful stories get overwhelming.

“Some people arrive owning a home but they are the fourth person to have bought it without a title deed and no one knows who the original seller with the title deed is. The devastation is big, but on the day someone gets their title deed, after a long search and battle, the joy they feel knowing that this will change not just their lives but that of their families is unbelievable. It makes this worth it.”

Hutsebaut says by the time people end up at the TSC office “they have used all means, some have even got help from outside the formal structure”. Some never received title deeds, some have had a parent die decades ago and the title deed is still in the deceased’s name, for instance. “It is a complicated system to navigate and is also expensive. The TSC has funding and expertise so this makes it a simpler, cheaper route for those stuck in a horror story.”

Illana Melzer, engagement manager at 71point Consulting, who opened the TSC at first to get data of the biggest housing issues in the township, says the titling issue is “catastrophic”. “We are still trying to figure out how many people who received RDP homes didn’t get their title deeds in the first instance. Roughly it could be about almost half a million people. Khayelitsha, a relatively new township, for instance, has over 40% of people in one area with no title deeds to the property they “own”, either because they never received title deeds, or there’s been a deceased estate, a divorce or an informal sale.

“Some of the ‘missing’ RDP title deeds are sitting in boxes in different municipalities and are just not being handed out - there seems to be an ambivalence about it, and yet without a title deed people are forced into an informal market where their asset’s potential will never be truly realised,” says Melzer.

It also shuts off formal financing. “There is very limited participation by the financial sector, they can’t give a secure loan if they don’t know who owns the home. Added to that, to get a title deed is a clunky, and long, process and can cost from R10 000 upwards, when you can “just go to a street committee and pay R300 to get a piece of paper saying the home is yours.”

The TSC has up to now been getting funding which makes the process of getting a title deed affordable to the lower end of the market.

“It is our hope to spread this operation throughout the country with funding. If we have more, it could be a game-changer, says Melzer.

The problems facing the lower end of the property market can feel overwhelming, catastrophic, unsolvable even, and those impacted may feel powerless - but for small pockets of hope like the TSC.

“We can’t give up hope,” says Turok. “It is a recipe for disaster. We have to see the positive things going on and build on those positives.”

The alternative, says Melzer, is to leave it, say it was a failure, and let people go and accumulate their wealth outside the townships in the suburbs where they can legally grow their assets.

“But that would be really sad.

“And while the situation is not a good one and will require a real effort to solve it… it is doable if we put our heads down.”

* Vivian Warby is a property writer and editor.

** This article first appeared in the Weekend Argus