Innovation in Housing Finance

IHF

This theme promotes innovation in responding to the housing finance challenges that persist in Africa.  Given our understanding of the housing asset and how it performs for low income earners, the investigations in this theme consider how such performance might be enhanced with financial innovation.

Throughout Africa, the housing finance focus of most practitioners is on the mortgage instrument.  This is critically needed for functioning property markets and indeed, for a healthy economy that attracts investment and promotes growth.  It does not respond, however, to the housing finance needs of the majority who are either too poor, do not have legal land ownership rights, are informally or  seasonally employed, or who are unable to meet any number of lenders’ other criteria to be eligible for a loan.  In South Africa, the cost of financing a newly built house with a 100% loan is affordable to less than 15% of the population – and with declining LTVs, the segment of households with affordability is  declining.  The need for alternative housing finance mechanisms which respond to how low income households meet their housing

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This theme promotes innovation in responding to the housing finance challenges that persist in Africa.  Given our understanding of the housing asset and how it performs for low income earners, the investigations in this theme consider how such performance might be enhanced with financial innovation.

Throughout Africa, the housing finance focus of most practitioners is on the mortgage instrument.  This is critically needed for functioning property markets and indeed, for a healthy economy that attracts investment and promotes growth.  It does not respond, however, to the housing finance needs of the majority who are either too poor, do not have legal land ownership rights, are informally or  seasonally employed, or who are unable to meet any number of lenders’ other criteria to be eligible for a loan.  In South Africa, the cost of financing a newly built house with a 100% loan is affordable to less than 15% of the population – and with declining LTVs, the segment of households with affordability is  declining.  The need for alternative housing finance mechanisms which respond to how low income households meet their housing needs (incrementally), or which enhance housing affordability in other innovative ways, is obvious.

Three broad areas have consumed the CAHF in this theme.  We have explored the housing access frontier in South Africa and are beginning to consider the application of this methodology in other countries in the SADC region.  The approach considers the extent to which low-income households have real access to the housing finance products on offer.  The analysis is then used as a basis for advocating for further innovation.We have also explored the issue of housing microfinance and the various opportunities and constraints inherent in this housing finance approach.  With our partners, Rooftops Canada and Habitat for Humanity, we’ve hosted two regional workshops.  In our current work with these partners, we are developing a regional support programme for housing microlenders.

Lastly, we have considered the role of pension assets in extending access to housing finance and housing generally.

In this current financial year, we will pursue a new project area, looking at the role of savings in housing finance and how this might be supported and promoted.