In order to deliver on the Western Cape Human Settlements mandate of creating integrated and sustainable human settlements, the future of housing will include a greater number of people contributing financially towards their houses and the government enabling more people to buy houses. The culture of dependency the government is creating where people get houses for free is dangerous, as it is not a model that can economically support our municipalities.
In some areas, nine out of ten houses built by the government are not occupied by the beneficiaries they were built for. The houses have been sold for a fraction of the amount or rented out. This shows us that we are not always giving people what they want. We are giving out free houses, yet the people we are giving them to are not using them.
These houses often become a liability, where now people have to pay for services, maintenance, transport and other costs, whereas before getting the house, they didn't have to. Without jobs, these houses become stones around their necks. The people we are trying to help end up going back to shacks, and valuable property falls cheaply into hands it wasn't intended for.
We have to change how we deliver housing solutions to the people. We are giving houses to people who can't afford them, yet the people who are contributing to our economy, such as nurses, teachers and policemen, are unable to buy a house. It's very difficult for them to afford to buy property and traditionally our government policies haven't helped them. The people earning between R3 500 and R12 500 a month, who earn too much to qualify for a government subsidy yet too little to qualify for a bank mortgage, are called the Gap Market. These people pay taxes, yet find it very difficult to ever own property. We will still continue to build and give houses to those in desperate need, yet in order to deliver on our strategic mandate of providing accelerated housing delivery to all people, we have to look for solutions for people in the Gap Market.
We need to help the people in the Gap Market, because they are the ones that will make our municipalities sustainable through the payment for rates and services. By predominantly focusing on the most needy, we ignore those who will be the real source of sustainability for our future societies.
This is why we need to look for financing solutions to help the people in the Gap Market. People in the Gap Market will have to pay back home loans provided by the banks, and the banks will need to make a profit. What we can do is to help reduce the cost of the loan, and one of the exciting initiatives is the upcoming Mortgage Default Insurance (MDI), to which the government is allocating R1 billion.
The MDI is a guarantee fund, which the government will use to guarantee loans for people in the Gap Market. Through reducing the risk for the lenders, the loans will be issued at a lower interest rate, and will be cheaper for the applicants. People will still have to be creditworthy and will have to pay off their loans. If the applicants default, then the fund will cover the bank for the balance of losses, after the bank has foreclosed on the property and sold it on the open market.
The MDI is planned to begin coming into effect in 2012, and I expect it will take a few years for the financial institutions to develop confidence in it. However, within four to five years, I expect to see the banks having increased confidence in the MDI, and that we will be seeing many more teachers, nurses, policemen and other valuable contributors to our society buying their own houses.
I am excited about the future of affordable housing in the Western Cape. I am excited that we are creating ways to enable people with jobs to buy houses, and we are moving increasingly to a society where those who are responsible and willing to pay can be helped.