SA Property - Housing made affordable for the affordable market segment
Enshrined in the South African Constitution is everyone’s right to access housing. The Minister of Human Settlements, Tokyo Sexwale, in a recent Budget Speech, reiterated the emphasis Government is placing in taking practical legislative and other measures to facilitate achievement of this right.
In his speech the Minister also stressed that the human settlement’s 2030 Vision and comprehensive strategy encompassed the full spectrum of the South African citizenry, and offered these segmentations as examples, the poor assisted with fully subsidised housing (RDP); the affordable market, amongst others, assisted through the Finance Linked Individual Subsidy Programme (FLISP); and the middle-to high-income earners whose interests are mainly taken care of through the Estate Agency Affairs Board (EAAB).
The Housing Act 1997 (Act No 107 of 1997), and subsequent National Housing Code are the key policy principles, guidelines, norms and standards underpinning the numerous housing programmes Government set up to create sustainable human settlements and improved quality of household life. Through these programmes, the various housing institutions and Provincial Human Settlement Departments working in partnerships are primed to accelerate delivery of housing opportunities and improve property markets on the ground.
Optimising on already established housing institutions, the Human Settlement Department tasked the National Housing Finance Corporation (NHFC) as the Implementing Agent of the revised FLISP strategy.
The NHFC has since 1996 been playing a key role of broadening and deepening access to affordable housing. Supported by enhanced insights, experience and knowledge, the NHFC plays a multiple role as an Innovator, Financier and Facilitator, ensuring workable solutions for sustainable human settlement growth and engagement of relevant partnerships.
It is in this vein of cooperation and partnership that the NHFC and EAAB joined efforts on mutually beneficial housing ventures, which include FLISP. Both the NHFC and the EAAB are committed to affording estate agents, country-wide, fair exposure to FLISP and those who deal with the affordable market an in-depth practical acquaintance with housing subsidy programme.
Mechanics of FLISP
FLISP is not a new housing subsidy programme, it was initially introduced in 2005, but the poor public uptake prompted Minister Tokyo Sexwale to revise its implementation strategy concentrating on the strengthening of its processing efficiencies, thereby improving uptake of the FLISP subsidies.
Central to the revised strategy is the new role of the NHFC which, while working closely with the Provincial Human Settlements Departments, is expected to create a ‘one-stop-shop’ experience; as well as ensure measurable involvement of all the key stakeholders such as Banks, Developers and Estate Agents in the delivery of FLISP.
The core essence of the subsidy, though, has not changed; it remains as one of Government’s key means of extending assistance to households who are unable to independently access mortgage finance to acquire residential property.
FLISP specifically addresses the housing needs of the Affordable Market, also known as the GAP Market. These are households whose income is not enough to qualify for a home loan, but it exceeds the maximum limit set for the ‘free basic house’ subsidy scheme intended for the ‘poor’.
The GAP market income is between R3 501 and R15 000 per month. Practically, FLISP allows qualifying beneficiaries to reduce the initial mortgage loan amount or augment the shortfall between the qualifying loan and the total house price bringing the eventual home loan instalment to an affordable amount over the loan repayment period. Through the FLISP subsidy, first time home-ownership opportunities are quite possible.
FLISP by definition is a ‘finance-linked’ subsidy, therefore for consideration, applicants must produce an ‘approval in principle’ indicating the approved home loan amount. In ensuring the subsidy helps deserving incumbents, a pre-determined set of criteria must be met to qualify, including that the applicant must be:-
- first time home buyer
- South African citizen or Permanent Resident with valid identity document
- over 18 years of age and competent to legally contract
The Government further maintains that recipients of FLISP must have dependents under their financial support and care to qualify for FLISP and should never have benefitted from any Government Housing Subsidy Scheme before.
Depending on the gross household monthly income, the once-off FLISP subsidy amount may vary between R10 000 and R87000. The subsidy may be used for purposes of acquiring residential property valued at R300 000 or less. The property has to be in formal towns, where transfer of ownership and registration of mortgage bond is recordable in the Deeds Office.
Estate Agents and FLISP
Towards enabling tangible first time home-ownership opportunities, the NHFC jointly with Provincial Departments accredited some development projects, to ensure availability of affordable housing stock. Applicants may select property from the FLISP Accredited Development Projects or from the Open Market.
A qualifying FLISP applicant may source new or old property in the Open Market with the help of a registered Estate Agent or Property Practitioner. In that instance, the estate agent may also help the applicant apply for the FLISP subsidy, once housing finance has been secured with a bank.
An illustrative example of how FLISP helps the GAP Market afford to acquire property is shown below:-
Example 1 is based on a R9 000 monthly income-band, where the individual after the Lender/Bank’s credit and affordability assessment, based on the National Credit Act (NCA) criteria, qualified for R300 000 home loan:-
FLISP REDUCES the mortgage loan amount to render the monthly loan repayment instalments affordable; (payment made to home loan account)
Property Price R300 000
Bank HL Approval R300 000
Less FLISP as a deposit R 50 000
EVENTUAL HOME LOAN AMOUNT R250 000
Example 2 is based on a R9 000 monthly income-band, where the individual after the Lender / Bank’s credit and affordability assessment, based on the National Credit Act (NCA) criteria, qualified for R250 000 home loan:-
FLISP AUGMENTS shortfall between the qualifying loan amount and the total product price; (payment made to transfer attorneys)
Property Price R300 000
Bank HL Approval R250 000
FLISP as HL top up R 50 000
EVENTUAL HOME LOAN AMOUNT R250 000
Estate agents, who facilitate accessing of FLISP to their affordable market clients, should obtain the following measurable benefits:-
- increased home loan affordability of clients,
- better bargaining chip when negotiating lower interest rate with Lenders,
- increased ‘application-to-approval’ conversion rate,
- increased business activity in the affordable market and reduced perceived risk
Essentially, the key benefit is the promotion of home ownership and in that way, an enhanced pride and security in communities. Under the administration of the NHFC, the processing of FLISP is efficiently streamlined, to allow for faster processing where the application form is properly completed, criteria are met and required supporting documents are presented.
As a ‘one-stop-shop’ and in cooperative liaison with Provincial Human Settlements Departments, the NHFC commits to communicating FLISP application outcomes within agreed timelines as detailed in governance service level agreements signed with stakeholders.
The NHFC website and Call Centre are equipped to address any queries that may arise on FLISP.
Contact NHFC FLISP for more information:
Courtesy: The Agent - Official Publication of the Estate Agency Affairs Board
Estate agents and Property Practitioners operating in the affordable market have an opportunity to gain further clarity about FLISP and its application processes at the EAAB organised Stakeholder Roadshows throughout the provinces -for more information regarding the EAAB roadshows www.eaab.org.za