Appendix B: South Africa case study report The social and economic impact of land titling in selected settlements in Ekurhuleni Metropolitan area February 2008 Synthesis report Authors Colin Marx and Margot Rubin Tel: +27 (0) 11 717 7730 Reference group Sarah Charlton, Marie Huchzermeyer, Alan Mabin, Mark Napier, Lauren Royston, Mirjam van Donk, Stuart Wilson Service providers Sarah Meny-Gibert (Social Surveys Africa) Michael Kihato (Stephen Berrisford Consulting) Dirk Taljaard (Progressus Research and Development) Sarah Charlton Executive summary The provision of land title to low income households as a mechanism of poverty alleviation and social and economic betterment is highly contested. Many countries and international organizations have promoted home and land ownership as one of their key poverty reduction strategies. The logic rests on the understanding that it is through well-defined property ownership regimes that national economies function of wealthier countries and households flourish. The general assumption is that if developing countries and emerging economies are able to replicate this model then economic development cannot be far off. Researchers, academics, economists and government officials have all taken positions on these arguments and it is a hotly debated and deeply contested area of development. In South Africa titling and the provision of ownership to historically disadvantaged individuals who were not able to own property under the Apartheid regime has been a key principle underlying much of South African housing and land reform policy since 1994. There is an expectation that it is through titling that economic and social inequity and past wrongs will be redressed in order to create a more equitable and integrated society. Although these ideas have been at the core of the land and housing debate for the past 14 years, little has been done to evaluate or review the effects of titling on low income communities and the next generation of urban policy looks set to continue in the same manner. About this Report This study forms part of a larger international research project, which is examining the social and economic impacts of land titling on poor households. The research took place in three different but similarly located urban settlements in the Ekurhuleni Metropolitan area, Gauteng Province, South Africa and attempted to answer the following questions: What are the social and economic outcomes and impacts of titling programmes? i. What are the social and economic outcomes and impacts of tenure regularisation in informal areas? For whom? ii. To what extent have titling programmes increased tenure security for all affected groups? iii. Has titling improved access to formal credit? By whom? From which sources? iv. Has titling led to increased investment in housing and/or infrastructure? By whom? v. Has titling led to improved well-being for poor households? vi. Has titling increased investment in housing the sense of poor households‟ social/political inclusion? What impacts has titling had on urban land markets, including the frequency and cost of transactions and prices? i. What are the trends in terms of overall access to land ii. And how are the patterns of development affecting the housing, land and property market? The report is divided into three main parts. The first provides a context, history and legal background to explain the institutional, legislative and social conditions within which the study took place. Part Two sets out the findings of the study and is grouped around the main thematic areas of tenure security, access to credit, housing improvements and investment, local municipal revenues, and the impact on economic development for development. Part Three draws conclusions from the findings and offers a series of policy recommendations in line with the study findings. i Reasons why this research is relevant and important The research has taken place at a most opportune time for a number of reasons. At the South African level, the National Departments of Housing, Land Affairs, and Public Works are taking stock of their programmes and are reviewing much of the work that they have undertaken and the policies that they have implemented over the last 14 years. There is also greater recognition of the fact that the urban land market is not working for poor people and low-income households consistently feel alienated from it. At the international level, the debate about the ability of land titling to contribute to poverty alleviation and improved socio- economic conditions goes on, with limited empirical evidence on both sides. This research will attempt to unpack and understand the role of titling in housing policy and delivery and assess whether it is usefully redressing past inequalities. Lastly, there are many assumptions about the benefits of titling programmes for low-income communities but the claims made about titling are not always realised, nor are the effects homogenous across countries or even across metropolitan areas. Main Findings The report presents findings that relate to the context of Gauteng province and which are indicative of the range of processes and mechanisms that are at work in other urban areas in South Africa. In the research, the distinction is made between different types of tenure claims that the respondents hold according to the underlying legal status of the land, the respondent‟s possession of documentation, and the type of documentation that was held. The most important tenure claims included „formal ownership‟, intermediate forms of ownership, rental, occupying and „looking after‟. Some of the key findings were that: There is a range of other tenure options that exist in low income communities but pass unrecognized by current policy The old dualisms of own/rent and informal/formal are not useful in understanding the different kinds of tenure that are used within low-income communities. Low-income communities understand a range of different kinds of ownership that are considered commensurate to each other but are not recognized by the formal legal property section. Possessing a title deed has little effect on owners‟ perception of their security of tenure When households in the three communities were asked if they were afraid that somebody could take their home away, irrespective of their tenure very few households reported that they thought that they could be moved. In addition to those with formal ownership claims, over 90% of households with informal ownership and over 95% of households who were occupying their property were confident that they could not be arbitrarily removed. Possessing a title deed has little effect on improvements and household investment in their homes Less than half (45%) of households with formal tenure and only 30% of households with some form of intermediate ownership had made any improvements to their homes, whereas 33% of households who own their properties informally had made some improvements to their units. When probed, most households claimed that the reason they had not invested in their homes was a lack of finance. The majority of households that had completed some kind ii of investment in their homes were generally motivated by a need to fix up their homes to make them more liveable. Possessing a title deed has little effect on borrowing/accessing credit The findings demonstrate that few (13.7%) low-income households borrow money at all, with most expressing a deep fear of debt. Of those who have borrowed money, most have used banks, but not one household in the survey has used their home as collateral for a loan. In all cases, the loans that had been taken out from banks were unsecured, irrespective of the form of tenure held by the household. Holding a title does not make selling easier There was no evidence to suggest that households with title find selling their units easier than other households. In fact the restrictive clause that requires the owner of a Reconstruction and Development Programme (RDP) unit, if wishing to sell within the first five years, to offer it first to the government seems to force households to sell their units informally. Title is not leading to formal secondary transactions Although government subsidized housing is initially legally registered within the formal property systems, the restrictive clause and the time and financial costs of transacting formally mean that many households who have received state housing choose to sell it informally. The end result is that the bifurcation between the low income housing market and the rest of the market is entrenched through these processes rather than normalized. Households do not see their homes as an income generating investments When asked if they would sell their homes or their documents to their homes only a small percentage of households (5%) said that they would. However, far more households said that they would be willing to give away their documents and houses to family members. This seems to indicate that households do not value their houses and title deeds as investments that they can realise to generate a profit and instead perceive their homes as an urban base and primarily as a bequest to their children although this could extend to include to providing support to members of the extended family network. There is a general sense that the extended family has “use rights” and can be accommodated in the unit but ownership seems to be bequeathed to specific individuals (usually, but not necessarily direct descendents). Title does not help households to save money in formal financial institutions Over two thirds (67.4%) of all the households surveyed do not save money at all, due to the low income levels of most of the households in the sample. However, households that were previously tenants reported that home ownership minimised their housing costs by obviating the need for rental payments. Households who are currently renting, either formally or informally, are more likely to save using formal financial institutions than those who own their properties or are already on the path to ownership.