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SAVINGS AND AFFORDABILITY IN SOUTH AFRICA'S LOW-INCOME HOUSING MARKET

A. Pillay and W. A. Naudé
Savings and Development
Vol. 30, No. 1 (2006), pp. 79-94
Stable URL: http://www.jstor.org/stable/25830919
Page Count: 16
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SAVINGS AND AFFORDABILITY IN SOUTH AFRICA'S LOW-INCOME HOUSING MARKET
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Abstract

South Africa faces a low-income housing crisis with the current backlog estimated at over 3 million units. The persistence of the back-log has been argued to be due to inadequate savings and lack of affordability of housing by low-income households. In this paper we present evidence from a survey of 653 households across 5 provinces of South Africa on the savings behavior and affordability levels of low-income households in the housing market. It is found that low-income households' ability to save is not insignificant, and that where they do not save enough it is because of lack of opportunity rather than lack of capacity. Indeed, as a percentage of monthly income we found that prospective home buyers in the lowest income growth saved the most — nearly 13% of their monthly income over a 24-month period. The majority (62%) used a conventional savings account held at a formal bank in order to save. When monthly savings are added to the disposable income of low-income households, and other debt obligations such as clothing and furniture credit lessened, it is found to significantly improve the affordability of housing for all but the very lowest income categories. The majority of respondents were found in such a case to be able to afford to repay mortgage loans. Improving the opportunity for low-income households to save, and improving their general indebtedness, can therefore be important policy initiatives to improve access to housing amongst South Africa's poor households.

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