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Adapting Netherlands 'Starterslening' Model To Improve The Current Finance Linked Individual Subsidy Scheme In South Africa

Author

Listed:
  • Princess Makhosazan Dastile
  • Prisca Simbanegavi

Abstract

Finance Linked Individual Subsidy Scheme Programme (FLISP) assists households who earn between R3 501 to R22 000 to get additional funds from National Housing Finance Corporation of R130 505 to the lowest income band and R30 001 to the highest income band in South Africa. This money can be used to pay for deposit or legal fees. The problem is that there has emerged a 'sandwich' class of households who earn just above the R22 000 threshold and still cannot afford entry-level mortgages. Adapted from Netherlands starterslening model, the paper conceptualized a hybrid FLISP that can absorb the sandwich class termed FLISP-plus. To this class, the National Housing Finance Corporation would give 70% of the R30 001 (R21 001) while FI offer a 30% additional loan (R9 000) which can be paid after 3 years. The applicability of the proposed FLISP-plus to the South African market was evaluated by analysing responses from interview data, purposefully sampled respondents from the Department of Human Settlements (DHS) and the financial institutions. Results showed that 'education' and 'credit score' for the FLISP-plus in affordable mortgages were common themes. Further, the results showed that the proposed FLISP-plus can be adopted for the proportion of the sandwich class segment whose credit scores are low but whose incomes are high. Households can work towards improving their credit scores in order to access FLISP- plus. The study concluded that DHS can train the sandwich class to educate them on how to manage their finances well for FLISP plus to be successful in increasing homeownership. On the other hand, financial institutions can train them on different products that can support savings towards consistent mortgage payments, making homeownership affordable.

Suggested Citation

  • Princess Makhosazan Dastile & Prisca Simbanegavi, 2022. "Adapting Netherlands 'Starterslening' Model To Improve The Current Finance Linked Individual Subsidy Scheme In South Africa," AfRES 2022-055, African Real Estate Society (AfRES).
    • Handle: RePEc:afr:wpaper:2022-055
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    References listed on IDEAS

    as
    1. Arthur Acolin & Jesse Bricker & Paul Calem & Susan Wachter, 2016. "Borrowing Constraints and Homeownership," American Economic Review, American Economic Association, vol. 106(5), pages 625-629, May.
    2. John Y. Campbell & João F. Cocco, 2015. "A Model of Mortgage Default," Journal of Finance, American Finance Association, vol. 70(4), pages 1495-1554, August.
    3. Bashir Olanrewaju Ganiyu & Julius Ayodeji Fapohunda & Rainer Haldenwang, 2017. "Sustainable housing financing model to reduce South Africa housing deficit," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 10(3), pages 410-430, June.
    4. Jie Chen & Lan Deng, 2014. "Financing Affordable Housing Through Compulsory Saving: The Two-Decade Experience of Housing Provident Fund in China," Housing Studies, Taylor & Francis Journals, vol. 29(7), pages 937-958, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Assisted Affordability; FLISP; Homeownership; low and moderate income; mortgages; Starterslening; Netherlands; South Africa;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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