Financed homeownership and the economic downturn in South Africa Lochner Marais * , Jan Cloete Centre for Development Support, University of the Free State, Bloemfontein 9300, South Africa article info Article history: Received 16 April 2015 Received in revised form 9 August 2015 Accepted 26 August 2015 Available online xxx Keywords: Global economic crisis National Income Dynamics Study (NIDS) Mortgage finance Housing policy South Africa abstract Urban South Africa has seen a transformation to homeownership since the mid 1980s, achieved mainly through the restoration of urban homeownership rights and property rights. Ownership has been transferred to some 500,000 state rental low income households and a capital subsidy scheme has assisted approximately three million low income households since the early 1990s. At the same time mortgage finance became available to black households during the mid 1980s. Since the mid 1980s, a concerted effort was made to increase housing finance to the historically disadvantaged black population of South Africa. Drawing on a policy assessment and the panel National Income Dynamics Study, we investigate the risks associated with this intention since the global financial crisis in 2008. More spe- cifically, we consider who has moved into homeownership and who has moved out of it and the reasons for having done so. We conclude that, in the initial phase in 2008 (because of increased interest rates), low-income black respondents had been more likely either to redeem their mortgages or to move out of homeownership and into rental housing. Yet, as the global financial crisis resulted in the South African recession in the second semester of 2009 and led to job losses, the negative impacts were experienced irrespective of population group or of income. © 2015 Elsevier Ltd. All rights reserved. 1. Introduction To own one's home has become conventional wisdom in many parts of the world. Globally, homeownership figures have been rising during the past 50 years. For some, increased homeowner- ship was one of the key social changes to have taken place during the 20th century (McGee, 2012; Smith, 2010). Though interna- tionally and in South Africa homeownership per se is contested terrain in housing policy (Claassens, 2005), the shift to ownership was however also evident in South Africa. Since the mid 1980s, urban South Africa has experienced a transformation to home- ownership so that, by 2011, approximately 71% of South African households were homeowners (Stats, 2013). This has been ach- ieved mainly through the restoration of urban homeownership rights and property rights. Ownership has been transferred to some 500,000 state rental low-income households (Marais, Sefika, Cloete, Ntema, & Venter, 2014) and a capital subsidy scheme has assisted approximately three million low income households since the early 1990s. Since homeownership in South Africa is part of the process of restorative justice, motives for owning one's home differ from those of the Global North, where homeownership is seen largely as a means of reducing the state's welfare burden (Forrest, 2011; Parkinson, Searle, Smith, Stoakes, & Wood, 2009). Yet the drive to restore justice to a wider section of the popu- lation has created a number of homeownership ‘edges’ or risks (see Fig. 1). 1 We distinguish between policy edges and edges at the household level. The first main edge is the historical policy edge created by apartheid, which excluded black 2 households from homeownership. We describe policy attempts to get households * Corresponding author. E-mail address: MaraisJGL@ufs.ac.za (L. Marais). 1 The term is borrowed from the Edges of Homeownership Conference held in Delft in the Netherlands in October 2014. Though the term “edges” refers essen- tially to the obstacles or the risks related to homeownership, it more specifically refers to the obstacles/risks associated with (1) South Africa's apartheid history; (2) access to ownership; (3) the move between ownership and the non-ownership of housing or between non-ownership and ownership; and (4) the difficulties involved in climbing the housing ladder. It is not our intention either to imply or suggest that any of these moves are desirable. Essentially, we reflect on these re- alities and use the various reflections as a tool with which to analyse these changes. 2 In the South African context, the term “black” may in some instances refer to all people of non-white racial heritage. Population group divisions in the NIDS data are based on a question in which the respondents needed to indicate to which popu- lation group they belonged. They could also elect not to answer the question or simply indicate that they did not know. We used this division to reflect on racial differences. Moreover, even if the black middle class is growing, inequalities in society largely follow racial lines. In the empirical data presented from NIDS, the term “black” specifically refers to individuals who identified themselves as (black) Africans. Contents lists available at ScienceDirect Habitat International journal homepage: www.elsevier.com/locate/habitatint http://dx.doi.org/10.1016/j.habitatint.2015.08.039 0197-3975/© 2015 Elsevier Ltd. All rights reserved. Habitat International 50 (2015) 261e269