State’s herculean task sorting out title deeds

Since the democratic dispensation in 1994, the South African government has built and delivered three million RDP houses. These housing opportunities are typically small and low-cost – and are subsidised by the government or free to poor citizens.

Yet fewer than one million people in the RDP housing market do not have registered title deeds for the homes they live in. A title deed is a legal document that reflects the ownership of a property.

Although estimates on the title deed backlog date back to 2011, the exact number of individuals without title deeds to the properties is difficult to calculate. The Department of Human Settlements has set a grandiose target of fast-tracking the release of more than 800 000 title deeds in the next three years.

Along with making a dent in the problem, the department is also looking to further release 1.5 million housing opportunities in the next three years, as it gets to grips with a housing backlog, which stands at 2 million.

Human Settlements Minister Lindiwe Sisulu, tells Moneyweb that much of the housing backlog dating back to 1994 has been cleared and what is being dealt with now is “new demand” from entrants in the social housing market. However, more value in housing opportunities can be unlocked if title deeds are released in a timeous manner.

Sisulu pegs the backlog to deeds that have been processed by the Registrar of Deeds but that have not been collected. There is a perception that it is better for owners to not have a title deed, as the municipality would then be responsible for water and other services for the property, and not the owner, she says.

“We need to educate beneficiaries of the government housing programmes on the importance of a title deed. When they understand the importance and the value they will ensure that they collect the title deeds,” says Sisulu.

Reasons behind the backlog

Industry players, however, say the problem is far more nuanced. Research by Urban LandMark released in 2011, found that the biggest reason behind the title deed backlog is the stalled processes of township establishment and proclamation, which is delaying the registration of a new housing area or neighbourhood. Underscoring this is that housing development projects go ahead without the approval of a general plan for a new area, as the players involved lack either the time or expertise (or both) to address the many underlying issues that need to be resolved on certain tracts of land.

The problem also seems to have been exacerbated by the revisions to the payment process for developers of government-subsidised houses. Until 2003, the registration of the title deed in the name of the beneficiary was first needed before the the final two payments could be made to developers. Changes followed, allowing developers to be paid before the registration of title deeds in the beneficiary’s name.

The rationale for the change was that the transfer processes of title deeds were complex and took too long to implement, which delayed the developers’ access to payment. Since the change, Urban LandMark has found that the registration of title deeds for subsidised properties has progressively declined.

Former programme director Urban LandMark Doctor Mark Napier, who is now a principal researcher at the Council for Scientific and Industrial Research’s built environment unit, says there are some title deed cases that are difficult to resolve and get worse as time goes by.

“From the day when people might have moved into their RDP houses, a spouse might have died and the property might be in the name of the spouse who has passed away. The spouse might want the title deed registered in their name.

“There might be children who have inherited that house, so there is the bequeathing of houses. There are distant relatives who might be seen as an owner in the community but cannot be seen in the same way by a conveyancer,” says Napier.

Further complicating the housing ownership pattern is the resale of RDP properties. Though RDP houses cannot be sold for the first eight years of issue, it’s believed that houses are sold in the informal market, sometimes with a local affidavit but without any formal transfer of the deed to the new owner.

Affordability

Beyond the administrative hurdles, Napier says reform is needed when it comes to the affordability of getting a deed – a fairly expensive exercise for the poor. “It’s definitely the case that land ownership is designed with wealthier individuals in mind… If an area is not properly declared in the first place, then the whole process of getting a title deed is an expensive exercise,” he adds.  A title deed has a price tag of about R1 950.

Making headway

The department is working with the Estate Agency Affairs Board (EAAB) to fast-track the release of title deeds. Sisulu says the EAAB has spent time understanding the backlog and devising plans to address the problem.

Other private sector players are starting their own initiatives. The Free Market Foundation (FMF) has led an initiative with FNB called Ngwathe Land Reform Project, which has been releasing title deeds in the Ngwathe municipality in the Free State since 2013. At the time, FNB sponsored the release of 100 title deeds, part of a pilot initiative, but has since funded 200 additional deeds. Other investors like retail magnet Christo Wiese also pledged money for 200 title deeds in the Ngwathe municipality – where there are lease arrangements on properties but individuals don’t have the deed to determine their ownership.

FNB’s managing executive for housing finance Doctor Simphiwe Madikizela, says about 30 000 title deeds are yet to be issued in Ngwathe. Across the country, there are seven to ten million opportunities to release title deeds, especially in rural areas where land is owned by communities and chiefs who give permission to occupy the land.

“When you release title deeds wealth is created for the community. Once people have the title deed, they can extend property and make a living off the property by renting the rooms. They can use their home as collateral to get loans for other personal purposes,” says Madikizela.  He says the Ngwathe Land Reform Project is a case study to be replicated across the country.  The FMF is expanding the title deeds initiative in large parts of the Eastern Cape and KwaZulu-Natal.