Browsing by Subject "mortgages"

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    An investigation into Location Efficient Mortgages in Cape Town, and the impact on the gap housing market
    (2026) Bhayroo, Tanita; Behrens, Roger
    Development patterns in South Africa have led to a spatial mismatch between economic opportunities and residential areas, predominantly affecting lower-income populations. Government subsidized housing aimed at supporting this income group are often located at the periphery of cities, where large tracts of land are obtainable and affordable, but peripheral locations limit households' access to economic opportunities and impose burdens associated with transportation. This peripheralized development perpetuates the cycle of poverty and economic and social marginalization. In Cape Town, approximately 76% of the population are members of households earning below the threshold of R22 000 per month to afford private housing. These households face a shortage of well-located and affordable housing, and are forced to live further from opportunities. Although government funded subsidy mechanisms do exist, these are largely aimed at the poorest households earning below R3 500 monthly. A “gap market” remains where families earn too much, for assistance, but not enough for formal housing finance, exacerbating the housing crisis. This research aims to examine whether unique funding mechanisms, specifically Location Efficient Mortgages (LEMs) can assist households transition from the gap housing market, to the competitive private housing market. LEMs are designed to leverage public transport use over private vehicles, factoring in the resultant savings as an additional income during home loan assessments. While LEMs were started and have been primarily explored in the United States (US), similar investigations have not been conducted in South Africa. Previous work by Wilkinson & Marks (2007), investigating the applicability of Transit Orientated Development in the Atlantis corridor, conducted a simple modelling exercise which suggested that implementing LEMs could improve the accessibility of housing for households in the gap market, as well as increase the buyer market for private developers. Cape Town was selected as the study area due to its public transportation options, and the prevalence of a gap housing market. The research utilises secondary data, specifically the 2020 National Household Travel Survey and the City of Cape Town GIS data, to develop a model assessing how living in location-efficient areas and using public transport can enhance housing affordability. Land use classification was employed to identify key land uses including residential, commercial and transportation hubs to assess public transport accessibility and location-efficiency of the areas analysed. The NHTS offered insight into travel habits and perceptions with data pertaining to household income, public transport expenditure and modes of transportation utilised. This information allowed for the identification of households within the gap market and the analysis of their transport expenditure, ultimately estimating potential savings that would contribute to mortgage calculations. This developed model provided an understanding of the impact that cost savings from utilising public transport, can help households in the gap market transition to the private housing market. The application of the model in Cape Town revealed that while switching from private to public transportation yielded significant financial savings, the model does not enable a shift to the private housing market. The average income in the zones analysed was less than the threshold of mortgage affordability, and even with public transportation savings, households could not exceed this limit. This outcome highlighted the disparity between households' housing affordability and the cost of housing in the private market. The findings also suggest that public transportation costs remain fairly constant across the areas analysed, regardless of the distance from economic centres. This suggests that households can improve their housing accessibility by simply opting for public transport over private vehicle use, allowing the benefit of lower transportation costs without relocating. This outcome highlights the ability of the minibus taxi system which can rapidly respond to demand for transportation to workplaces or educational institutions regardless of where households are situated. In contrast, in the US where LEMs have been implemented, public transport is concentrated around economic centres and connected to key residential areas and the utilisation of LEMs in these areas is likely to have a significant impact for households in enhancing their affordability. Additionally, while the model indicates that cost savings from public transport use did not, in general, result in a shift to the private housing market, households in the upper segment of the gap market may experience positive income effects. This proportion may not be as large as initially anticipated; but this does align with a core understanding of the limited applicability of LEMs. To better understand the impact of such mortgage products, further research is needed in key areas identified through targeted household surveys. This would provide insights into household travel and housing expenses to determine the viability of alternative mortgage options. This research highlights the significant proportion of households that fall into the gap housing market, unable to access most government subsidies or afford private market housing. Interventions from both the public and private sectors are essential to bridge the gap between affordability and availability of housing in South Africa. The diversification and regular adjustment of qualification criteria for government subsidies can enable more low-income families to secure better housing options. The private sector can also contribute by developing affordable housing, provided they receive worthwhile incentives. In addition, although a shift to public transportation can reduce costs for households and make private housing more accessible, policies that discourage sprawling development such as Transit Oriented Developments (TOD) and density incentives, can address long commute times which remain a significant challenge for low-income households in outlying areas.