IDEAS home Printed from https://ideas.repec.org/p/afr/wpaper/2022-055.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://afres.architexturez.net/doc/oai-afres-id-2022-055
    Download Restriction: no
    File URL: https://afres.architexturez.net/system/files/afres-2022-fp-22.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    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. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anthony Orlando, 2018. "Asset Markets, Credit Markets, and Inequality: Distributional Changes in Housing, 1970-2016," ERES eres2018_182, European Real Estate Society (ERES).
    2. Erik Hembre & Stephanie Moulton & Matthew Record, 2021. "Low‐Income Homeownership and the Role of State Subsidies: A Comparative Analysis of Mortgage Outcomes," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(1), pages 78-106, January.
    3. Kyle Herkenhoff & Lee Ohanian, 2019. "The Impact of Foreclosure Delay on U.S. Employment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 63-83, January.
    4. Stefano Colonnello & Mariela Dal Borgo, 2024. "Raising Household Leverage: Evidence from Co-Financed Mortgages," Working Papers 2024: 01, Department of Economics, University of Venice "Ca' Foscari".
    5. Paul Calem & Jeanna Kenney & Lauren Lambie‐Hanson & Leonard Nakamura, 2021. "Appraising home purchase appraisals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 134-168, March.
    6. Anil Kumar, 2018. "Do Restrictions on Home Equity Extraction Contribute to Lower Mortgage Defaults? Evidence from a Policy Discontinuity at the Texas Border," American Economic Journal: Economic Policy, American Economic Association, vol. 10(1), pages 268-297, February.
    7. Damian S. Damianov & Diego Escobari, 2021. "Getting on and Moving Up the Property Ladder: Real Hedging in the U.S. Housing Market Before and After the Crisis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(4), pages 1201-1237, December.
    8. Wang, Jia & Winters, John V. & Yuan, Weici, 2022. "Can legal status help unauthorized immigrants achieve the American dream? Evidence from the Deferred Action for Childhood Arrivals program," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    9. Matteo Benetton, 2021. "Leverage Regulation and Market Structure: A Structural Model of the U.K. Mortgage Market," Journal of Finance, American Finance Association, vol. 76(6), pages 2997-3053, December.
    10. Yongheng Deng & Eric Girardin & Roselyne Joyeux & Shuping Shi, 2017. "Did bubbles migrate from the stock to the housing market in China between 2005 and 2010?," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 276-292, August.
    11. Ono, Arito & Uchida, Hirofumi & Udell, Gregory F. & Uesugi, Iichiro, 2021. "Lending pro-cyclicality and macroprudential policy: Evidence from Japanese LTV ratios," Journal of Financial Stability, Elsevier, vol. 53(C).
    12. Falagiarda, Matteo & Saia, Alessandro, 2017. "Credit, Endogenous Collateral and Risky Assets: A DSGE Model," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 125-148.
    13. Mocetti, Sauro & Viviano, Eliana, 2017. "Looking behind mortgage delinquencies," Journal of Banking & Finance, Elsevier, vol. 75(C), pages 53-63.
    14. Neil Bhutta & Daniel R. Ringo, 2017. "The Effect of Interest Rates on Home Buying : Evidence from a Discontinuity in Mortgage Insurance Premiums," Finance and Economics Discussion Series 2017-086, Board of Governors of the Federal Reserve System (U.S.).
    15. Mavropoulos, Antonios & Xiong, Qizhou, 2019. "Housing consumption and macroprudential policies in Europe: An ex ante evaluation," IWH Discussion Papers 17/2018, Halle Institute for Economic Research (IWH), revised 2019.
    16. Valentina Michelangeli & Enrico Sette & José-Luis Peydró, 2021. "Borrower versus Ban Channels in Lending: Experimental- and Administrative-Based Evidence," Working Papers 1307, Barcelona School of Economics.
    17. Roberto Brunetti & Carl Gaigné & Fabien Moizeau, 2023. "Credit Market Imperfections, Urban Land Rents and the Henry George Theorem," Revue économique, Presses de Sciences-Po, vol. 74(5), pages 681-703.
    18. Duca, John V., 2017. "The Great Depression versus the Great Recession in the U.S.: How fiscal, monetary, and financial polices compare," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 50-64.
    19. McQuinn, Kieran & O’Toole, Conor & Slaymaker, Rachel, 2021. "Credit access, macroprudential rules and policy interventions: Lessons for potential first time buyers," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 944-963.
    20. Lok Man Michel Tong & Gianluca Marcato, 2018. "Modelling Competitive Mortgage Termination Option Strategies: Default vs Restructuring and Prepayment vs Defeasance," ERES eres2018_300, European Real Estate Society (ERES).

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:afr:wpaper:2022-055. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Architexturez Imprints (email available below). General contact details of provider: https://edirc.repec.org/data/afresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.