Fiscally Unsustainable Social Welfare, Untenable Housing Solutions and the Mortgage Default Ratio in South Africa

Abstract

This article reflects on social welfare system and governance of housing markets from an end-user perspective. The article critically
analyses the way in which social welfare has correlated to unsustainable development and created self entitlement behaviours and
attitudes in the South African low income housing market. The phenomenon was demonstrable by empirical research whose
findings confirmed an existence of an association between a fully subsidized social housing model (as underpinned by South Africa’s social welfare) and propensity to default on mortgages. The study found that the risk of default by homeowners in the low income housing market in South Africa is influenced by government’s housing grant model. In other words, the research established that the principle of servicing a mortgaged starter property (that is almost similar to a government free house by both structure and design) is not universally accepted by homeowners of these mortgaged houses. The unintended consequences are that the system has created indefinite expectations that potentially could; (i) erode the country’s balance sheet; (ii) add to non-payment behaviour; (iii) pressurize the economic and credit systems; (iv) propagate entitlement attitudes and mindsets; (v) create social instability and (v) widened the country’s balance of payment deficits.