'Redlining in housing discriminatory and counter-
developmental'

The current practice of redlining in housing by financial
institutions in the country was discriminatory, racist and anti-
developmental - the Congress of SA Trade Unions said
recently in its submission to the Department of Housing's draft
legislation, the Community Reinvestment Housing Bill.
The bill is aimed at addressing current discriminatory banks
policies against poor people who apply for housing loans.
COSATU said it hoped the bill would successfully tackle the
unavailability of finance for the lower end of the home loan
market. It said: "Currently, large sections of this market are
redlined by banks. In other words, home loan applicants who
would otherwise qualify on the basis of the standard criteria
for granting loans are denied finance purely on the basis of the
geographic area in which the property is located.
"We regard redlining as a racist practice. In practice it is
black areas, particularly townships, and racially mixed areas
that are redlined." COSATU supported its alliance partner,
the South African Communist Party; two years ago at the pick
of its campaign to force banks serve the people. Over 40 000
people across the country turned up at various demonstrations
in honour of what the Party called The Red Saturday in
October 2000.
COSATU slammed the banks' redlining policies for
contributing to a vicious cycle of deterioration of living
conditions in some areas. It said the denial of access to finance
contributed directly to the running down of properties, lack of
finance maintain and improve properties as well as general
"slummification." "It is important that the proposed legislation
clearly outlaws redlining. Further, it should effectively shift
banks away from discriminatory and anti-developmental
lending practices, and actively promote affirmative lending.
This should be done through a combination of "carrot and
stick" measures," said the federation. COSATU also warned
that it would reject any inclusion of the clause in the
Department's draft legislation that would make it possible for
financial institutions to continue with unfair policies. The
federation was referring to the section 4. (1)(b) that stipulates
that financial institutions must "refrain from the practice of
redlining other than where dictated by safe and sound business
principles."
COSATU, which called for the deletion of the clause, said the
concept could easily be manipulated by financial institutions to
justify their continued discriminatory policies. "Banks do
need to accept an element of risk in investing in communities
which they have long neglected, otherwise the vicious cycle of
decay will be perpetuated. We believe that the standard
evaluation criteria for assessing and granting loans should
suffice to protect banks and ensure sound business practices,
and not extraneous criteria such as the neighbourhood," it said.
Among some of the clauses suggested in the bill the federation
believes could be manipulated are sections 4.(3) and 4.(1)(g)
that deals with exceptions on some unacceptable practices.
The federation also expressed its dissatisfaction at the draft
bill's proposed fine of no more than R500 000 to any
institution that violates the legislation, saying it was little. "In
the context of massive amounts of money that banks deal with
on daily basis and the huge sums at stake particularly in the
housing market, this amount does not seem adequate.
Especially if banks are guilty of repeated and flagrant
transgressions of the legislation, this amount would not seem to
be an adequate penalty. In fact, banks may calculate that it
would make economic sense to continue discriminatory
lending practices and simply pay the fine," said COSATU.