Wed | Aug 23, 2017

A real debate on NHT

Published:Saturday | December 6, 2014 | 12:41 PM

A mostly misdirected debate continues over the National Housing Trust's (NHT) J$180-million acquisition of the property in Trelawny where Lennie Little-White used to operate his financially bankrupt heritage attraction called Outameni. The complainants claim that the investment was beyond the Trust's mandate and that the money should have been used to provide a few more mortgages to its contributors.

A more useful discussion would be about how the NHT might be used to make a real dent in Jamaica's housing crisis, with its estimated deficit of 45,000 homes, the fact that more than 900,000 people, or approximately a third of the island's population, are squatters and that housing completions are no more than 3,000 units annually, roughly the same as the starts.

The problem is that while the need for shelter is high, it is not matched by effective demand. Most people, including the majority of the NHT's more than half a million contributors - who lend the Trust two per cent of their incomes at nominal rates for seven years - can't afford to buy the houses that come to market in Jamaica - not even with the support of the agency's subsidised mortgages. Yet, the contributors' loans and a three per cent payroll tax on employers ensure a ready inflow of cash to the Trust, which has more than J$210 billion in assets.

NEED To LEAD

In Jamaica's situation, there is, we believe, an obligation of the NHT to be robustly at the forefront of research into lowering the cost of shelter, from design to the type of material used, the financial arrangements for housing, and supporting government policy. For instance, the NHT, having regard to the success of the old Sites and Services programme, especially during the 1970s, might analyse whether it might not make sense for the Trust's resources to be used to underwrite/subsidise the cost of infrastructure - which is a major contributor to the cost of real-estate developments - so as to help to deliver more affordable shelter to Jamaicans.

The point is that with incomes of between J$5,000 and J$10,000 weekly, the 60 per cent of NHT contributors who fall in this bracket are, even with one per cent mortgages, effectively excluded from the formal real-estate market. So, too, is the larger portion of the 30 per cent who earn between J$520,000 and J$1.2 million a year, to whom homes with price tags of between J$8 million and J$12 million would likely appeal.

In the circumstances, the discussion, perhaps, might also focus on the efficacy of a cultural shift in Jamaica, from the quest for homeownership and renting, which was recently placed on the agenda for this hemisphere by the Inter-American Development Bank and was the subject of discussion in October by Jamaican housing-finance experts.

Germany, where only 43 per cent of families own homes, is an example of a country where policies that balance incentives for investment in rental properties and the rights of tenants solved a shelter crisis - at the end of World War II, West Germany was short of 5.5 million houses - maintained stability in the real-estate market, and left tenants with disposable income for investment and consumption.

It perhaps says something that Germany was insulated from the housing bubble that ruptured, with deleterious effect, in the United States, Britain, Spain, and Ireland, triggering the global financial crisis of 2008.