Editorial | Food for thought in CaPRI’s NHT report
Our surprise would have been if the reflexive response to the Caribbean Policy Research Institute's (CaPRI) review of the National Housing Trust (NHT) was other than the proposal that the Trust exit the housing construction business, and other matters implying the loosening of the State's grip in the functioning of markets. Old habits, especially bad ones, die hard.
So, it will perhaps take more than four years of market-oriented reforms before people are comfortable in seriously addressing more than half a century of entrenched ideas about economic management and social intervention.
This newspaper, however, believes that the CAPRI report is worthy of serious, non-contentious debate to see how the agency can best serve the intention for which it was created. Moreover, in the context of the Holness administration's declared policy of stimulating private consumption to drive economic growth, some of the suggestions in the report may be of value to the Government.
There is little doubt that the NHT has, over the 40 years of its existence, done good things and has had a fair bit of success in providing shelter to Jamaicans. It has more than J$200 billion in assets and, since its inception, has delivered nearly 170,000 mortgages and nearly an equivalent number of other benefits to workers, who contribute two per cent of the five per cent annual payroll tax that funds the agency. The NHT collects more than J$20 billion a year and spends an equivalent amount on its housing programmes, including the provision of mortgages.
But, like others before them, CaPRI has concluded that for all its impressive numbers and healthy balance sheet, the NHT has been unable to deliver substantially on its mandate and is, perhaps, in its current form, incapable of doing so. The perception that the NHT is an agency to help poor people is not borne out by the facts. Its mortgages are heavily skewed in favour of its wealthiest contributors; the poorest contributors can't afford its mortgages.
PERVERSE SOCIAL TRANSFER
"The NHT ... appears to be an instrument of perverse social transfer insofar as it taxes poor and rich alike, but the majority of its benefits accrues to those who are better off," CaPRI concluded. "Poorer contributors are subsidising wealthier ones."
CaPRI, in the circumstance, suggests a change in the law to stipulate that funds should be available to poor contributors based on a percentile of income distribution, while pursuing demand-side strategies in favour of its potential beneficiaries who need subsidies. The research group also argued that a retreat by the NHT from the housing construction will increase private participation, facilitating competition to the benefit of the poor.
But perhaps the most fundamental of the group's suggestions is for the elimination of the employees' two per cent contribution to the Trust and reducing that by employers by one percentage point to two per cent, which, they argued, would not affect the agency's ability to operate at its current level, without any long-term impairment of its asset and capital base. What, though, would be attractive to the Government is the idea that such a move "would serve to boost consumption by J$20 billion annually". Alternatively, if firms retain more of their money, they might invest more.
This is a debate that should not be circumscribed.