Imani Duncan-Price and Damien King | NHT rethink key to housing fix
Housing is an issue that resonates with every Jamaican. Every Jamaican wants to live securely. Every Jamaican wants to own his or her own home. It is, therefore, no wonder that our report, 'An Assessment of the NHT', has sparked much public discussion.
The Caribbean Policy Research Institute (CaPRI) exists to inform public policy through evidenced-based research for the benefit of Jamaicans and the wider Caribbean. Our goal is to advance national and regional interests. The public debate about the NHT is, therefore, good for governance and public policy in Jamaica. Accordingly, CaPRI uses this medium to address some of the issues raised since publication of the report in May.
These issues include concerns about our recommendations to:
1. Reduce NHT contributions.
2. Relinquish construction of houses to the private sector.
3. Intervene in the rental market.
We also use this opportunity to highlight some recommendations that have not featured substantially in public discussions.
CaPRI recommended that NHT contributions should be reduced to 2% of the wage bill, instead of the current 5%. The remaining 3% can then either be left in the pockets of Jamaican workers and producers, or can be diverted to the Consolidated Fund for budgetary support.
Concerns have been raised that such a move would inhibit the NHT's ability to execute its mandate, namely: (i) to improve the supply of housing; and (ii) to improve efficiency in the housing market. CaPRI disagrees.
To put things into perspective, the Government has been able to extract $11.4 billion from the NHT since the commencement of the current International Monetary Fund programme that started in 2013. During this period, the NHT's expenditure on housing has hardly changed when compared to the years immediately preceding the progamme. This is despite the fact that $11.4 billion equates to about half of total NHT contributions each year. This, therefore, indicates that the NHT's operations at current output will not be impaired by our proposal. Indeed, our point is that the NHT has more money that it needs at its historic rate of operation.
In addition, CaPRI believes that the NHT can sell a percentage of its mortgage portfolio to private financial institutions at a discounted rate. This will help provide additional capital, which the NHT can then use to create additional housing units at a faster rate, furthering its mission to improve the supply of housing in the country. Understandably, some modelling will need to be done to determine the extent to which this strategy will boost the housing supply while ensuring sustainability of the fund.
Some fear that the NHT's gradual exit from the housing construction market will lead to higher housing prices. This fear is understandable, but would only emerge where CaPRI's recommendations (as they have been) are taken in isolation. CaPRI has recommended that (i) the NHT facilitate incremental building more efficiently by designing lending schemes compatible with contributors' income flows; and (ii) that access to land titles be improved. These recommendations empower contributors to gradually build their homes.
CaPRI has also recommended (iii) that subsidies be given on the demand side, that is, to home purchasers, and not to developers; and (iv) that the legislative and regulatory framework of the housing market be improved. All four recommendations, combined, will help to improve the efficiency of the housing market - a discussion that appears absent from the public domain, and one of the two fundamental purposes of the NHT. When efficiency has been improved, competition from housing developers, coupled with the autonomy of NHT contributors, will help to keep prices within an acceptable range.
Because home ownership justifiably has such personal value to Jamaicans, some persons fear that CaPRI's recommendation for the NHT to intervene in the housing market via rentals condemns them to a life of insecurity in a rental building.
The key issue here is that many NHT contributors in the lower-income bands have never qualified for a mortgage. Yet still, 2% of their income is forcibly extracted, leaving them with less disposable income, which may have otherwise been directed to food, rent, or their children's education.
If these contributors do apply for their refunds eight years later, the refund is worth less than its initial value, with devaluation and inflation. For these contributors, then, the NHT is a tax, for which they never see returned benefits.
Until home ownership becomes a reality for this group of contributors, they still need a roof over their heads. Rent is, therefore, their next best alternative. For this reason, CaPRI proposes that the NHT explore options to assist in the rental market, with vouchers being one example of how that may be done. Furthermore, appropriate policy options to facilitate urban renewal through development of such properties, as well as transition from rental to ownership, should also be explored.
CaPRI ultimately welcomes the robust debate taking place about the NHT and the fulfilment of its mandate - this can only lead to a better result for all.It is in that spirit that CaPRI shared the assessment with the NHT chairman and, subsequently, members of the management team in January 2016 for feedback.
Further to additional data provided recently by the NHT, CaPRI looks forward to meeting with the team to determine corrections to the report as necessary. We stand corrected regarding the mandate of the NHT - indeed it is to do more than enable housing for poor Jamaicans. We maintain, however, that the NHT can do more towards its overall mandate and so hope that the management and board consider implementation of some or all the recommendations we have put forward.
Imani Duncan-Price and Damien King are co-executive directors of CaPRI.
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