Mon | Sep 25, 2017

Martin Henry | Break up housing cartel

Published:Sunday | July 17, 2016 | 7:00 AM
Martin Henry
Prime Minister Andrew Holness (left) is greeted by Earl Samuels, assistant general manager, mortgage operations and group finance at the Jamaica National Building Society, at the NHT's 40th anniversary service last Sunday.
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I want to use this opportunity to beg LASCO to enter the housing market.

This is not free advertisement, which this very successful Jamaican company doesn't need. LASCO's slogan is 'We make living affordable', and under that banner the company has brought an expanding range of basic consumer goods to market at prices below the competition. It has sourced from around the world and packaged for the Jamaican market in high volumes basic foods and other consumer goods of good quality at lower prices which everybody else said couldn't be done and didn't do.

Housing desperately needs the highly successful LASCO business model. The housing cabal for low volumes at high prices, in which the Government itself is the principal shareholder, must be broken up.

This administration has come to office promising to "reform the NHT, the Housing Agency and the Mortgage Bank to expand affordable housing construction and reduce interest rates on mortgages. We will create a special intergenerational 50-60 year mortgage to make home ownership and payments easier."

A fire has been lit under the HAJ. Pushed by the Government to deliver on the mandate of the agency for the provision of low-income housing, the new board has cleaned out the top management of the problem-riddled, poor-performing HAJ. But even at its best, the HAJ delivers only a few hundred units per year and at prices above poor people's heads.

The NHT has never in its 40 years managed to deliver even 10,000 new mortgages in a year. The highest figure I have seen is 7,916 in 2013, which then fell off sharply in the next two years. It's best recent year for actually building houses itself was 2012, when an impressive total of 2,676 units were completed! While it sits on a mountain of contributors' money, from which the Government can tap $45 billion over a four-year period, up to 80 per cent of its contributors cannot qualify for even the lowest mortgages.

At the very beginning of our national Independence, the Jamaica Five-Year Independence Plan, 1963-1968, estimated that 165,000 housing units, mostly at the low-income end, would be necessary to address the housing shortage the country faced. That averaged 16,500 units per year. The current estimate in the National Housing Plan is 20,000 with a continuing shortfall of some 17,000.

 

GOV'T RESPONSE

Back in 1963, the response of the Government to the housing crisis dogging the country from 'Full Free' Day in 1838 was to propose building 3,000 units per year! We have never given up that approach to housing of half crossing the river.

The prime minister, speaking at the 40th anniversary church service of the NHT last Sunday, announced that a strategic review is to be done on the Trust.

He said the intent of the review, to be spearheaded by the new chairman, Ambassador Nigel Clarke, is to improve the ability of the agency to deliver housing solutions to Jamaicans. Without radical changes in the approach to housing, the strategic review may only allow the NHT to deliver a few hundred more housing solutions per year while the rest of the population continues to wait.

One-third of the population lives in more than 700 squatter settlements. A large number live in crowded, substandard tenement housing, and every week the news carries a story of one of them, long past its useful life, burning down, leaving how many families homeless. Substantial numbers are stuffed into houses, formal or informal, occupied by multiple generations of relatives who cannot afford independent housing and who occupy less space than the internationally acceptable square footage per person. The majority of the Jamaican population live in substandard housing.

A potent measure of our non-performance in housing is mortgage as a percentage of GDP. Five per cent for Jamaica. For the United States, 65 per cent; the UK, 80 per cent; Denmark, 102 per cent; China, 20 per cent; Malaysia, 30 per cent. We're joking.

Let me offer here again, as citizen, some key actions for the housing revolution:

Houses have to sit on land, and the cost of land is a major input cost. Government owns Crown lands - lots of it. The takers of Crown lands for housing up in the Dallas Mountains and out at Old Harbour are on to something. The people have been deliberately denied land since Emancipation. Government should now deliver an abundance of Crown lands lots to market at rates well below the current inflated commercial rates. Not only would this provide land for housing, but it would realign the real estate market to reality.

Government should provide, in the course of a couple of years, titles for the tens of thousands of parcels of lands without titles and not the couple of thousand per year now being delivered under the Land Administration and Management Programme. Every uncontested application, with fair and publicised opportunity for contest, should be honoured with charges kept down to recovery of cost level.

 

CUT TAXES

Government should sharply cut the tax burden on housing, which now accounts for up to 30 per cent of costs, and shift tax intake from the front end of housing transactions to the back end. I've spotted at least eight taxes on housing transactions. Titled land owners/homeowners should pay property taxes calculated as an actuarily determined sensible proportion of value with 100 per cent collection and stiff penalties for evasion up to loss of property.

The whole mortgage system is based on regular salary income. The State, as the biggest mortgage provider, should smash those obstructive banking rules and work out a system for irregular income earners, the majority of people in the Jamaican economy, to pay irregularly in both amount and timing as they earn, with the immovable property as guarantee.

Government must aggressively fix what I will generously call 'distortions' in the housing market, locked by the current players (mortgage providers, building professionals, technical-level labour, developers, realtors, suppliers, etc.) operating with a certain cabalistic 'understanding' of virtually guaranteed profits at low volumes and high prices under the status quo. The housing market is neither a normal nor a free market.

Regarding greater public-private partnership, the de facto housing minister should invite, by competitive bidding, providers who can use the stagnant mountain of NHT money, which is constantly replenished by continuing new contributions and which is completely off a strapped Budget, to bring to market LASCO-type housing solutions, high volumes with low prices well below $5 million. With the sweetener of a state-guaranteed profit under specified conditions.

Radically, we should relax unrealistic building standards that drive up the cost of formal housing, pushing people on to gully banks and landslide-prone hillsides and the verges of roads as squatters in far less safe conditions.

We missed 1838. We missed 1865. We missed 1938, which also had its land hunger marches, I'm learning. We messed up the Independence Development plan for housing. We have failed on the 1976 Housing Trust plan for housing the masses. The housing revolution is long overdue. Let's go in 2016!

- Martin Henry is a university administrator. Email feedback to columns@gleanerjm.com and medhen@gmail.com.