Don't cut out state-sponsored home construction, says former NHT boss - Mitchell dismisses recommendations in CAPRI study
Howard Mitchell, former chairman of the National Housing Trust (NHT), has shot down as impractical a recommendation by the Caribbean Policy Research Institute (CaPRI) for the State to relinquish its construction of low-income houses to the private sector, pointing out that this would take home ownership further out of the reach of poor contributors.
"I am in general support of the CaPRI paper, but I feel that you cannot leave low-income housing to the private market alone. The private developer will not see any margin in it and private developers are profit driven," Mitchell told The Gleaner.
He was responding to the study titled 'The NHT: Wrong Funding, Wrong Target, Wrong Strategy', which advocates a gradual withdrawal of the NHT from direct construction of houses, arguing that this would facilitate greater competition, thereby forcing suppliers to be efficient.
During the official launch of the document at a forum in New Kingston on Monday, Dr Damien King, co-executive director of CaPRI, insisted that the private sector having sole responsibility for construction of affordable housing solutions would have the effect of driving prices down and result in diversification of housing offerings, as it tried to satisfy a wider customer base.
The CaPRI study argues further that the current situation crowds out private investment, thereby reducing the number of suppliers in the market and, ultimately, reducing competition.
Mitchell, however, is not convinced that this would redound to the benefit of intended beneficiaries.
"The experience I had five years ago was that we offered developers three per cent mortgages and they said it made no sense because their problem was that there is no margin in building low-income houses and that's the difficulty I have with the suggestion," the former chairman declared.
He continued: "I think you have to leave space for providing housing on a state-supported or sponsored basis for those of us who are unable to enter the free market for housing in a low-wage economy. The reason why the NHT has been giving mortgages to the top end of the economic demographic is because the low end can't afford the deposit. They can't afford the monthly payments even if it's one per cent interest in many cases."
RENT NOT A BAD OPTION
The former chairman also said the recommendation for the NHT to broaden its concept of looking at the rental market instead of focusing solely on home ownership is not a bad option, but needs fine-tuning.
CaPRI argues that the rental option can be facilitated by the issuance of rental vouchers, in order to subsidise housing for those who are unable to purchase.
"I have no problem with the rental option in the paper, provided that there is a rent-to-own aspect in there," Mitchell disclosed.
"The other thing we need to remember is that there is the issue of 40 per cent element of our underground economy, so people find money from somewhere. So if you give them the option of renting to own and they can come up with payments on a lump-sum basis as they acquire money, then maybe that can work."
However, he again urged caution.
"Even with the rental option, if that is left to the private market, you will be creating a lot of slum landlords if you are not careful, so the State has to regulate or structure the provision of housing for those who are not at the centre of economic success."