Sat | Feb 25, 2017

Renting to ease regional housing shortage

Published:Monday | October 6, 2014 | 12:00 AM
Joseph Bailey (left), secretary general of the Caribbean Association of Housing Finance Institutions (CASHFI) and Patrick Thelwell (right), general manager of the Jamaica Mortgage Bank, listen as Earl Jarrett, general manager of the Jamaica National Building Society, makes a point at the CASHFI Regional Housing Conference in 2012. Contributed

The use of rented properties to ease Jamaica's housing shortage is back on the front burner as experts prepare for a two-day meeting in New Kingston starting today.

Earlier this year an Inter-American Development Bank (IDB) report suggested that renting may be a solution to easing the housing shortage within the Caribbean.

That idea has found favour with some policymakers who believe it may address the problem, at least, in the short-term.

Among those backing this proposal is Dr Morais Guy, minister with responsibility for housing, who last year called on developing countries to implement strategic housing policies aimed at making rented accommodation more attractive to persons seeking housing solutions.

At that time, Guy noted that in Jamaica, rental housing was very important in the Kingston Metropolitan Area in particular, due to high property prices, high housing demand and the availability of opportunities for employment and business. He added that renting could also play a role in reducing squatting.

Guy has the backing of Joseph Bailey, secretary general of the Caribbean Association of Housing Finance Institutions (CASHFI).

Measure of stability

According to Bailey: "In many emerging markets, rental is a model that is used to give a measure of stability to the housing market".

"In many cases the rental market works, for example, in the instance of a lease contract, which affords the tenant an option to buy the home depending on how they meet their rental agreement. Rising house prices and increasing deposit requirements from lenders have forced many more people to rent.

"A shortage of overall supply has helped to push up rental costs, consequently, more people may need assistance with housing cost, including those who may otherwise consider themselves earning reasonable incomes," added Bailey as he expressed hope that the CASHFI conference, would help regional governments to arrive at further solutions to tackle their country's housing problem.

IDB Representative to Jamaica, Therese Turner-Jones, concurred with Bailey. "In principle, offering rented houses as a part of the solution to ease the housing deficit makes sense. Many Jamaicans living in sub-optimal conditions won't be able to afford housing and where financing is concerned, many are at a disadvantage."

"For residents who live in densely populated areas, communities can be created where they are able to rent the properties. These communities would include parks and other green areas," said Turner-Jones.

Problem that will arise

"The problem that will arise though is that rental complexes will have issues such as, who is the landlord? Who will pay for the maintenance for the complexes? And, how will it be made up in terms of income levels, given the culture of the Caribbean where class is a factor in how we think."

Aside from the cultural factors which may hamper or prevent governments from exploring rent as an option to ease the housing shortage, quantity surveyor, Brian Goldson, believes the cost of mortgages will also be a factor.

"One of the major factors that will prevent this from being feasible is the financing of mortgages. If one were to buy a $25 million house for the purposes of rental, with a monthly payment of $167,000 after the 20 per cent down payment, the person would have to rent at almost $200,000 per month to cover their initial costs. How many persons can afford that type of rent?"

But Earl Jarrett, general manager of the Jamaica National Building Society (JNBS), is arguing that mortgages have been trending down.

"The current rate is 9.29 per cent and this has been declining steadily over the years," said. Jarrett.

"We have seen more persons purchasing homes whenever the interest rate declines. In Jamaica, in particular, there was a time when the mortgage rates were in double digits and the dream of ordinary persons accessing a home was more difficult. However, JNBS is committed to seeing every Jamaican owning a home; and, as such, we continue to examine ways to make mortgages affordable," he added.