Christopher Burgess | Can the NHT and private banks fix Jamaica’s housing crisis?

The National Housing Trust (NHT) was created in 1976 to provide affordable mortgages and expand housing supply. Over the years, it has supported over 240,000 individuals through loans and housing construction.

However, despite increased contributions, the number of completed housing units has dropped sharply in recent years. The mandate under the NHT Act is simply:

• “Adding to and improving the existing supply of housing.”

• “Enhancing the usefulness of its funds by promoting greater efficiency in the housing sector.”

To achieve these goals, NHT has partnered with private banks through initiatives like the Developers Programme, Guaranteed Purchase Programme (2018), and External Financing Mortgage Programme (2023). However, these projects have been plagued by delays and high costs.

DECLINING PRODUCTION AND EFFICIENCY PROBLEMS

NHT once played a key role as both financier and developer, delivering large projects like Greater Portmore (1990–1997) and inner-city housing programmes (2005–2008).

But this has drastically declined, in the last decade, annual completions fell from 4,000+ units (2000–2006) to under 1,600 in 2023 (NHT annual reports). The number of beneficiaries also declined from 7,200 per year (2000–2010) to fewer than 6,800 in recent years.

NHT’s blames this on rising construction costs, land scarcity, rigid procurement rules, and delayed approvals. It unlikely that NHT can contribute significantly to the 15,000-unit annual demand without major reforms.

MORTGAGE FINANCING: THE GROWING GAP

The NHT provides 60 per cent of Jamaica’s mortgages, averaging 8,000 loans annually in the last decade, with $47 billion disbursed in 2023. However, private sector mortgage financing remains low (about $24 billion) due to high interest rates, BOJ competition, and asset taxation. The government’s annual $11.4-billion withdrawal from the NHT since 2013 has further constrained its ability to scale up lending.

To meet future demand, annual mortgage disbursements need to double to $60–$100 billion, requiring an end to government diversions and increased private sector involvement.

NHT MORTGAGE CEILING: A MAJOR PROBLEM

The real value of NHT loans has shrunk dramatically due to inflation. For example, in 2006, 10,000 mortgages were issued at an average of $2.75m, while in 2010, only 6,000 loans were issued at $5m each. A focus on starter homes and service lots would help more low-income families access housing and is a more efficient use of the Trust’s resources.

The value of the NHT loan ceiling amount is also dwindling. In 2004, the $2.5 million ceiling had a present-day value of about $11.3 Million. An applicant could buy the equivalent of a Catherine Estate starter home alone. Today, the $7.5 million ceiling would require two people. The Trust needs to restore purchasing power for low- and middle-income families by increasing the ceiling to at least $10 million

FINANCIAL SECTOR: MISSING PLAYER IN AFFORDABLE HOUSING

Jamaica’s financial sector, including NHT, JMB, commercial banks, and building societies, plays a critical role in housing finance, supporting 2,000 to 4,000 housing units annually, with $40-$70 billion in mortgage loans. However, private banks remain hesitant to match NHT’s financing levels due to BOJ competition, high asset taxes, and greater returns from other investments.

The NHT provides over 60 per cent of mortgages in the sector, largely due to attractive lending rates averaging less than 3 per cent, compared to prevailing private bank rates of 9 per cent to 11 per cent. There has been significant growth in loan disbursements, increasing from $40.1 billion in 2021 to $47.6 billion in 2023. Cessation of the annual $11.4 billion withdrawal from the Trust (that represents about 20 per cent of the Trust’s capacity), projected loan disbursements could reach between $70 and J$90 billion, aligning with future housing needs.

Private sector mortgage growth shows potential. For example:

• Scotia Group expanded its portfolio by $35B (2020–2023)

• VMBS & JNBS increased their mortgage portfolios by $19b and $27b (2021–2023), respectively.

ASSET TAX PROBLEM

One major barrier to private sector mortgage lending is Jamaica’s asset tax, which reduces banks’ ability to invest in housing. Jerome Smalling, CEO of JMMB, highlighted competition with the BOJ for funds and the impact of asset taxes as factors limiting their involvement.

“Everybody beat upon us to say, oh, we do this and we do that. Nobody’s saying, look at this asset tax, it’s like a contribution to the people of Jamaica, because it’s not an earning tax. It’s just a tax that is levied against our asset base. And we’ve paid it since 2014.”

There is sufficient money in the financial sector for individual loans (BOJ) and possibly to further participate in the housing sector. Loans increased from $100 billion (2004) to $500 billion in 2024, reflecting an annual increase of $20 billion. The financial sector possibly needs to be incentivised to participate further in affordable housing.

FINANCIAL SECTOR NEEDS POLICY FIXES

Jamaica’s financial sector has the potential to meet housing demand. Retrograde policy decisions and interest rates are major barriers to meeting mortgage demand. Government’s continued withdrawal of $11.4B reduces NHT’s ability to provide loans and finance more housing projects. Prevailing high mortgage rates (nine to 11 per cent) versus NHT’s subsidised loans (three per cent) result in private lenders struggle to compete, resulting in lower participation in affordable housing finance.

Jamaica’s financial sector has the capacity to meet the housing demand, but policy reforms are essential. Ending the $11.4b NHT withdrawal and incentivising private-sector participation are critical to boosting mortgages for affordable housing.

Christopher Burgess, PhD, is a registered civil engineer, land developer ,and the managing director of CEAC Solutions Company Limited. He is a Jamaica Institution of Engineers Council member. Send feedback to columns@gleanerjm.com.