Housing stimulus - Holness announces new NHT policy targeting low-income earners
Published:Tuesday | May 24, 2016 | 12:00 AMEdmond Campbell
LOW-INCOME earners will, effective July 1, have the opportunity to borrow up to $4.89 million per contributor, or $9.8 million jointly, from the National Housing Trust (NHT) to purchase a house, while paying no interest, based on a dramatic shift in housing policy that was announced yesterday by Prime Minister Andrew Holness.
In his contribution to the Budget Debate in Gordon House yesterday, Holness said his administration would use housing and related construction activity as an engine of economic growth.
With income bands being a determining factor in terms of interest rates charged on mortgages, Holness, who has direct responsibility for the NHT, has announced that persons in the income band of between $7,500 per week and $12,000 per week will now be able to access loans from the Trust at zero per cent per annum.
"Based on calculations of the Trust, such individuals would be qualified to borrow up to approximately $4.89 million. Two contributors of similar income levels, below $12,000 per week, can now jointly afford a mortgage of $9.8 million," Holness said.
At the same time, contributors now earning between $12,001 and $20,000 per week will now be eligible for a two per cent mortgage interest rate, down from four per cent. Further, persons with a weekly income of between $20,001 and $30,000 will be eligible for loans at four per cent, down from six per cent.
Holness said this move to enable the poor to own their own homes was not only his dream and plan but also the vision of Michael Manley. The former prime minister and People's National Party president established the NHT in the 1970s to create housing solutions for Jamaicans.
Those contributors earning above $30,000 weekly will continue to pay at the highest interest rate of six per cent. These adjustments will take effect for mortgages written after July 1, 2016.
With a constant refrain of "Now that is prosperity", the prime minister told Jamaicans, "If you were not thinking of owning a house, or building a house, now is the time. This is part of the prosperity doctrine."
The disabled and senior citizens will continue to enjoy the two per cent interest rate discount, while public-sector workers will still benefit from an additional one per cent reduction in interest rates.
According to Holness, this policy shift will positively impact more than 70 per cent of prospective mortgagors, significantly increasing the amounts they can afford to borrow.
The NHT policy change will cost the housing institution $1.58 billion in forgone interest revenue over the four-year period 2016-17 to 2019-20.
Adjustments are also being made to subsidies and grants to eligible NHT contributors.
The combined ceiling for mortgage loans and home grants will be capped at $4 million per contributor, which means that persons earning $12,000 or less weekly, as well as senior citizens and the disabled, will be eligible for a home grant, which has increased from $1.2 million to $1.5 million.
At present, contributors to the NHT for a minimum of 10 years can access the home grant. However, persons contributing for a period of seven years will shortly be able to apply for the home grant.
"An individual would now access the home grant in the eighth year of contributing to the Trust. This will take effect on July 1, 2016. The adjustment is set to allow every NHT contributor to afford, at minimum, a studio unit, having contributed for seven full years," the prime minister said.
This proposal is expected to cost the NHT $3.2 billion over the next three years for the grants.
Come July 1, the NHT will also be adjusting its loan limit for house lots. The NHT will be increasing the loan limit from $1.5 million to $2 million for house lot loans.
"This means that two contributors may access up to $4 million jointly for purchase of a lot/land on the open market and a further $7 million for construction of a housing unit on the same lot, subject to affordability."
Based on housing demand in Kingston, St Andrew and St Catherine, the NHT will partner with the Urban Development Corporation to develop 700 housing solutions on lands in the Caymanas area.
Housing solutions of varying designs and price points will be constructed on the property over a four-year period, at a cost of more than $5 billion, which will be funded by the NHT.
More benefits are coming for low-income earners, with the prime minister announcing that approximately 2,000 serviced lots would be delivered over the next two years.
He said the final selling price of these lots will range from $1.8 million to $2.4 million and will be situated in the parishes of Westmoreland, Trelawny, St Ann, Clarendon and St Catherine.
Holness said the lots would be sold to contributors earning below $12,000 weekly.