NHT defends sky-high Ruthven Towers prices
Published:Tuesday | November 9, 2021 | 12:12 AM
Amid public backlash on the high-end Ruthven Towers apartment complex in New Kingston, the National Housing Trust (NHT) has defended its pricing strategy, arguing that the unit costs – which range between $27.7 million and $37.7 million – reflect skyrocketing construction prices, its location, and access to amenities.
The long-awaited Ruthven Towers was first proposed to sell for $16 million to $22 million in 2018, but the price was up for review after the public chastised the Trust for rates that rivalled those charged by private real estate developers.
NHT, a state provider of affordable homes and mortgages, went back to the drawing board to review development plans as well as the pricing structure, but in the end released prices that are 73 per cent higher than initial projections.
The housing agency blamed the spike mainly on “the cost of construction inputs, as well as global supply challenges which have increased the cost of housing”.
“In some instances, key inputs such as steel have seen a 200 per cent increase. These supply and price shocks have been further exacerbated in the last two years with the current pandemic,” the NHT said in a statement issued on Monday.
CEO of West Indies Home Contractors (WIHCON), Marvin Campbell, confirmed that supply-chain challenges amid the COVID-19 pandemic have impacted the cost of construction inputs, including steel, lumber, cement, and electrical wires. The fluctuating foreign-exchange rate has also played a role, he said.
However, Campbell said that housing market escalation typically runs five to 10 per cent.
“Anything above that would be considered high, but it really depends on what the drivers are,” Campbell told The Gleaner.
WIHCON itself says it has been staving off price increases to consumers through forward-buying, and has settled for lower margins on its projects by absorbing some costs.
NHT has asked for more time to respond to deeper questions from The Gleaner about the development.
Its response may provide clarity on why the Trust decided to dive back into housing developments for the top end of the market, a segment it said it would retreat from in 2012 following sluggish sales on its Paddington Terrace development, and before that, one at Salisbury Avenue.
Houses in the Paddington Terrace development cost J$33 million to J$46 million.
However, in its two-page statement, the NHT sought to downplay its investments in top-end housing.
The agency said that in the last four years, it has executed more than 23,000 housing starts up to March 2021, with the majority targeting low- to middle-income earners. Its developments, said the NHT, have been priced as low as J$4.5 million.
The NHT said that the redesigned eight-floor Ruthven complex was developed to target the segment of its contributor base with the lowest need for subsidies – in other words, those in the high-income bracket.
The middle- to high-income earners within the NHT contributor base are those earning a weekly salary of $42,001 and over, which works out to a minimum annual salary of little over $2 million.
The NHT has confirmed that it is willing to finance up to $15 million per unit at an interest rate of four per cent for the Ruthven Towers development. The remainder will be financed at an interest rate of seven per cent.
Over a 25-year period, that would put the monthly mortgage amount for the lowest-priced apartment at $149,000, assuming a deposit of 10 per cent of the unit cost is paid upfront. It means that someone seeking to qualify for a unit would need to earn between $5 million and $6 million annually.
But senior lecturer of educational policy, planning, and leadership at The University of the West Indies, Canute Thompson, is taking issue with the approach, pointing out in an email to the NHT on which The Gleaner was copied that less than 10 per cent of employees in Jamaica earn $6 million per annum.
“With that kind of cost profile, I ask, for what market segment, what category of contributor, is this project designed?”