The National Housing Trust (NHT) is expected to apply changes to several of its policies as the Government moves to quell disquiet brewing in the housing market, where thousands of contributors continue to be priced out of a home.
Prime Minister Andrew Holness announced a raft of changes to how the lending agency will operate going forward when he made his contribution to the Budget Debate in Parliament on Thursday.
“We have been hearing the cry of the people for affordable housing. We have been sharpening our pencils to get the numbers down, through creative designs and material use, and creative financing options, but even at those price points, housing is just not affordable for a large segment of the Jamaican population” Holness admitted.
Zooming in on low-income earners, he said homeownership for that group is but a dream, even in instances where they have contributed to the NHT and are entitled to loans.
“There were very few housing solutions that their income could afford,” he said.
Ironically, the prime minister noted that the socio-economic group has been financing higher-income earning groups by contributing to the Trust without a drawdown.
As a result, he said that the NHT has been instructed to focus on housing solutions that will come into the market at between $8- and $11 million.
Holness also announced a revision of the NHT’s policy pertaining to subsidies.
He said income will be the sole determinant of whether a subsidy is applied. Previously, the category of special groups was also used as a determinant as well as price subsidies were applied to the selling price of a housing solution within a development.
“The is an important part of the NHT ensuring that if it is giving a subsidy, it is fair; it is targeted to those in need and not giving people subsidy who don’t need it, which contributes to inequality,” said Holness.
Currently, the interest rate for an applicant is decided on the basis of income at the time of application and is applied over the life of the loan.
As the circumstances of mortgagors change, Holness said, their new incomes may place them in a higher or lower income band, lessening or increasing the need for an interest rate subsidy.
He said that effective July 1, all new loans will be reviewed periodically to determine whether the level of subsidy given at the opening of the loan is still required or a greater or lesser subsidy is needed.
The disability grant will also be doubled come July, moving from up to $150,000 to up to $300,000.
Additionally, the NHT will allow up to three contributors to apply for a two-bedroom or larger unit.
“That is a big move. This policy position ensures that more persons, particularly family members, can access housing,” he said, cautioning that proof that the applicants are related is mandatory.
Meanwhile, he said the Government is examining a strategy to make lands it owns available for housing development at no cost to developers.
That way, the prime minister said, only construction and infrastructure cost will be passed on to the purchaser.
And through a new development, the NHT is expected to arrange with mortgage lending institutions, regulated by the Bank of Jamaica, to fund the full mortgage disbursements to contributors, including NHT mortgage benefits of up to $6.5 million.
The disbursement, including the NHT’s portion, will be fully financed by the partner institution, Holness announced.
He said NHT will then pay directly to the institution the difference between the interest rate charged by the institution and the interest rate it charges.
“This will relieve the NHT of the cash required to fund the principal amount of the mortgage upfront,” he said, adding that the NHT is obligated to fund the interest rate subsidy between the mortgage lending rate of the partner institution and its rate.
The mortgagor will not be negatively impacted, Holness pointed out, as the interest payment will remain as if the funds were accessed directly from the NHT.
Holness said the NHT is projected to create a total of 7,324 new mortgages at a value of $30.27 billion by the end of March, while housing expenditure for the current fiscal year is projected at $50.4 billion, up from $48.2 billion in the previous year.