Kristen Gyles | The housing crisis

It is hoped that by 2030, Jamaica will become the place of choice to live, work, raise families and do business. People need homes to live and raise their families in, so the current state of affairs in the housing market should be of some concern to all who share the Vision 2030 for Jamaica.

The focus of last week’s article was on the high volume of human traffic moving permanently into the city areas and how it has helped to contribute to the drastic increase in house prices. There are things we can do collectively to mitigate the effects of population congestion in city areas. However, even with the best of efforts, cities will remain cities and residential housing in city areas will never be as affordable as in less populous areas.

Another issue worthy of exploration in relation to the housing crisis, however, is the operation of the National Housing Trust (NHT) and how its profits have been and continue to be utilised.

The NHT has achieved a lot since its inception in the 1970s. First, it continues to provide low-interest loans to thousands of contributors annually. Further, it has overseen the construction of numerous housing projects over the years. Particularly of note is that in 2021, the NHT finalised a five-year housing programme in which 23,000 housing solutions were introduced.

The NHT, like many mortgage lenders, is highly profitable. The NHT is so good at what it does that for the past 10 years, its accumulated profits have consistently been in excess of $100 billion. The accumulated profit as at March 31, 2023, for example, was over $164 billion and the profit generated in the 2022/2023 financial year alone was over $18 billion.

REMAIN PROFITABLE

As long as the NHT continues to issue anything close to its usual number of loans annually, at its current interest rates, subject to the usual rates of delinquency, the NHT will remain profitable. And that is good. Maybe even too good.

The National Housing Trust (Amendment) (Special Provisions) Act, 2020, came into effect on April 1, 2021 to allow the government to take $11.4 billion annually from the NHT’s profits until 2026. This was not the first time such an initiative had been introduced. Finance ministers over the years have rationalised that without the ability to draw down on the NHT’s profits, the government would be forced to levy more new taxes and to add to the already high tax burden Jamaicans face.

The justification has always been that these drawdowns enable the government to sustain important programmes that are of significant benefit to the country. In one case, seemingly to assuage some of the guilt associated with the government’s habitual mooching off the NHT’s resources, one finance minister hinted at the need for the government to relieve the NHT by dipping into the surplus generated by other public bodies, for budgetary support.

We understand that there is a delicate balance that must be struck where the country’s finances are concerned, but when public bodies are set up for very specific purposes, how can those purposes ever be achieved when it becomes the policy of government to take whatever they can from the reserves of said entities? What motivation will there ever be for these entities, which are often self-funded, to actually generate surplus?

In some sense, the government’s reliance on the NHT’s funds may be well-reasoned since useful initiatives have undoubtedly been sustained from the diverted funds. On the other hand, now the chickens have come home to roost and the housing sector is in such dire need of resuscitation that perhaps the NHT’s funds now need to be utilised solely for the benefit of persons seeking home ownership in a hostile real estate sector.

SIGNIFICANT STRIDES

The NHT has made significant strides over its lifetime. However, some thought must be given to the demographic of people who benefit the most from the NHT’s resources. The NHT’s mission is to facilitate home ownership and community development, particularly among lower income contributors. However, the truth is that while the majority of NHT contributors have access to loans at zero per cent interest, few from this majority category (who must be earning $30,000 or less weekly) are able to utilise these loans because of what the loan can (or can’t) afford them.

Earlier this year, the NHT invited applications from Jamaicans for one- and two-bedroom units at Union Acres and Estuary Meadows in St James. None of the advertised units cost less than $10 million, with some costing as much as $16.5 million. Individuals seeking to purchase a similarly priced unit with the help of the NHT would likely need additional loan financing since the NHT’s $7.5 million clearly wouldn’t cover the cost. The additional loan financing would likely be accessed at sky-high interest rates.

For Jamaicans wanting to purchase a home, the general loan ceiling has made quite the journey over the past few years, from $5.5 million to 6.5 million in 2019 and eventually to $7.5 million last year. That is great, but it appears that the NHT can do even more. In order for the NHT to do more, however, this and future governments will have to accept and agree that it should.

Kristen Gyles is a free-thinking public affairs opinionator. Send feedback to kristengyles@gmail.com and columns@gleanerjm.com