Real Estate - Property Matters by Afra Raymond
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The HDC’s project delivery deficit

Published Thursday 25thJanuary 2009

The Housing Development Corporation is one of the organizations being reviewed by the Uff Commission. Thus far, the HDC has been providing information on the Cleaver Woods housing project – the one which was the source of the Prime Minister’s pointed queries to the former Minister of Housing. Readers may be interested to know that Part 1 of the HDC’s submission, which is available at www.constructionenquiry.gov.tt, clarifies that the $10M discrepancy raised by Mr. Manning was the result of errors on their part.

The HDC’s ambitious development programme has long been an issue of great national concern. Reasons for this range from concerns as to whether the target of 100,000 new homes in a decade was realistic, who is going to be allocated the new homes, their location in relation to existing communities – shades of voter padding and coded racism there – the impact of all these new homes on the property market and so on. The national housing policy is clearly of great importance.

It is my contention that the national housing programme is chronically underperforming, by any measure. This week we focus on the output side – i.e. the number of new homes built as part of that programme. This edition of ‘Property Matters’ is an edited version of my submission to the Uff Commission, in which I set out some questions on the HDC’s and UdeCOTT’s performance in this arena.

My critique of the output of new homes since the start of the new policy is set out in Property Matters of 1st January 2009 ‘Learning Lessons’. That article states that the output of new homes in the 6-year period 2003-2008 under the national housing policy is about 24,000 units.

The National Housing Policy was published by the Ministry of Housing on 18th September 2002 as ‘Showing Trinidad & Tobago a new Way Home’. That document can be accessed at http://phe.gov.tt/home/images/stories/housingpolicy.pdf.

The Introduction to that policy states that the output target is “…the construction of 100,000 shelter solutions in the next ten (10) years…”, which implies an annual average output of 10,000 new homes. That policy comprises a significant part of public sector construction. Having been implemented for 6 financial years – the period 2003-2008 - this is an appropriate stage for a review of the Project Delivery aspect of the programme. Please note that Project Delivery is listed as one of the Terms of Reference of the Uff Commission.

The annual target output of new homes was subsequently reduced to 8,000 as evidenced by the Budget Statement of the Minister of Finance, which can be accessed at http://www.finance.gov.tt/documents/publications/pub90A98A.pdf, at page 29 of which we are told “…Since 2002 to date the Government has initiated more than 32,000 housing starts, well in line with our projected 2020 goal of 8,000 housing starts per year for ten years in the Public Sector…”.

At the most elementary level of consideration the proposed output figures are not being achieved. Even if we adopt the Finance Minister’s statement, the annual average number of homes started is 32,000/6 = 5,333. It stretches credibility to suggest that this average output, which is two-thirds of the goal, is “…well in line with our projected…goal…” – i.e. the reduced annual target of 8,000 new homes. The total output over the initial 6-year period is so poor that the only way the ‘projected goal’ could be achieved is for 48,000 new homes to be produced over the remaining 4 years of the program. That would imply an annual average output of 12,000 new homes in the next 4 years, an incredible increase.

The doubts raised by these considerations only deepen when one considers the more detailed Supplementary Public Sector Investment Program (SPSIP) 2009. The SPSIP 2009 is the document, published by the Ministry of Finance in the second half of 2008, which sets out the capital programmes of the State Enterprises and Statutory Agencies. It is used to compile the national budget and can be accessed at http://www.finance.gov.tt/documents/publications/pub6EA570.pdf, where, at page 45, we are told that “…The objective of this programme is to construct 100,000 housing units over a ten (10) year period.…” and at page 46, that “…HDC commenced construction of approximately 8,458 units including houses, town houses and apartments which are at various stages of construction. The total estimated cost of these units is $2,287.0 million…” .

At the very least, we are witness to utter confusion over the actual targets. Here we have confusion over both targets and output, with obvious detriment to policy review. Clarity as to targets is the pre-condition to measuring performance. We must be able to measure performance in order to chart our progress towards an improved construction industry.

Using the SPSIP, which details its statements, one is able to deduce the origin of the quoted statements of about 24,000 new homes actually completed during the course of this programme. 32,000-8,458 = 23,452.

The executing agency of the Ministry of Housing was the National Housing Authority (NHA), which agency was subsumed into the Housing Development Corporation in 2005. We should also note that until 2008, both UDeCOTT and the HDC had responsibility for producing new homes under the national housing policy. UDeCOTT’s role is clearly spelt out in the Introduction to that policy.

This Commission of Enquiry has the power to call for documents, witnesses or replies to its queries. It is my view that the HDC should be requested to state clearly the true number of new homes constructed by State agencies and private sector partners in the course of fulfilling the national housing policy. UDeCOTT should be requested to provide output figures for new housing. Both organizations should be asked to provide details of out-turn costs for the completed projects.

A further aspect of this large-scale construction programme which warrants the attention of the Commission is the extent of variations in the capital programme of the Ministry of Housing.

That data is extracted from the Estimates of Expenditure, an annual publication of the Ministry of Finance. The analysis of variances is a useful policy tool in measuring performance, since with diligent application it is possible to improve the accuracy of estimating program costs and outputs. The extent to which these variances have grown in the 9 years under examination is astonishing. The rapid growth of the overspend and the failure to clearly declare targets or achievements all belie the chronic shortcomings in the construction management/project management/budgeting aspects of this vital, large-scale national programme.

The actual output of new homes is less than half the stated target. That is a major plank of government policy which has signally failed. Why not use this opportunity to locate and fix the problems?

Some serious questions need to be asked, and answered - These would include – What are the reasons for the poor overall performance in terms of output of new homes? Was there any significant difference in performance between NHA/HDC and UDeCOTT? If so, can the reasons for these be identified? What steps can we take to apply benchmarking in order to improve performance without sacrificing accountability?

 

Afra Raymond is a chartered surveyor and a director of Raymond & Pierre Ltd. Feedback can be sent to afra@raymondandpierre.com.

Afra Raymond - Property Matters

Some serious questions need to be asked, and answered - These would include – What are the reasons for the poor overall performance in terms of output of new homes? Was there any significant difference in performance between NHA/HDC and UDeCOTT? If so, can the reasons for these be identified? What steps can we take to apply benchmarking in order to improve performance without sacrificing accountability?