|Housing Policy Imperatives – Part 5
Published Thursday August 5th, 2010
This week the
examination shifts to the scale of the failure of our national housing
policy. Three main points for consideration are –
Meeting the targets
The original target was
for the HDC to construct 100,000 new homes in a decade, which figure was
generated from the 1994 'PADCO' study – that study is available at the
Ministry of Housing & Environment’s library. The annual target was
reduced to 8,000. As noted in the previous article, the reduced targets
should have yielded 60,000 new homes by now, but the HDC has built only
15,394 new homes.
The HDC made a recent
statement that the number of empty new homes was approximately 10,000.
So just about 5,000 new homes have been built and distributed since the
inception of this 'accelerated housing programme' in September 2002.
Even if we omit 2002, that is an annual average of about 700 new homes
being built and distributed.
Even with the most
optimistic assumptions, one is looking at considerable challenges in
achieving these demanding targets. At the current rate of performance
it would take over 140 years to satisfy the original target. That is
how far off-track this accelerated housing programme has gone. Deep
into the long grass.
In previous articles in
this series, I have been critical of the HDC's cost-based approach to
pricing its units. In terms of the central mission of the Ministry of
Housing - i.e. creation and distribution of housing to the needy – that
pricing model is inappropriate. That is because it does not identify
either the housing subsidy allocated to successful applicants or the
opportunity cost of the HDC's policies.
approach is the more appropriate model to satisfy those basic
requirements. That is because it offers greater clarity to
policymakers, since it is based on the market value of the completed
homes, with the housing subsidy and the opportunity cost being the
difference between the value and the actual HDC selling price.
March 2008, this newspaper carried a report headlined “PM's son in
line for apartment” - see
- on allegations that Brian Manning, son of the then-PM was in line to
receive one of the HDC apartments at Fidelis Heights in St. Augustine.
Noel Garcia, the then-MD of the HDC, was reported to have said -
said the Government had taken a decision not to subsidise this
It is being sold at market rates in
HDC’s thrust to expand and attract an open market clientele.”
Given that the units
were reportedly being sold for a maximum of $875,000 and that they were
worth a minimum of $1.7M, it is clear that each new home there is sold
with at least $800,000 in housing subsidy. The only way Garcia's
incredible statements could be correct is if one were using the
misleading cost-based approach.
I entirely agree with
his statement that the Fidelis Heights development “...is therefore
not part of HDC’s provision of subsidised housing for low-income
earners.“ It is really subsidised housing for the middle-income
groups, but that could never be right when the waiting list is bulging
with needy people who cannot even get an HDC unit to rent.
Fidelis Heights was,
even by its name, a monument to misleading and wrong-headed thinking.
The HDC project with probably the highest level of housing subsidy per
unit was built for the least needy on their waiting list. Only if the
underlying philosophies and resulting models are appropriate, can we
avoid a repetition of this blatant waste of public funds in the face of
real, human need.
Given that the HDC is
unable to satisfy the needs of the people it was intended to serve – the
poorest citizens who cannot afford a proper home – it is scandalous that
its scarce resources should have been diverted to Fidelis Heights, or
the one at Federation Park in Port-of-Spain.
The selection of this
pricing model is proof of misguided policy at the most elementary
level. The basic concept of opportunity cost appears to have eluded the
responsible officials and, what is more, that misguided policy appears
to have been approved at the very highest level.
can only encourage corrupt behaviour.
What has the national
housing programme cost this country? That is no rhetorical question,
since this fact sits at the heart of the analysis. The Housing
Development Corporation (HDC) is the State’s implementing agency for
production of new housing, it was formed in 2005 by an Act of Parliament
and replaced the National Housing Authority (NHA). The HDC’s funding
comes from four sources –
Treasury allocations – Those are announced in the budget and can
be established from the Estimates of Expenditure as Capital Allocations
to the Ministry of Housing.
Sale of new homes – When the HDC sells a new home, that money is
also available to them.
Bond Issues – The HDC has also raised money by occasional bond
issues; those funds can be used to either build more homes or ‘pay down’
on more expensive loans. The bonds issued are government-guaranteed, so
they are considered as virtually risk-free 'sovereign debt’. Given that
the government itself issues bonds at lower rates of interest, it begs
the question as to why these SPE's are allowed to borrow on these
terms. That issue was raised by in the BG View of 20th
August 2009 – see
Bank Financing – The HDC also borrows money from commercial banks
or the IADB to fund their construction programme.
Try as I might, it has
proven impossible to determine just how much the HDC has spent on
building new homes in any given year. That is because there are no
accounts at all which are available to the public.
The HDC Act, at section
18 and 19, mandates that the Board shall keep and properly audit
accounts. Section 20 requires the Board to submit its annual report to
the line Minister within 3 months of the end of the financial year. The
line Minister is in turn obliged, by section 20 (2), to lay that report
in Parliament within 3 months of receipt. See –
The HDC has never laid
either its annual report or audited accounts into Parliament for the
public. The failure to publish accounts is one of the most serious
warning-signs of companies in financial trouble.
That failure to publish
HDC or NHA accounts over such a long period (since 2002 at least)
spanning several administrations, is a serious indictment of the main
participants – the politicians, the Board Directors and of course, the
professionals involved in the entire huge operation.
I have been reliably
informed that the HDC’s new management is attempting to rectify this
situation and that must be a priority if we are to properly assess the
performance of this vital social programme.
The overall picture is
Gross under-performance in terms of the output of new homes, only
about one-quarter of the reduced target has been achieved:
Poor financial and project controls - as revealed in the Uff
Report (at para 25:30 – see
not one HDC project has a signed contract:
No accounts or annual reports, given the preceding point, that is
An inequitable allocations policy, with lower priority given to
those who cannot afford to buy.
Approximately 10,000 new homes remain empty and that is the one
which tops them all. The ongoing adverse consequences include –
vandalism, the greater rate of general deterioration afflicting empty
homes, the high cost of security and of course, the continued pressure
on those people on the waiting list ‘holding strain’.
Given the combined
effect of all this, which is probably hidden to most of today's readers,
one can only wonder at the patience of our needy citizens.
The entire situation
also raises potent questions about the purpose and performance of the
Afra Raymond is
Managing Director of Raymond & Pierre Limited and President of the
Institute of Surveyors of Trinidad & Tobago. Comments can be sent to