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Housing hustle

Published: 
Sunday, May 1, 2016

Kevin Baldeosingh

The Housing Development Corporation (HDC) helps make housing in T&T unaffordable for ordinary citizens.

Now you may be wondering how this can be, since the HDC (and its predecessor the National Housing Authority) was created to provide houses to people who otherwise couldn’t afford it. But the American economist Thomas Sowell in his book Economic Facts and Fallacies, writes: "The biggest economic fallacy about housing is that ‘affordable housing’ requires government intervention in the housing market, perhaps with subsidies, rent control, or other devices to allow people with moderate or low incomes to be able to have a decent place to live…"

The ostensible rationale behind the NHA was that houses would be built and sold at cost. In practice, of course, the result was that most houses were handed out to actual and assumed supporters of the People’s National Movement, often below cost. Indeed, when he was Housing Minister, Dr Keith Rowley stated that the majority of recipients were people from the East-West corridor (although he also denied that by this he meant Afro-Trinis since, he said, he didn’t know the race of applicants). During Patrick Manning’s tenure, the HDC website had a map with red dots indicating housing projects: San Fernando East looked like it had measles.

Now whenever a government becomes involved in commercial activity, this immediately skews the market in that sector. The creation of the NHA removed any incentive construction companies had to create low-cost housing, since the Government had cornered that potential customer base. But, as the American economics journalist Henry Hazlitt noted in his 1969 book Man vs The Welfare State: "The more things a government undertakes to do, the fewer things it can do competently."

Recent revelations from a report in the Express show that this fundamental economic truth applies to T&T in the 21st century. The HDC has a waiting list of over 160,000 people, and builds houses at an average cost of $1.3 million and apartments for between $400,000 to $900,000. The corporation’s completion rate is a dismal 16 per cent.

Although this might seem to still leave space for private sector developers, who can build good three-bedroom houses for between $500,000 to $900,000 and have a 95 per cent completion rate, the existence of the HDC creates market uncertainty. A perusal of the Real Estate section of the classified ads shows that decent houses in the $500,000 to $1 million price range simply do not exist. Any such house within that range is either incomplete, lacks Town & Country approvals, or is located in a high-crime area. This means that people with mid-level incomes simply cannot afford to buy a house. By contrast, in a trace off a secondary road in central Trinidad, I have seen one developer advertising four-bedroom houses in a gated community for $2.2 million. These houses are already built, so clearly the developer was confident that there were buyers in this income bracket.

Along with a real estate bubble due to high energy revenues, this situation was created by the HDC’s venture into housing for middle- and upper-income earners, which further skewed the market and which was even more corrupt, since these units were used to bribe individuals in key institutions. "Ironically, having created artificially high housing prices, government then often supplies token amounts of ‘affordable housing’ to selected individuals or groups," writes Sowell. Even in low-corruption Singapore, the housing programme was used to favour constituencies who voted for Lee Kuan Yew’s People’s Action Party. "We must look after PAP constituencies first because the majority of the people supported us," then-National Development Minister Teh Cheang Wan boldly stated in 1985.

Despite this, many people continue to believe that state intervention is required to provide homes to low-income people. But the people who get HDC units have to qualify financially to pay the mortgage, which means the truly poor still can’t get—or are not supposed to get—these homes. This is also true of the HDC units built for middle-income earners: certainly, many of the journalists so favoured could not have afforded market rate mortgages on Fidelis Heights apartments.

So, if the Government were not involved in building houses, the likelihood is that construction companies would start competing for would-be home owners in all income brackets and house prices would fall. Of course, financial and other regulations would have to change too. Bank loan requirements for a ten per cent downpayment would need to be waived, for example, since even persons who can afford mortgage payments can’t necessarily afford to save the required sum by their 30s, which is when most people want to buy their own homes. A record of reliable rent payments over a five-or-ten-year period and a good credit rating might do in lieu of a downpayment, and the Town & Country regulations, which are weakly enforced and incentives for bribery, would have to revamped to focus on safety.

But this column is merely a theoretical exercise: after all, politicians aren’t going to close down the HDC as long as houses make such excellent bribes for police officers, soldiers, senior public servants, and soca singers.

Kevin Baldeosingh is a professional writer, author of three novels, and co-author of a history textbook.

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