With apologies to readers, this is to correct my figures in relation to the amount of Public Money which TTMF received in relation to the 2% subsidised mortgage programme. The figures disclosed in TTMF’s Summary Financial Statements are actually liabilities, being the reducing balance on the original allocation of $200M for this programme.
The recalculated figures for TTMF’s recovery of 2% mortgage subsidy 2007 to 2014 are
These figures are far less than those I cited in my article, since only $105.2M has been drawn from the original allocation of $200M, as against my erroneous claim that $1,227.5M of Public Money had been spent on this subsidy.
Last week I examined housing subsidy to illustrate the ways in which Public Money is used to provide better housing opportunities.
The sidebar contains my correction, which shows that a total of $105.2M was spent in this 2% subsidised mortgage programme between 2007-2014. I was also informed that the 2% subsidised mortgage had been granted to 1,466 applicants, who earn less than $10,000 per month, to buy homes under $850,000. In late 2014, TTMF also started offering 5% mortgages to applicants who earn up to $30,000 per month for homes up to $1.2M – 298 of those mortgages have been granted to date.
This revision and the new information will require that we pay even greater attention to the HDC’s operations, since it far outstrips the other agencies providing housing options.
So, what is the proportion of applicants between the lower and middle income groups? At pg 28 of the Vision 2020 Housing Sub Committee Report (2005) that is estimated as follows –
“…shows that more than half of the demand for housing to 2020 (57.3%) falls within the low-income group with 30.7% in the middle income group and 12% in the high-income group…”.
It is difficult to reconcile those researched conclusions as to the demand for homes with the actual distribution of new HDC homes, in which only 21.7% were rentals. The pattern of distribution of those homes seems to indicate that the decision was taken to promote home-ownership in preference to building rental units. There is no doubt that this decision was detrimental to the neediest applicants, who were unable to qualify for mortgages, while at the same time being beneficial to those whose earnings qualified them for mortgages.
Of course it is true that income levels increased since the original 2005 Report, so the definition of low and middle income would have shifted. Nonetheless, it is clear that the construction of rental units was a low priority.
That decision to promote home-ownership may well have been rooted in the desire to reduce the ongoing management challenges of renting homes to poorer households. If that is indeed the case, it would represent a significant departure from the housing policy which is intended to serve the needs of both low and middle income persons.
SIDEBAR: Time is Money
One of the significant issues which has impacted the HDC’s programme of building new homes for sale is delays in obtaining clear title to the properties. These cases can result in completed homes which do not have the proper title to allow a mortgage to be granted. In such cases, the HDC has reportedly been allocating those homes to purchasers under a ‘Licence to Occupy’ in which 90% of the Licence Fee (rent) goes towards the purchase price.
This is a sound way to proceed since the new homes are occupied, while the title is organised and most of the rent is applied to the purchase price.
A large number of units have been subjected to these delays, with the anticipated sale postponed and that has a serious financial impact. A sum of money which is received in the future is less valuable than the same sum of money received instantly. That decline in the value of money with delay is due to such elements as the reality of inflation, the risk of devaluation and of course the sheer uncertainty of being paid.
According to the Joint Select Committee’s 2015 Report into TTMF –
“…In 2008 we had established what we called an HDC Unit in anticipation of 3500 mortgages from HDC within three years. Three years later we had to disband that Unit because the HDC did not have the title that would afford mortgages…” (testimony of TTMF Managing Director, Ms Ingrid Lashley, at pg 126)
This is a limited insight, but it can give us some idea of the scale of the issue, if 3,500 homes did not have proper title over a period exceeding three years. One can scarcely imagine a private developer surviving if that sort of situation ever occurred.
The fact is that issues such as these are a potent warning of the dangers of the rush to development in which the numbers game and output targets can eclipse good practice.
There is also the fact that some of these HDC homes are used as investment property by owners who live elsewhere, perhaps even owning other property. The HDC leases prohibit renting-out, even in parts, those properties without prior written consent being obtained. A casual search on the internet can show many such properties offered for rent on the market by agents. Is the HDC managing its portfolio properly in relation to this issue?
Apart from the issues as to the types of homes built in the HDC’s large-scale development programme, there are other concerns as to its operation.
At pg 71 of the Vision 2020 Housing Sub Committee Report (2005) it is stated –
…It is apparent that the cost of administration of the public housing programme (costs related to the Ministry of Housing, NHA, LSA, SILWC and UDeCOTT) is extremely inefficient when expressed in terms of cost per unit produced. It is estimated that $0.71 out of every dollar spent on housing is spent on administrative costs…
Which means that in 2005, over 70% of the money spent on public housing was going to recurrent expenditure.
The HDC was created in October 2005 as a successor agency to the National Housing Authority (NHA) and there were specific provisions in the HDC Act to avoid some of the management issues with which the NHA had been beset.
The then Housing Minister was Dr Keith Rowley, our newly-elected Prime Minister, so his remarks at the inauguration ceremony for HDC are noteworthy –
…There are a lot of things that did not go right in the NHA and one of those things had to do with accountability…The HDC is not going to function like that. We are required by law to have the accounts ready in a certain period of time. The CEO will be held accountable and the Cabinet will hold the minister accountable and the Parliament will hold the Cabinet accountable. That is what the HDC means…
According to the provisions in the HDC Act, its audited accounts are required to be published at a set date every year, within 6 months of its financial year-end. Despite the legal requirement, the HDC’s audited accounts have never been published. Which means that we are unable to tell if there has been any improvement in the NHA’s ‘efficiency ratio’ of only 29% of its spending going directly to build new homes. Is the HDC doing any better? There is simply no way for the public to know.