Property Matters – The Affordability Hoax

The Affordability Hoax. Drawing by David Cave.

AFFORDABILITY IS THE MAIN PILLAR OF THE HOUSING POLICY SINCE 2002
—Key quote from HDC’s Home Ownership webpage

“…Housing Minister Randall Mitchell says Government has made housing more affordable to low and middle-income families unlike the People’s Partnership government which catered for high-income earners…” December 2016

Randall Mitchell, MP, Minister of Housing and Urban Development

Once again, the HDC and the Minister of Housing and Urban Development, Randall Mitchell, have been in the news with strong claims based on the HDC’s program and new mortgage offerings by TTMF. The headline in this newspaper on 10 February 2017 was “More people to access affordable housing“. In my view those are baseless and misleading official claims which readily qualify as ‘alternative facts’. Bigly so.

These statements are not unique to Minister Mitchell, who is relatively new to this portfolio, but enough is enough. Given the importance of public housing in the nation’s welfare arrangements and the sheer lack of reliable information on the issues, it is now time to dismantle the myth of an increasing supply of affordable housing.

What is ‘Affordable Housing’?

SIDEBAR: The 2% TTMF mortgages

This is the most affordable mortgage on the market and it is subsidised by the state. I am reliably informed that TTMF offers 100% mortgages to qualified applicants. A 100% mortgage means that no deposit is needed since the entire cost of the purchase is covered by the loan.

For a $1.0M loan at 2%, the monthly payments would be –

  • for a 25 year term – $4,238.54;
  • for a 30 year term – $3,696.19.

The accepted ‘rule of thumb’ is for mortgage payments to be no more than one-third of the household income. That means that the households qualifying for that $1.0M mortgage would have to earn at least $11,000 monthly, well above the average.

There are many definitions, but there seems to be broad consensus that ‘affordable housing’ must be affordable to those who earn less than average wages. That is the definition with which I am working.

The 2002 Housing Policy makes affordability a central question within its 32 pages, but it contains no single, clear definition. My own reading of that policy is that its authors also shared my view of the meaning of affordability. The omission of a clear definition was fatal to the success of that policy, in my view.

What are the official figures for household income?

CSO data as cited by the Minister of Communications, Maxie Cuffie, in November 2015 shows that 60% of the country’s households earn less than $9,000 a month. My own research with the CSO found corresponding figures, with 2014 being the most recent year.

This official announcement was made when the current PNM administration was reversing the decision of the previous Peoples Partnership administration to increase the income limits for applicants for state housing –

“So when you look at the fact that 60 per cent of the population earns $9,000 and less, you’ll see the HDC was operating outside of its mandate and it needed to operate according to law. Raising the joint income limit to $45,000 allowed it to operate outside the law.

“So the revision to the $25,000 joint income limit (the upper level) is in keeping with the HDC’s mandate to serve lower and middle income citizens,” he added…”

That statement is unsustainable, since the average monthly household income is obviously less than $9,000, yet the restoration of a $25,000 limit is declared as being ‘in keeping with the HDC’s mandate’. If the official records state that a middle income household earns less than $9,000, how can one sensibly regard a $25,000 limit as being of service to ‘lower and middle income citizens’? I tell you.

So what is the HDC planning to build?

Hon Randall Mitchell, MP, Minister of Housing and Urban Development

This is Minister Mitchell, speaking in December 2016 of the HDC’s return to its moorings –

“…Mitchell said the average price of an HDC unit will return to a more affordable $450,000 to $500,000, down from $900,000 to $1.3 million in the last administration…”.

I fully support a return to those affordable prices. Using the figures in the TTMF sidebar, an applicant for a $500,000 home would require a monthly household income of the order of $5,500 to qualify for TTMF’s 2% mortgage.

Given that the HDC’s first housing project was the Public Private Partnership at Mahogany Court in Mount Hope, with an average price in excess of $900,000, there is a long way to go to achieve affordable housing.

It is also important to note once again that most low income households cannot qualify for mortgages at all, which means that buying a home is out of the question. The real question for those in charge of this housing program is just how many affordable rented homes are being built in the 2,500 starts planned for 2017.

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8 thoughts on “Property Matters – The Affordability Hoax

  1. There is no way that the GORTT can house all of it’s average monthly wage earners. The HDC does allow persons to rent-to-own so I will assume that some of the newly constructed housing units will be reserved for this type of home ownership. What percentage? I do not know. The government is trying to wean people away from their dependency for FREE public sector housing. Previous public sector tenants with rents as low as $100 per month were allowed by successive governments to rack up rent arrears of as much as $15,000 inclusive of interest. This is unacceptable. Yes, government should provide housing for those who are most in need but Trinidad has way too many people who have determined that government must house them for FREE. There is at present a lot of public housing from which no rents or other money is collected yet these units are ‘maintained’ by the government. It is time that those who desire a house from the government pay the pepper corn rate of 2% to own or rent-to-own a residential unit constructed by the government. End the FREENESS. To tell the truth, there is nothing such as ‘low income housing’. There is merely housing for persons with low incomes. And as the fortunes of Trinidad and Tobago dwindle we have to encourage citizens to be responsible and to stand on their own feet. Party done!

    1. Hello Joanne,

      There is no need to speculate – the answers to your valid questions on the housing numbers are in ‘Property Matters – State Housing Facts’ published here on 8th January 2017.

      The fact that the rental portfolio was mismanaged in the past is no reason to abandon rental housing, as there are many needy applicants who simply cannot qualify for a mortgage…if the purpose of our national housing program is to improve the quantity and quality of housing available to families who are excluded by the market, we simply have to do better…

      Thanks for joining-in.

      Afra

  2. It’s shocking to me that GORTT housing for the average family should be 150 K US. I have noticed that housing in Trinidad does not seem to vary much and base is very similar to big city prices. Can you tell me why this is so ? I have been thinking of retiring in TT and even with a fairly generous pension I would be hard pressed to buy where I lived as a young married man. Loved your presentations on corruption. Good luck with your crusade.

  3. Why should the Government be involved in housing this is poor use of its funds. Sell land at subdised price, furnish materials VAT and all taxes free, subsidise the mortgage at commercial banks

  4. and afra
    while you are at it could you look into the FAtcats of BATT and their oppressive fees( really deposit fees for salaries and pensions!! / fees for cheques to pay bills and fees for statements

    ..really are my elderly parents to be penalised for not being be IT savvy at 85 ? or can we trust internet for banking ?…it does not work any more effectively in T&T

    BATT is ..stealing what little savings we have stored for this rainy day?? BATT lacks Corporate conscience in these hard economic times! . ( economic hitmen !!)
    RBTT was sold to RBC by big boys w never suffer!!
    as become victims from our own govt ( white collar criminals ) who fail to intervene to stop thsi senseless hemorrhaging of our savings
    pb

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