“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
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?
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.