Property Matters – Achieving Affordability

hdclogoThe previous column labelled the repeated official statements as to the increased supply of affordable homes as ‘alternative facts’. This week, I will set out just what needs to happen for the HDC to provide more affordable housing.

Even when the definition is well established, it is notoriously difficult to deliver affordable housing to those who really need it. The challenges is far greater if there is no attempt by the responsible officials to define the goal. A degree of clarity is therefore essential if affordable housing is to be truly achieved.

What definition of affordable housing is used by the HDC and the Housing Ministry?

newmangeorge
Newman George, chairman of HDC

To estimate the distance to the target, consider the current official statements –

  • …low to middle-income earning families will no longer be left behind…
  • 2,500 new homes to be started in 2017;
  • new homes are for sale, with no mention of rentals;
  • finance for those new homes via low-cost mortgages;
  • The reduction in the average price of those new homes to ‘a more affordable $450,000 to $500,000, down from $900,000 to $1.3 million in the last administration‘.

The official role of HDC was stated in the Joint Select Committee’s June 2014 Report at pg 8:

“…2.1 The Housing Development Corporation (HDC) falls under the ambit of the Ministry of Housing and Urban Development (MoHUD) and is mandated to:

  • Provide affordable shelter and associated community facilities for low and middle income persons; and
  • Carry out the broad policy of the Government in relation to housing…”

Affordable housing must, by definition, be affordable to persons earning less than the average wage. The official figures from the Central Statistical Office (CSO) for 2014 state that 60% of the country’s households have a monthly income below $9,000. It therefore stands to reason that the average monthly household income is less than $9,000. So affordable housing could only be intended for persons at that income level.

It might be tenable to suggest that there are different levels of affordable housing for low-income and middle-income families, but that raises the pregnant question of how many new homes are being provided for each income group. My own research into HDC’s allocations shows that few, if any, new homes are given to low-income applicants. The inclusion of middle-income applicants in the HDC’s mandate has allowed those families to be provided for at the expense of the low-income applicants. That is poor public policy, since vast resources have been invested in this exercise with little relief for the low-income families whose only recourse is the HDC. The other options are unauthorised occupation of lands or contending with low-rent landlords. Neither of those is tenable in our small-island state, due to the poor living conditions for those families and the wider environmental impact of unplanned development.

The main point in relation to the poorest families is that they do not qualify for mortgages. If the true intention is to provide affordable housing which does not leave low income families behind, substantial numbers of rented homes need to be built and allocated.

What is the weight of housing need in the project planning and allocation process of the HDC? Are we still in ‘the bad old days’ in which new 3-bedroom homes are allocated to single applicants who can afford the asking-price and large, low-income families wait forever on the waiting-list? Housing need is an important aspect which needs close attention if our nation’s housing policy is to ever be ‘fit for purpose’.

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

Minister Mitchell stated that the 2017 program was expected to have 2,500 housing starts and that needs to be questioned –

  • How many of those new homes are intended for rent and how many are for sale?
  • How many of those new homes are intended for low-income families and how many are for middle-income families?
  • What are the anticipated prices of the units in those projects?
  • What is the role of housing need in selecting applicants to be allocated these new homes?

Finally, the waiting list must be considered. The monthly household income limit has been restored to $25,000, which is at least three times the average income level. That means that the current limit does not, by any stretch of the imagination, satisfy affordability criteria. What is to be done?

Allowances can be made for the CSO’s latest figures being for 2014 (at the time I last checked, in early 2016) and a further margin of error in estimating income for our society in which income can be under-reported. Even so, one can reasonably estimate the average monthly household income at less than $10,000. If the Housing Policy is to provide for low and middle income applicants, the income limits need to be adjusted. There is a clear and compelling case for the redaction of the HDC’s waiting list to exclude applicants with monthly household incomes above $10,000. To persevere with the $25,000 limit is to deepen the real gap between the intentions of the housing policy and its actual outcomes.

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