Author: AfraRaymond

Managing Director, Raymond & Pierre Ltd. Past-President, Joint Consultative Council for the Construction Industry, Trinidad and Tobago- December 2010 to November 2015. Past President Institute of Surveyors of Trinidad & Tobago 2009-2010.

Housing Policy Imperatives – part 5

This week the examination shifts to the scale of the failure of our national housing policy – see <http://www.vision2020.info.tt/pdf/Policies and Procedures/Strategic_Corporate Plans/Housing Plan.pdf>.  Three main points for consideration are –

  1. Meeting the targets
    The original target was for the HDC to construct 100,000 new homes in a decade, which figure was generated from the 1994 ‘PADCO reports’—The Review of Shelter and Land Development Policy Study (PADCO reports): The PADCO reports is a series generated by The Planning and Development Collaborative International, Inc. and Laughlin and Associates Limited (who were contracted by the Government of Trinidad and Tobago in 1993)—that study is available at the Ministry of Housing & Environment’s library.  The annual target was reduced to 8,000.  As noted in the previous article, the reduced targets should have yielded 60,000 new homes by now, but the HDC has built only 15,394 new homes.The HDC made a recent statement that the number of empty new homes was approximately 10,000.  So just about 5,000 new homes have been built and distributed since the inception of this ‘accelerated housing programme’ in September 2002.  Even if we omit 2002, that is an annual average of 667 new homes being built and distributed. Even with the most optimistic assumptions, one is looking at considerable challenges in achieving these demanding targets.  At the current rate of performance it would take over 140 years to satisfy the original target.  That is how far off-track this accelerated housing programme has gone.  Deep into the long grass.
  2. The Cost-based Pricing model
    In previous articles in this series, I have been critical of the HDC’s cost-based approach to pricing its units.  In terms of the central mission of the Ministry of Housing  – i.e. creation and distribution of housing to the needy – that pricing model is inappropriate.  That is because it does not identify either the housing subsidy allocated to successful applicants or the opportunity cost of the HDC’s policies. The value-based approach is the more appropriate model to satisfy those basic requirements.  That is because it offers greater clarity to policymakers, since it is based on the market value of the completed homes, with the housing subsidy and the opportunity cost being the difference between the value and the actual HDC selling price. On 21st March 2008, this newspaper carried a report headlined “PM’s son in line for apartment” – see http://legacy.guardian.co.tt/archives/2008-03-21/news8.html – on allegations that Brian Manning, son of the then-PM was in line to receive one of the HDC apartments at Fidelis Heights in St. Augustine.  Noel Garcia, the then-MD of the HDC, was reported to have said –

    …the Government had taken a decision not to subsidise this  particular development. It is being sold at market rates in HDC’s thrust to expand and attract an open market clientele.

    Noel Garcia, former MD of HDC. Photo courtesy Trinidad Guardian
    Noel Garcia, former MD of HDC. Photo courtesy Trinidad Guardian

    Given that the units were reportedly being sold for a maximum of $875,000 and that they were worth a minimum of $1.7M, it is clear that each new home there is sold with at least $800,000 in housing subsidy.  The only way Garcia’s incredible statements could be correct is if one were using the misleading cost-based approach.

    I entirely agree with his statement that the Fidelis Heights development “…is therefore not part of HDC’s provision of subsidised housing for low-income earners.”  It is really subsidised housing for the middle-income groups, but that could never be right when the waiting list is bulging with needy people who cannot even get an HDC unit to rent.

    Fidelis Heights was, even by its name, a monument to misleading and wrong-headed thinking.  The HDC project with probably the highest level of housing subsidy per unit was built for the least needy on their waiting list.  Only if the underlying philosophies and resulting models are appropriate, can we avoid a repetition of this blatant waste of public funds in the face of real, human need.

    Given that the HDC is unable to satisfy the needs of the people it was intended to serve – the poorest citizens who cannot afford a proper home – it is scandalous that its scarce resources should have been diverted to Fidelis Heights, or the one at Federation Park in Port-of-Spain.

    The selection of this pricing model is proof of misguided policy at the most elementary level.  The basic concept of opportunity cost appears to have eluded the responsible officials and, what is more, that misguided policy appears to have been approved at the very highest level.

    Wrong-headed thinking can only encourage corrupt behaviour.

  3. Costs
    What has the national housing programme cost this country?  That is no rhetorical question, since this fact sits at the heart of the analysis.  The Housing Development Corporation (HDC) is the State’s implementing agency for production of new housing, it was formed in 2005 by an Act of Parliament and replaced the National Housing Authority (NHA).  The HDC’s funding comes from four sources –

    1. Treasury allocations – Those are announced in the budget and can be established from the Estimates of Expenditure as Capital Allocations to the Ministry of Housing.
    2. Sale of new homes – When the HDC sells a new home, that money is also available to them.
    3. Bond Issues – The HDC has also raised money by occasional bond issues; those funds can be used to either build more homes or ‘pay down’ on more expensive loans.  The bonds issued are government-guaranteed, so they are considered as virtually risk-free ‘sovereign debt’.  Given that the government itself issues bonds at lower rates of interest, it begs the question as to why these SPE’s are allowed to borrow on these terms.  That issue was raised by in the BG View of 20th August 2009 – see http://guardian.co.tt/business/business-guardian/2009/08/20/debt-depreciation-or-discipline.
    4. Bank Financing – The HDC also borrows money from commercial banks or the IADB to fund their construction programme.

    Try as I might, it has proven impossible to determine just how much the HDC has spent on building new homes in any given year.  That is because there are no accounts at all which are available to the public.

    The HDC Act, at section 18 and 19, mandates that the Board shall keep and properly audit accounts.  Section 20 requires the Board to submit its annual report to the line Minister within 3 months of the end of the financial year.  The line Minister is in turn obliged, by section 20 (2), to lay that report in Parliament within 3 months of receipt.  See – http://mphe.gov.tt/home/images/stories/pdfs/tthdc%20act%2024%20of%202005.pdf.

    The HDC has never laid either its annual report or audited accounts into Parliament for the public.  The failure to publish accounts is one of the most serious warning-signs of companies in financial trouble.

    That failure to publish HDC or NHA accounts over such a long period (since 2002 at least) spanning several administrations, is a serious indictment of the main participants – the politicians, the Board Directors and of course, the professionals involved in the entire huge operation.

    I have been reliably informed that the HDC’s new management is attempting to rectify this situation and that must be a priority if we are to properly assess the performance of this vital social programme.

The overall picture is stark –

  • Gross under-performance in terms of the output of new homes, only about one-quarter of the reduced target has been achieved:
  • Poor financial and project controls – as revealed in the Uff Report (at para 25:30 – see http://www.raymondandpierre.com/articles/article84.htm), not one HDC project has a signed contract:
  • No accounts or annual reports, given the preceding point, that is not surprising:
  • An inequitable allocations policy, with lower priority given to those who cannot afford to buy.
  • Approximately 10,000 new homes remain empty and that is the one which tops them all.  The ongoing adverse consequences include – vandalism, the greater rate of general deterioration afflicting empty homes, the high cost of security and of course, the continued pressure on those people on the waiting list ‘holding strain’.

Given the combined effect of all this, which is probably hidden to most of today’s readers, one can only wonder at the patience of our needy citizens.

The entire situation also raises potent questions about the purpose and performance of the SPEs.

SIDEBAR: The concept and importance of opportunity cost and housing subsidy

Let’s use a typical home at Fidelis Heights as an example.

  • Unit Cost – $825,000 (and it is not clear if land and professional fees were included)
  • Selling Price – $825,000
  • Market Value – $1.7M

    • In the prevailing cost-based pricing model, this is considered a satisfactory, ‘zero-subsidy’ result, since the State has recovered all of its costs. Another phrase in the lexicon is the ‘cost-recovery’ model of pricing.

    The danger, as shown in the example in this article, is that the ‘cost-based’/’cost-recovery’ model ignores opportunity cost.

    The opportunity cost is the difference between the actual selling price of the unit and the market value. The HDC could sell each Fidelis Heights home for $1.7M, but has made the decision to sell at a reduced price of $825,000, which means that each sale is at the loss of those possible earnings. That amount of the loss incurred by the decision to sell at a lower price is called the opportunity cost. It is important that opportunity cost be identified and quantified as an element in all decision-making, both private and public sector. A decision-making process which ignores or obscures opportunity cost is negligent at the very least and can encourage corrupt practices and the dilution of capital.

    In this example, the opportunity cost is $1,700,000 – $825,000 = $875,000.
    Opportunity cost

    $875,000 is enough money to build at least three modest homes, yet this system has allocated that much money to each Fidelis Heights purchaser, each of whom qualified for a mortgage at that level.

    As a result of this questionable choice and the resultant shaky pricing model, there is an enormous ‘leakage’ of housing subsidy and opportunity cost.

    The opportunity cost can also be described as the housing subsidy since that is the difference between what a Fidelis Heights unit actually sold for and what a purchaser in the open market would have to pay for a similar unit.
    The two terms are therefore synonymous – Opportunity Cost is exactly equal to Housing Subsidy.

    http://guardian.co.tt/news/general/2009/03/25/quality-performance-must

    •
    A version of this commentary appeared in print on August 5, 2010, on page 13 of the Business Guardian.

    Related reading:

    Housing Policy Imperatives – Part 4

    Having set out a framework for a more effective and equitable national housing policy, it is time to deepen the discussion.  In this week’s column, I will further analyse the existing housing policy so as to highlight those errors which we must avoid if we are to do better.

    My proposed framework would quantify housing subsidy and allocate that in accordance with identified housing need, with the quality of the new homes also being monitored to ensure constant improvement.

    To go further into the issues requires that we examine these aspects –

    • National Planning – It will be very difficult to achieve improved levels of housing quality if we proceed to build large numbers of new homes without reference to a national land-use plan.  1984 was the last time our Parliament approved a national land-use plan.  Over 25 years have elapsed and the position of the last government was that the national land use plan was being prepared for discussion in the next 2 years or so.  We have very limited developable land in this country – only about 9 to 10% of the total – so it is critical to plan and co-ordinate our future for best results with our limited resources.  Transportation, education, shopping, health-care, industry, housing and recreation are the main aspects which need to be fit onto those developable lands.  This ongoing housing programme has already had grievious cases of the alienation of agricultural lands for housing.  Alienation of agricultural lands is when we pave over farmland for non-agricultural development.  That land is permanently lost in terms of our food supply, but we need to preserve our agricultural lands.  That is vital in terms of maintaining our food security.
    • Intensity of development – An associated aspect that we need to reconsider is whether we can spare the land to continue HDC developments of  homes with gardens.  The HDC must publish its figures on the numbers of new homes built; the amount of land consumed; the numbers of houses versus the numbers of multiple-family homes and of course, the numbers of these various types of homes which have actually been occupied.  At this point the HDC has only built 15,394 new homes, compared to their annual target output of 8,000 new homes, which, if attained, would have been 60,000 new homes.  The HDC has only built a quarter of the intended number of new homes, which means that we still have time to adjust and improve the programme.
    • Pricing – The more I consider the dilemma in which this housing policy has been caught, the more it seems that the fundamentals were poorly-considered.  Just consider the issue of the pricing of the units – How did the pricing model evolve?  I have already, in part 2 of this series, critiqued the HDC’s cost-based model for its erroneous outputs in terms of assessing the quantities of housing subsidy being allocated.  One can go further to ask how these price points emerged.  Was any reference made to the incomes of the people on the waiting-list or were the HDC prices driven by the demands of the physical development agenda?  It seems to me that the latter was what took place, if indeed any conscious process of setting prices ever did occur.  If we are aiming for people-centred development, that entire misguided approach to pricing needs to be revised.  We need to give serious consideration to building more modest multiple-family homes for rental.
    • Quality – Another matter which has been in the news from both the last administration and now the new one, is the issue of the poor quality of some of the new homes.  We have been given various ‘horror stories’ about poor construction and the need for further works and so on.  But there is more to this story.  The fact is that the norm in the construction industry is that a contractor only has a valid claim to be paid in the case of ‘works properly executed’, so how did the HDC end up paying for all these defective buildings?  I am not seeking to exonerate the contractors from any wrongdoing, but the simple fact is that someone in HDC ought to have had the responsibility to inspect and approve the works before payment was authorized.  Either the HDC has a process for doing that or not.  If yes, what went wrong?  Who signed-off on those poorly-built homes?  If there is no such process, then the HDC system is one which exposes the Treasury and the neediest families in the land to real abuse.  These are serious questions which need to be answered, and soon.  If there are indeed civil servants and consultant advisers who have been approving defective work, they need to be dealt with.  If that were so, it seems to me that such actions would amount to grave professional misconduct, at the very least.  Such people should be banned from any State work for a period, as a minimum.  The real horror story is the official silence on the fact that someone from the HDC had to approve these very same defective works.  Lying by omission – see http://guardian.co.tt/commentary/letters/2010/06/03/don-t-blame-contractors-only-shoddy-hdc-work.  That continuing dishonesty is the real horror story.  To remind readers that this is no new issue, please see – http://guardian.co.tt/news/general/2010/04/26/capacity-firms-weak-non-existent.

    I close this week by renewing my call for Minister Moonilal to take leadership on this burning national issue.  A conference on revising Housing Policy should include participation from the leading civil society organizations such as the JCC, the National Land Tenants’ and Rate-payers’ Association, the Sou-Sou Land group, Habitat for Humanity and the Salvation Army.

    Basic facts need to be compiled and distributed to seed the discussion.  The framework and philosophy need to be clearly articulated, if we are to get it right this time around.

    The continuing presence of over 10,000 empty homes is intolerable – it is solid proof of a seriously failed policy.  Our silence has to be broken on this issue.  We cannot continue this way.

    Related reading:

    VIDEO: Morning Edition Interviews

    VIDEO: Morning Edition Interviews – March 2010

    AfraRaymond.com, at this time chooses to re-issues these interviews on Morning edition on TV6 CCN, Trinidad and Tobago, to keep readers up-to-date on issues surrounding Uff Report and UDeCOTT Affair respectively.

    1. Afra Raymond sits with senior journalist Andy Johnson to discuss the “UDeCOTT/Calder Hart Affair” on Morning Edition television show on TV6.
      • Programme Date: 10 March 2010
      • Programme Length: 0:28:16

    2. Afra Raymond sits with guest host, William Lucie-Smith on the Morning Edition television show as part of a panel with senior counsel Israel Khan, to discuss the leaked Uff Report.
      • Programme Date: 31 March 2010
      • Programme Length: 0:26:52

    Second FoI Application for Duprey Letter

    Application #2 for Duprey Letter

    This is a second attempt to get at the Duprey letter – the first application was eventually deflected by the Ministry, who asked us to refer to the Central Bank. I believe that was a barefaced attempt to stifle our request with the fact that the Central Bank is exempt from the FoI Act.

    My request for the 2008 audited accounts is based on the terms of the 12th June CL Financial Shareholders’ Agreement – Section 4 of the SA sets out the procedure for a proper system of accounts, culminating at 4.4.5 – “…shall ensure that an annual report of CLF is prepared and dispatched…in manner consistent with standard corporate practice…” The accepted interpretation of this language informs us that the word ‘shall’ denotes an obligatory, non-voluntary duty. If that is the case, when can we expect publication of the 2008 annual report, accompanied by audited accounts, as per ‘standard corporate practice’?

    Housing policy imperatives – part 3

    hdc-logoLast week’s column delved into the vital issue of housing subsidy and its mis-allocation.  This week, I will set out some suggestions as to how this wrong-headed allocation of public subsidy might be re-oriented to better serve our needy citizens.

    The existing system is fundamentally flawed and in urgent need of reform, if we are to better apply the limited quantities of housing subsidy to the nation’s real housing needs.

    In order to create a more effective and transparent equation for the allocation of housing subsidy we need to establish three things.  Those are the quantity of housing subsidy which is available for the State to dispense; the housing need of those on the HDC’s waiting list and the housing quality of the new units produced by the HDC, since those ought to be raising the general standard of housing accommodation.

    The key point here is that there is only limited housing subsidy available and a clear choice has to be made as to its allocation.  That choice has been made under the existing policy, which in my view is inequitable and counter-productive.  If we accept that the proper measure of a successful housing policy is needy families moving into new HDC homes which improve their living conditions, we also need to accept that a policy which can generate over 10,000 empty homes is a failure.

    A supplementary point is that if we are spending vast sums to build new homes, we also need to obtain a measurable improvement in the nation’s housing standards.

    The main points could be outlined in this way –

    • Housing Subsidy – First of all, we need to establish the quantity of housing subsidy the State is prepared to dispense.  That can be determined by the sale of the new homes, as recently proposed by Minister Moonilal.  The figure here being the difference between the market value of the new homes and the HDC’s sale price.  I am of the view that we are at, or very close to, the ceiling as to the national percentage of home-ownership.  Another approach would be to establish the difference between the market rental value of the HDC units and the rents affordable to the applicants on the waiting list.  That figure can be capitalized to allow comparison between the policy choices.  The proposed effort to sell the new homes will in fact be inimical, since it will have the effect of decreasing the amount of housing subsidy available to those who cannot afford to buy.  In other words, the neediest people on the waiting list are being discriminated against by the policy of the HDC.
    • Housing Need Index (HNI) – We need to develop a framework for measuring the housing need of applicants for HDC housing.  That analysis would need to include such items as size of the family, family income and their living conditions, as well as any special needs such as disabilities and the location of the extended family.  The UK’s Department of the Environment and its implementing agency, The Housing Corporation, have already done substantial work in developing the HNI as a means of properly allocating State funding for housing across the nation.  The USA’s Department of Housing and Urban Development (HUD) has also done considerable work on this complex series of questions.
    • Housing Quality Index – In 1993 I proposed a Housing Quality Index for the UK which would have been a tool for measuring how effectively the State funding had been applied in creating good quality housing.  The main elements of my proposal were to measure the quality of design of and amenity provided by new homes.  The Housing Corporation’s approach to this can be viewed at http://www.housingcorp.gov.uk/upload/pdf/710_HQI_Form_v3-1.pdf, see also this view from the UK’s Homes and Communities Agency (HCA) – http://www.homesandcommunities.co.uk/housing_quality.  Training is available at the Housing Quality Network – http://www.hqnetwork.org.uk/index.

    We need to allocate the limited housing subsidy to those in the greatest need.  That is the only reasonable policy for this critical area of national development.  That can only proceed properly on the basis of understanding the parts of the puzzle.  Anything other than a comprehensive review of these wrong-headed policies is a recipe for more waste and empty homes.

    Which brings me to an issue raised in last week’s column; the incidence of ‘policy silos’.  That phrase – ‘policy silos’ – refers to a condition in which the activities of various State agencies impinge on the same issues and yet, incredibly, there seems to be scant, if any, co-ordination between those agencies.  The aspects addressed last week can be summarized as –

    • The Minister of Housing and the Environment, Dr. Roodal Moonilal, making extensive statements on the sale of new homes, but being silent on the burning issue of new homes for rent.  Silence as to the greater area of need, alongside ambitious proposals to advance futile policies in favour of the less-needy.
    • The Minister of Science, Technology and Tertiary Education (MSTTE), Fazal Karim, proposes blanket rental subsidies for students in tertiary education.
    • The Legal Affairs Minister, Prakash Ramadhar, who is responsible for the rent control system, declares that he prefers that rents be determined by market forces.

    Those are exactly the ‘policy silos’ we need to dismantle if we are to make any real progress on these vital issues.

    Minister Moonilal should take the lead on this issue by convening a symposium or conference to debate these issues and establish some kind of policy consensus.  We cannot continue this way.

    We need to go beyond the numbers game of billions spent, jobs created and new homes built.  We need to move to a new, clear space where our national housing policy is declared as existing to improve the living conditions of our neediest citizens.  We need to move beyond the narrow perspectives which glorify home-ownership as the only correct answer.  There are many productive and honest families, in advanced countries, who never own a home.  They are no less worthwhile than those of us who are home-owners.

    Most of all, Minister Moonilal should take urgent steps to distribute the ‘…approximately 10,000…’ homes to the most needy.

    SIDEBAR: Re-purchase programmes

    There ought to be a programme for those people who have HDC homes and no longer need them.  That program would offer a cash payment to those HDC tenants who vacated their units.  That would have the practical effect of releasing additional housing units to the HDC without the expense and delay of having to construct new ones.

    Related reading:

    Change, not Exchange – Part 3: Jack Warner

    Jack Warner, MP. Photo courtesy Trinidad Guardian
    Austin 'Jack' Warner, MP and acting Prime Minister
    On 6th June, I wrote in this space about the challenge to the new government to bring about a real change, as opposed to mere exchange.  I ended that column by highlighting the worrying case of Jack Warner, one of my former history teachers, making history by being the first Cabinet Minister to hold other appointments.  My objection to Mr. Warner serving two masters was that it would be impossible for him to give the full energies we have every right to expect from our Cabinet members.

    We need to be mindful of the relationship between morals, ethics, law and of course, that scarce commodity, good sense.  Obviously, law is the paramount authority, because we live in a republic ruled by laws, not men. No one should break the law and there are penalties for doing that.  But we also know that in life we make many important decisions without referring to any laws. Those are sound decisions, which form norms, eventually described as custom-and-practice or culture. There are many acts, which are at one and the same time both deeply offensive to right-thinking people (and I think that most people are right-thinking) and in breach of no particular law.  Many acts, with no need for examples, since this is a newspaper any child could pick up and read. There might even be laws against me describing such acts in print.  Who knows?

    The reality being that, as important as law is, the proper development of our society depends on far more than just law.  Law is a necessary, but not sufficient ingredient for proper development.  So, what do I mean by proper development?  One of the key signs that we are moving forward would be an increased sense of consequence and the capacity to learn from our errors.  Some examples of our failures in those respects were set out in the prior article in this series.

    Some of the main points here were –

    • Board resignations – Jack Warner’s opening statement, made on Indian Arrival Day, was his strong demand that all Board Directors of State Enterprises and Statutory Bodies coming under the control of his Ministry must submit immediate resignations.  In making that call, Mr. Warner relied heavily on custom-and-practice, good practice and established norms.  He was, quite properly, declaring that he expected those high-ranking public servants to behave properly.  No reference to law was considered necessary to see what was the right thing to be done.  Yet when queries arose on Jack Warner’s multiple appointments, we were rapidly boxed-into a strange place where only the law prevails.  That is ‘chinksing’ with a vengeance.
    • Warner’s statement upon his return home on the 15th was most instructive.  Consider please that this was no hasty response to an ambush question and that the entire Piarco reception had been arranged by Warner.  His emphatic reply as to the weakness of Rowley’s case was telling, in as much as it relied on the various examples of PNM wrongdoing that Rowley was accused of having condoned.

      …If Dr Rowley is so concerned about the Parliamentary Code of Ethics, I want to ask him some questions this afternoon. “Why was he so silent when Mr. Manning appointed his wife, not once, not twice, but three times as a minister? “I want to ask him why he was silent when a Minister of Health had his son open pharmacies all over the country to sell CDAP drugs? Wasn’t that code of ethics broken then? “I want to ask him also why he was silent when another Minister of Health had his wife take all the insurance of the Government of Trinidad and Tobago to a company she owned? Why was he silent then?

      See – http://guardian.co.tt/news/politics/2010/06/16/warner-i-have-broken-no-law

      Strange as it might seem, a mere 3 weeks into the honeymoon, we were witnessing a premeditated statement by a senior Minister to the effect that ‘two wrongs make a right’.  Mr. Warner was trying to silence Dr. Rowley, by reference to his condonation.  That is a sad and rickety foundation from which to proceed, but even more telling is Warner’s implicit acceptance that his own position was wrong.

      Warner’s attempt to diminish Rowley’s victory was also interesting –

      Not contented that he removed Patrick Manning from office—he got the easiest political ride in history—he had the temerity to accuse me of breaking some law, or transgressing some code of ethics…

      It has to make you wonder, if that is Jack Warner’s view of Rowley’s victory, what is his view of the PP’s triumph?

    • In the midst of all the lawyers’ opinions, we had an attempt, by Michael Beloff QC, to set these local events in international context –

      …Beloff said he was unaware of any precedent in any common law jurisdiction for a person holding at one and the same time, ministerial office and another post outside of the Government.  “I have little doubt that a main reason is that the demands of ministerial office would usually preclude such dual appointment and the minister could be exposed to criticism for not devoting himself full-time to his government duties…

      see http://www.trinidadexpress.com/news/97564904.html

    • The silence of the lions – Most notable, for me, in all this, was the lack of comment from outspoken people like – Errol McLeod, David Abdullah, Makandal Daaga and Anil Roberts.
    • We voted against the idiosyncratic and bizarre leadership style of Mr. Manning, in which important policies were perverted and new precedents set for a favoured operative.  It seems that the grounds for the decision were limited and the well-established precedents set aside for Mr. Warner and effectively, a ‘special case’ was made for him.

    I say again that the State has a duty to be exemplary in its conduct.  We have a right to reasonable, consistent and transparent decision-making by government.  Another aspect of this is that this lawyer-driven decision seems, to me at least, to limit the PM’s power in Cabinet to control her team.

    Apart from law, most of the people who supported Jack Warner on this issue seemed to proceed from either the ‘two wrongs’ principle or from the notion that Mr. Warner is a superior performer.  It seems that, in this case, Jack Warner will have to ‘take win’ and all we can do is measure his reputation against his actual performance.

    One of the fascinating aspects of this affair is the way in which power has been defined, and re-defined, in the unfolding.  My favourite definition of power was always ‘the ability to set the agenda’.  It has always been the case that the setting of the public agenda was a prerogative of the PM, leaving Leaders of the Opposition lagging one beat behind.  As a result of that pattern, a lot of sound and fury became the norm of Opposition. In his opening statement on 4th June, Dr. Keith Rowley, as the new Leader of the Opposition, set out his objections to Jack Warner’s multiple appointments.  We had comments from every sector of the society on this issue and many group exchanges on radio call-ins and the social media.  Whatever one thinks of the actual objections raised by Dr. Rowley, it is clear that those objections shaped the public agenda. That is no bad thing. In this rounds, it seems that the change we voted for could be coming from unexpected places and with odd timing.

    Housing policy imperatives – Part 2

    Last week’s column set out my principal queries as to our nation’s housing policy – see http://www.vision2020.info.tt/pdf/Policies and Procedures/Strategic_Corporate Plans/Housing Plan.pdf – and the intervening events have only put those into better focus.

    Key points –
    ‘Cheaper Govt Houses’ in the Sunday Guardian of 27th June featured an interview with Dr. Roodal Moonilal, Minister of Housing and the Environment.  The Minister touched on some of the key issues and confirmed that

    …Some people simply cannot afford the market value of the homes. As a result, Government is looking to provide a further subsidy to assist with the purchasing of homes. I intend to take a proposal to Cabinet to consider the price reduction of the housing units…

    – see http://guardian.co.tt/news/politics/2010/06/27/cheaper-govt-houses-pg-6 .

    There was no mention of rented housing in that article, so it seems that the new Minister has adopted the existing policy of preferring to sell the new homes built by the Housing Development Corporation (HDC).  In addition, he is proposing to increase the housing subsidy.  An important  correction is that HDC houses are not sold at ‘market value‘ as the Minister implied.  Market value is the amount the new home could sell for on the open market and the HDC offers the new homes to applicants at a lower price.

    What is Housing Subsidy?

    This is an important aspect of the housing policy discussion and these are the basic points –

    • Public funding – To create new homes, the HDC has to spend public money for land acquisition, professional fees and cost of construction – these are ‘first costs’ for new homes, but there are other significant costs of getting a needy family to move in.
    • Housing subsidy – For example, if the market value of a new HDC home is $900,000 and those homes are sold to applicants for $425,000, the housing subsidy in that case is $475,000.  Please note that I am not relating the sale price to the cost of production of the new home – that is a mistaken approach, because it ignores the opportunity cost of the investment decision to sell at that reduced price.  Effectively, this ignores the market to the detriment of the taxpayer.  Even in the case of rented housing, the same basis would apply, with the difference between the market rent and the actual rent being the weekly housing subsidy.
    • The allocation of Housing Subsidy – Fidelis Heights at Bates Trace in St. Augustine is a new HDC development of townhouses near to UWI – in my view, the homes there are middle-income units which should not have been built by the HDC.  In that case the housing subsidy per unit is in excess of $850,000.  In view of the desperate national housing shortage and the scarcity of resources, it was a grievious mis-allocation of both public capital and housing subsidy to have embarked on this scheme.  In the examples cited by the new Minister, the housing subsidy is far lower.  The people who purchased units at Fidelis Heights got them at between $780,000 to $900,000.  I am also aware that those homes were allocated without reference to housing need – i.e. some of them went to single people, without children.  To put it plainly, there is no case for allocating $850,000 in housing subsidy to a single person, when there are entire families in greater need, who are not catered for by the system.  There is a very poor quality of discussion on the issue of housing subsidy.  That is because of the system of cost-based pricing, as mentioned above, which error is compounded by the sparse references in the official statistics.  I have only been able to unearth a single official attempt to quantify housing subsidy in the ‘2010 Draft Estimates of Development Programme‘ http://www.finance.gov.tt/documents/publications/pub07D7E4.pdf ‘Provision of Housing Subsidies at Greenfield sites’ is stated, at line H 003 to be $3,058,863.  I am not saying that there is a poor understanding of the role of housing subsidy.  That would be untrue, since the people who are manipulating the system all understand the real value of housing subsidy very well.
    • Rent control – ‘Rent subsidies for tertiary students’, also in Sunday’s Guardian – see http://guardian.co.tt/news/politics/2010/06/27/rent-subsidies-tertiary-students – featured a discussion on the housing situation affecting 14,000 UWI students.

      [Minister of Science, Technology and Tertiary Education (MSTTE) Fazal] Karim said while the university has established mechanisms to register landlords “there exist no mechanisms to monitor prices, ensure quality accommodation, minimise security anxiety or seek the interests of the landlords and students.” In the near future, Karim said, the MSTTE and the Health Ministry will establish a committee that will make recommendations to establish mechanisms for the provision of subsidies “on rents to all students residing in the region and who are registered at tertiary institutions in the area.”

    It seems from his statements that the MSTTE is proposing a rental subsidy to all tertiary students, whatever their means.  In a situation of scarce resources, that type of policy can have inequitable consequences, since some of these students are not needy at all.

    The Minister of Legal Affairs, Prakash Ramadhar, attending as MP for the area, said –

    …what adds to the problem is the lapsing by the Rent Assessment Board. “We nationally had to debate the issue if this country would go into a free market in terms of rent or rent restriction.”

    Ramadhar said he would like to see free market forces determine rents.

    Legal Affairs Minister Prakash Ramadhar, left, Fazal Karim, Science, Technology and Tertiary Education Minister, right, listen attentively to the landlords during yesterday’s discussion. Photo: Jennifer Watson. Courtesy Trinidad Guardian
    Legal Affairs Minister Prakash Ramadhar, left, Fazal Karim, Science, Technology and Tertiary Education Minister, right, listen attentively to the landlords during yesterday’s discussion. Photo: Jennifer Watson

    So here we have the paradox deepening, with the Minister responsible for the rent control system seeming to say that he is against those controls.

    The outlook for the state’s intervention into the housing arena is confusing, to say the least.  Confusion is the ideal atmosphere to breed under-performance and corruption.

    Our needy citizens deserve better.  This entire debate should be to create reasonable, redistributive and  sustainable housing policies for our nation.

    The allocation of scarce housing subsidy must be reported and improved, so that the most needy receive the most subsidy.

    Next week, we expand to include questions as to how many of the HDC houses are occupied by the legitimate tenants?  Are steps being taken to deal with those who have broken the terms of their tenancy?  Also, some discussion on the use of re-purchase schemes as another way to create extra units of housing.

    SIDEBAR: The numbers’ game

    Last week’s column asked Dr. Moonilal to specify how many new homes were empty at this time and it was very disappointing to read that “…approximately 10,000 homes, including defective units, are unoccupied…”.  The new administration has to strive to do better than the one they just replaced and it is just not acceptable that the HDC cannot (or will not?) report on an elementary matter like this.

    Related reading:

    Housing policy imperatives – part 1

    Proper housing is an essential part of decent human rights and the development of a just society.  For those of us who have proper housing, we can be virtually blind to the plight of those who do not.

    Dr. the Honourable Roodal Moonilal, Minister of Housing and Environment
    Dr. the Honourable Roodal Moonilal, Minister of Housing and Environment

    We now have a new government – the People’s partnership (PP) – and given  the swirling claims and counterclaims around State housing, it is important to re-open this discussion.

    The first aspect of housing policy to be considered would have to be the basic model – ‘What is it?’

    The main housing policy of the first UNC government was to provide serviced lots – i.e. land was acquired and developed with infrastructure (roads, drainage, electricity and water supplies etc.) before being distributed.  That approach is based on the notion that it allowed the State to have a positive impact on the housing shortage with the use of limited resources.  Between 1995 and 2001, that policy yielded a modest result, since only about 2,200 serviced lots were sold, with 376 new homes built.

    Showing Trinidad and Tobago A New Way HomeThe current national housing policy, entitled “Showing Trinidad and Tobago a New Way HOME” was initiated in September 2002 by then Minister Danny Montano with the stated goal being 100,000 new homes to be built in a decade.  The annual  target was soon reduced to 8,000, with those new homes to be sold to applicants.  The aim was to increase the quantity and quality of housing available to those who were unable to afford housing in the open market.  That program never achieved its targets and there was a consistent pattern of over-stating its achievements.  The last claims we heard were that the total output had been adjusted (downward, of course) from 26,000 to only 15,394 new homes in the 7-year period from 2003 to 2009.

    In terms of gross output, the PNM policy easily outstripped the UNC’s, even if, in terms of its own targets, it was a signal failure.  From the aspect of output versus target numbers, the results are so mixed that it is difficult to settle the question of which policy was the more successful one.

    For me, a key test of a housing policy’s success would have to be the number of people who have benefitted from an improvement in the quality of their housing.  In that case, the existing policy is seriously wanting, since, despite the output of 15,394 new homes, most of those remain in the hands of the Housing Development Corporation (HDC).  Just like with the actual numbers built, there has been a pattern of cover-up, shifting figures and plain dishonesty.  Despite my efforts, I am unable to locate a published record of how many of these new homes have been given out.

    Dr. Moonilal, we need a clear statement of just how many new, empty homes the HDC has on its hands.

    “Rent control is a thorny housing policy issue, but it deserves a second thought, since so many of our needy citizens occupy rented housing”

    I went to the 2007 conference of the Caribbean Association of Housing Finance Institutions (CASHFI) and the PS of the Ministry of Housing said that a major issue was the fact that about 90% of the people on their waiting-list could not qualify for a mortgage.  If the objective of the existing model is to promote home ownership in preference to rental units and 90% of the applicants cannot afford to buy, there is a clash between those policies and the reality of the needy.

    New forms of housing finance were devised to overcome that hurdle and those included mortgages –

    • at 2%;
    • with zero-percent deposits;
    • even 100+% models which allowed the new home owner to spread the cost of appliances and furnishings over the period of the mortgage.

    We need to re-consider our housing policy in fundamental terms –

    • What is the extent of housing need in our country? In last week’s ‘BG View’, there was a call for the national pensions proposals to be based on the results of the 2010 census – see http://guardian.co.tt/business/business-guardian/2010/06/17/pension-promises-deferred .  The review of national housing policy must be based on realistic housing need data and that should also emerge from the census later this year.  In “A critique of State Housing Policy‘, published here on 2nd August 2007 – see http://www.raymondandpierre.com/articles/article35.htm – I proposed that our country has a 5-part housing market.  In my view the task would be to determine the numbers occupying each parts and which of them we intend to provide for.
    • Is large-scale construction the only way to assist those in housing need? Another aspect which needs review is the matter of rent-control, since that is a cheap way of assisting those in housing need without spending vast sums of taxpayers’ dollars.  The reality is that although rent-control legislation remains on our law-books, the rent control boards which regulate that area of civic affairs have been allowed to wither and die.  Rent control is a thorny housing policy issue, but it deserves a second thought, since so many of our needy citizens occupy rented housing.
    • Are we at realistic limits in terms of tenure? To make a simple contrast, in 1992, when US President Bill Clinton launched his expansionary proposals to ramp-up home-ownership, about 62% of the homes in the US were owner-occupied.  At the end of 2008, after a massive and disastrous experiment intended to increase home-ownership, about 68% of US homes were owner-occupied.  Our current home-ownership percentage is about 76%.  Given the poverty of those on the waiting-list, does it really makes sense to keep on building new homes for sale to poor people.  Are we at the ‘Limits to growth’ where home-ownership is concerned?
    • What types of homes should we build? Large swathes of agricultural land have been ‘paved-over’ to build these  new homes, which is to the permanent detriment of our food security, to name just one obvious concern.   The fact is that we do not have enough land in this country to continue that pattern of large-scale development.

    Next week, the focus shifts to issues of build quality, allocations policy, land grabbing and value-for-money aspects.
    Related reading: