Archive for category Public Procurement Reform

Property Matters – Housing Issues – part 5



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

YEAR SUBSIDY (cumulative)
2007 $.9M
2008 $5.3M
2009 $16.5M
2010 $34.1M
2011 $52.7M
2012 $70.4M
2013 $87.4M
2014 $105.2M

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.



AUDIO: The Breakfast Roundtable interview on Sky 99.5FM – 23 March 2016

sky995fmAFRA RAYMOND, Immediate Past President of the Joint Consultative Council (JCC), comments briefly on the firing of Jearlean John by the new HDC board, after being on administrative leave for a couple of months. He says we should not be too quick to believe the Marlene McDonald dismissal is a sign of greater accountability to come on the part of governments. Mr. Raymond also lauds Government’s proposal to use the housing sector to create opportunities for construction industry, to help pull T&T out of recession.

  • Programme Date: Wednesday, 23 March 2016
  • Programme Length: 26:04

, , ,

1 Comment

Property Matters – Housing Issues – part 4

hdc-logoAlthough the HDC is the State’s main implementing agency for its housing policy, there are other important elements to be considered. The main one I will examine here is the role of public subsidy in the housing program.

Given that we live in a relatively wealthy and very densely-populated small island state which operates a free market system, the prices charged for property sales or rentals have moved upwards historically. One of the objectives of the housing policy is to assist those who are unable to compete in the market, so it is justifiable to apply State resources to reduce the cost of housing to those needy persons.

That allocation of Public Money and land to the housing program is intended to create the new homes for the applicants. In addition to the direct construction of the new homes, Public Money is also used to reduce the cost of housing.

These additional applications of Public Money are called Housing Subsidy, the three main types are –

  1. The five-year tax allowance of $25,000 per annum is available to first-time home-buyers. That is about $6,250 more cash each year for first-time buyers of homes in the open market or from the HDC. I have been unable to locate any official estimates of how many people benefit from these provisions. All first-time buyers are entitled to this tax allowance, whatever the actual price of the home being purchased. This subsidy is therefore widely enjoyed and not at all targeted to the needy.
  2. Subsidised mortgages at a 2% interest rate are available from TTMF for persons earning less than $10,000 per month who are buying homes under $850,000. This is substantially below the market rate of interest, so TTMF is subsidised by the State to compensate for the difference.This program started in 2007 to provide a ready stream of affordable funding for the anticipated output of the HDC’s large-scale construction program. This table shows the Public Money spent on this subsidy in the eight years for which TTMF’s audited accounts are available –

    State Subsidy of 2% Mortgages for low-cost housing
    (via TTMF)

    2007 $199.1M
    2008 $194.7M
    2009 $183.5M
    2010 $165.9M
    2011 $147.3M
    2012 $129.6M
    2013 $112.6M
    2014 $ 94.8M
    TOTAL $1,227.5M

    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.

    The recalculated figures for this subsidised 2% mortgage programme are –

    TTMF recovery of 2% mortgage subsidy 2007 to 2014

    YEAR AMOUNT of SUBSIDY (cumulative)
    2007 $900,000
    2008 $5,300,000
    2009 $16,500,000
    2010 $34,100,000
    2011 $52,700,000
    2012 $70,400,000
    2013 $87,400,000
    2014 $105,200,000

    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.

    This revision will require that we pay even greater attention to the HDC’s Housing Subsidy, since it far outstrips the other subsidies. There is also a seminal interplay between the HDC and TTMF which needs to be discussed in terms of promoting homeownership.

  3. HDC Subsidy is applied to the actual sale price or rent of the new homes. It can be calculated as the difference between the market value of the new home and its selling price. The same approach can be applied to rental units. Although I have not been able to find any consistent assessment of these figures from my limited interactions with the HDC, it seems clear that most of this housing subsidy is distributed to buyers of new homes.The allocation of the HDC subsidy ought to be an area of interest, since that program is intended to target the needs of ‘low income and middle income’ applicants. There is scarce evidence across the HDC program, so one is driven to use the few examples which become visible from time to time.

The two examples I am citing are –

  1. fidelisheights

    Fidelis Heights

    Fidelis Heights

    This is a 180-unit project at Gordon Street/Bates Trace in St Augustine, opposite the Sir Hugh Wooding Law School (UWI).

    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…”

    The units were sold for a maximum of $825,000 and they were worth a minimum of $1.7M, so each new home there was sold with at least $800,000 in housing subsidy. The only way those statements could be correct is if one were using the misleading cost-based approach. This is really heavily subsidised housing for the middle-income groups.

    In this example, the opportunity cost is $1,700,000 – $825,000 = $875,000. Over 50% Housing Subsidy!

  2. Victoria Keys

    Victoria Keys

    Victoria Keys

    This is a 264-unit complex at Four Roads, Diego Martin, on an island site opposite to the Starlite Shopping Plaza. Again, this project appears to have been intended for middle-class applicants as per the previous example.

    The substantial construction of these apartments was completed in 2010, but there have been extensive modifications/improvements of the units to a surprising degree, when one considers the HDC mandate. The project is only now nearing completion, so consider these disclosures from the Minister of Housing and Urban Development, Marlene McDonald, in her statement to Parliament on Friday 4th December 2015 (pgs 59-61 of Hansard) –

    “Some three bedrooms were turned into two bedrooms, some two bedrooms were turned into one bedroom; when they were completed there were tiles on all the floors in the 264 units, all those tiles were dug up. No one lived in there you know; all the tiles were removed and replaced by hardwood floors. All the tiles in the bathroom are now porcelain tiles. All the kitchen cupboard—beautiful…it is one of the finest HDC sites in the country…I am talking about the inside of the building…264 units, every one air-conditioned…“to provide a quality living experience”, you had the installation of automatic sprinkler systems; you had the installation of garbage chutes in each apartment; the installation of centralized air-conditioned units for common areas of the buildings; you had two four-storey car parks built, and let me tell you, with elevators. There are two of them, one on the western side of the compound and one on the eastern side. There is a swimming pool and the swimming pool sits on the roof of the eastern side of the car park. So you have the four-storey car park and sitting at the top there is the swimming pool…There is also a clubhouse there. There is also a tennis court. There is also a gym. There is also a sauna-cum-spa…”

    According to the Minister, the total costs were –

    	• Original Cost of Construction of the buildings: $299M
    	• Cost of modifications of the buildings:         $141M
    	• Cost of External Works:                         $170M
                                                        TOTAL $610M

    The total cost of $610M, when divided by the 264 new homes at this project, equates to an average cost of $2.3M! Please note that these estimates given by the Minister do not seem to have included the cost of what would be very valuable land. That is how far adrift this housing program is from focusing on the urgent needs of our less fortunate citizens.

    According to Dr. Rowley, speaking about the valuations of those units on 21 November 2015

    …The cheapest unit is $1.6 million and the top units are valued at $4.5 million,”

    One can only hope that those units will be sold at market prices so that HDC can recover some of these exorbitant costs. Given the location and the high-quality finishes, there Is no rational case for any housing subsidy to be expended at Victoria Keys.

How is Housing Subsidy managed?

The standard HDC lease, under which its new homes are sold, contains provisions at clause 22 which prohibit the purchaser from selling the property for ten years. The owners of these new HDC units who wish to sell within the first ten years have to obtain the HDC’s written consent. In the event of such an application, the HDC has the option to repurchase the property at the original price. That option is open to the HDC for three months, after which the homeowner can sell.

The purpose of that clause is to give the HDC the option of recovering housing subsidy in those cases.

For example, an HDC home worth $1.2M in 2009 and purchased for $720,000, represents a $480,000 housing subsidy. If that owner wished to sell today for $2M, the HDC could exercise its option to repurchase the property for $720,000 and sell-on to the prospective purchaser for the agreed price of $2M. The proper exercise of that option would allow the HDC to receive a net sum of $1.28M, within which its original subsidy of $480,000 is recovered.

This property management clause is intended for the replenishment of the HDC’s funds and the discouragement of profiteering on public housing. The fundamental principle being that the State, having made the initial heavy investment, is entitled to recover its monies and any capital gain within a reasonable period. The ten-year period represents an intended embargo on profiteering, after which time the homeowner is free to sell without penalty.

I have seen at least six HDC consent letters in cases of persons selling those units within the ten year time-limit, but none of the persons I spoke with had any idea what I was speaking about in terms of the HDC having those rights. No penalty charges were made. This means that valuable public property rights are either subject to public officials who do not understand the provisions of the fundamental documents created by the HDC, subject to arbitrary decision-making processes in which some fortunate people are able to sell within ten years and without penalty and others are not. Which is worse, inept officials, or erratic, possibly corrupt, decision-making? I tell you.


I have been critical of the HDC’s cost-based approach to pricing its units, because it sets the prices by reference to the cost of construction. Apart from the land element being effectively omitted, that is an inappropriate approach, because it does not identify the housing subsidy allocated to successful applicants. The value-based approach better satisfies those basic requirements, since it is based on the market value of the completed homes. The housing subsidy being the difference between the value and the actual HDC selling price.

It is essential to establish the size of the overall housing subsidy and then, to determine how that subsidy is allocated. A clear analysis of housing subsidy is used in the advanced jurisdictions to monitor housing programs and review the policy as necessary. When one juxtaposes the sharp competition for public housing with the drastic reduction in available Public Money, it is now imperative that data-driven approaches are adopted to better inform the design, allocation, funding and partnership aspects of the housing program.

, , , ,


The Proposed changes to the new Public Procurement Act

The Public Procurement and Disposal of Property (Amendment) Billprocurement-bill was tabled in Parliament on Friday 13th November 2015 and a Joint Select Committee appointed – under the Chairmanship of Finance Minister, Colm Imbert – to invite and consider comments on the changes being proposed. Overall, I took the view that the proposed amendments would likely improve this new law, so these are my formal comments as submitted to that JSC. CLICK HERE TO READ.

This is a critical law to tackle the high levels of waste and theft of Public Money and it is therefore critical that it is implemented as swiftly and as solidly as possible, even if we know that certain parts would need to be closely monitored and subject to early adjustments as necessary.



Formal Submission to Joint Select Committee – The Whistleblower Protection Bill, 2015

This is my formal submission on these important proposals, which are intended to give protection to persons reporting wrongdoing in public or private bodies. Most fraud and white-collar crime is reported by ‘tips’, so the effective tool has to be ‘If you see something, say something’. We also need to push for more effective investigations and prosecutions, but first we need high-quality information.’


2016 Budget Review

The 2016 budget statement was made on Monday 5 October 2015 by newly-appointed Minister of Finance & the Economy, Colm Imbert MP. Imbert is a professional engineer, so the fact that he lacked any formal certification in the financial field sparked much debate. The budget proposals have been made, so we are well past that point now.

These expenditure and revenue figures are from the Budget Statements, so no account has been taken of either actual outcomes or supplemental appropriations – this is the process used by the Government to obtain authorisation from the Parliament to exceed the approved spending limits in the national budget.

Read the rest of this entry »

, , , , , , ,


Facing the Facts

Two important laws were partially-proclaimed by the President at the end of July –

  1. The Public Procurement and Disposal of Public Property Act, which is intended to control transactions in Public Money, and the
  2. Planning & Facilitation of Development Act, which is intended to provide for effective control of physical development.

Both those laws would be critical in controlling the worst excesses in terms of waste and theft of Public Money as well as the scourge of unplanned development. There is still substantial work to be done to properly implement those new laws, neither of which will actually come into effect before elections on 7 September, so our stern attention will therefore be essential.

The campaigning and committee-work to achieve those new laws has been demanding, so it Is important to re-state our fundamental concern as to the sheer hostility of high-level public officials to the truth. This is a fundamental point since the new laws create modern, transparent and participative processes. If the key public officials maintain their hostility to the truth, we would be entering a period of serious struggles to implement these new laws.

These examples speak to the official hostility to the truth with which we are beset.
Read the rest of this entry »

, , ,



Get every new post delivered to your Inbox.

Join 896 other followers