Archive for category Property Matters

Property Matters – Housing Issues – part 6

hdc-logoOn Thursday 17th March 2016, the Office of the Prime Minster confirmed that the appointment of Housing & Urban Development Minister, Marlene McDonald, had been revoked. On Tuesday 22nd March 2016, the Housing Development Corporation (HDC) Board issued a Press Release to confirm that its Managing Director, Jearlean John, had been dismissed.

In less than one week, the two top public officials in our country’s housing program had been removed from office. It does not seem decisive that both those dismissed officials were female, but it is more likely that there is another connection between these events.

We have lacked proper standards of governance in our country for so many decades that some people are seeing these dismissals as a ‘breath of fresh air’ in which those new standards are being set. An apparent case of actions speaking louder than words.

I am not convinced, based on what has been officially disclosed thus far, that we are yet seeing any ‘breath of fresh air’. Even if one assumes that significant wrongdoing was established in both cases and further, that those led directly to both dismissals, how have those channels for potential wrongdoing been fixed?

There is a pattern of unacceptable mismanagement at the HDC since its establishment in October 2005. Culpability for gross mismanagement of Public Money extends to both sides of the so-called political divide. It may be emotionally satisfying to see public officials removed from office, given the widespread and disgusting impunity with which we are beset, but the temporary thrill at this or that dismissal is simply not enough. The only way this staggering level of corruption could have become a new normal is because of broken systems and intentional gaps.

Instead of clarity, we are once again being confronted by rumours, strategic silences and leaks. Sometimes it seems that we like everything but the simple truth. These tactics resemble the ‘Carefully Cultivated Confusion‘ I accused the previous administration of, during one of their Invader’s Bay smokescreens. It is therefore imperative that we examine these linked dismissals closely to clarify just what has happened and what has not.

The Marlene McDonald Case

marlenemcdonald

Former Minister of Housing, Marlene McDonald, MP

The basic information is missing – Was Marlene McDonald dismissed or not? Did she resign? There are conflicting versions of these stories.

If she was dismissed, and assuming that she did have a personal relationship with Michael Carew, then why was Ms McDonald dismissed? Was it for

  1. helping Michael Carew to get his HDC application fast-tracked in 2008?
  2. her role as then Minister of Community of Development in the ‘Calabar Foundation matter’ in which public funds were allegedly disbursed improperly to a new charitable foundation headed by the said Michael Carew?
  3. her role in employing the said Michael Carew and his brother in her Constituency Office, in breach of the applicable regulations? Or all three?

Is it true that the PNM Chiefs knew all of this all along, but it was only the public exposure of Ms McDonald’s various actions which triggered her dismissal? There is also the distinct impression that the effective suspension of the Jearlean John management team triggered a series of disclosures which ultimately undermined Ms McDonald’s position.

Please also note the ‘zig-zag’ behaviour of the opposition who complained loudly at allegations of McDonald’s improper Constituency Office spending, but have now adopted bizarre evasions in the face of allegations as to their own improper treatment of those very funds. The silence of the government on this issue seems to me to be facilitating this nonsense.

The Jearlean John Case

jearleanjohn2

Jearlean John, former CEO of HDC

Here we have yet another gap in that the HDC’s Public Statement gave no reason for Ms John’s dismissal, yet the dismissal letter which we have seen cited her ‘insubordinate and disrespectful’ behaviour when asked to explain two tax invoices for motor vehicle rentals. Was Ms John dismissed because of the audit? Are we to believe that HDC which has never published its audited accounts as required by law, invoked an audit to dismiss its Managing Director? It seems that some of these issues may be ventilated in Court, if the matter gets that far.

There are now a series of leaks and allegations emerging in the wake of Ms John’s dismissal –

  • Rented Cars? – What of the allegations as to rented cars from TCM? We are hearing that a Mercedes-Benz was rented for $27,000 a month? What kind of Benz is that? Who has use of that vehicle and what is its registration number? The Public Statement issued on 6th April 2016 by TCM’s Kirk Waithe (who is also the spokesman for civil society watchdog Fixing T&T) provided certain important details, but not these points were not addressed.
  • Deferred Gratuity? – What about the deferred gratuity reportedly being paid to Ms John by Pizza Boys? Are we being told that this is improper? If so, why?
  • Large Loans? – What of the allegations of large loans taken by HDC from ANSA Finance? Are we being told that those were improper borrowings? If so, why?

All of those alleged matters would be disclosed in the course of proper management and accountability, which has been lacking as detailed here –

  1. Companies Act breaches

    S.99 (1) of this Act states that –

    “…DUTY OF DIRECTORS AND OFFICERS
    99. (1) Every director and officer of a company shall in exercising his powers and discharging his duties—

    1.  act honestly and in good faith with a view to the best interests of the company; and
    2.  exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances…”

    It would be impossible to exercise proper management over a company of this size and complexity with no audited accounts.

  2. HDC Act breaches

    HDC was established on 1st October 2005 by the HDC Act, which stipulates at sections 18, 19 and 20 that the Commission’s audited accounts be published by the end of June of each year. Those audited accounts have never been published, so the law has been broken.

    Public Money must be managed and accounted for at a higher standard than private money. That standard is irrefutable.

    Yet, over one Billion dollars in Public Money is being spent every year with no audited accounts. That would be be an unacceptable performance in the private sector. That is also irrefutable.

  3. Trinidad & Tobago Securities Exchange Commission (TTSEC) breaches

    TTSEC made two Orders against the HDC in respect of contraventions of the Securities Industry Act 1995 and the Securities Industry Bye-Laws 1997. Those Orders are in relation to the failure of HDC to publish their accounts –

    1. firstly, on 19th March 2010, with fines totalling $121,000;
    2. secondly, on 25th July 2011, with fines totalling $400,000.

    HDC raises money for its operations by selling bonds, which are ‘Securities’ regulated by the TTSEC. So, in addition to the prior breaches, the HDC raised funds via large-scale bond issues and formally agreed via those ‘Settlement Agreements’ that it did not conform to its legal obligations.

    An earlier series on this topic had disclosed these HDC bond issues – September 2006 – $1.39 Billi0n, September 2008 – $700M and January 2009 – $500M. There may well have been subsequent bond issues, so the sums involved could be greater.

  4. Integrity in Public Life Act (IPLA) breaches

    S. 24 (3) of the IPLA specifies that “…(3) No person to whom this Part applies shall be a party to or shall undertake any project or activity involving the use of public funds in disregard of the Financial Orders or other Regulations applicable to such funds…

    The cited sections of the HDC Act comprise the “…Financial Orders or Regulations applicable to such funds…”. It is also my view that the HDC’s fund-raising via bond issues and the subsequent breach of the legal obligations constitute “…an activity involving the use of public funds in disregard of the Financial Orders or other Regulations applicable to such funds...”

    JOINT SELECT COMMITTEE Report into HDC (June 2014 )

    This JSC comprised the usual 12 members – 7 from the government (then PP); 3 from the opposition (then PNM) and two Independent Senators – under the Chairmanship of Independent Senator Elton Prescott SC.

    Ms Jearlean John was Managing Director of the HDC from November 2009 to 22nd March 2016. This is a notable extract from her opening statement to the JSC’s November 15th 2013 hearing –

    “…I hope that at the end of this inquiry you will make the determination that the HDC, the way it is managed, is grounded in good, sound principles of accountability and transparency, that we run a solid company based on solid, sound processes…I can assure you those processes are used at the HDC every, single day…” (pg 101 of the JSC Report of 25th June 2014)

    Ms John was firm in her view that the HDC was properly managed.

    The final recommendation of that JSC Report was –

    “…Outstanding Audited Financial Statements
    4.39 The Committee thought that the failure of the Corporation to produce audited financial statements for the years 2004-2007 was unacceptable and a definite red flag given the Corporation’s cash flow.

    4.40 Even more troubling was the revelation that the lack of up-to-date financial statements has thwarted the Corporation’s ability to seek funding in the open market.

    RECOMMENDATION
    We recommend that the outstanding audited financial statements of the Corporation be prepared and submitted to Parliament and or the Auditor general as a matter of priority The line Minister must introduced (sic) the necessary oversight procedures within his Ministry to prevent lengthy delays in the production of audited financial statements on the part of the HDC and any other entity falling under the purview of his Ministry…”
    (pg 74)

    The JSC used unmistakeable ‘Parliamentary language’ to identify the HDC’s failure to account as “…unacceptable and a definite red flag…”. Although the JSC was critical of missing 2004-2007 audits and Ms John was MD from 2009-2016, the point is that no audits have been published to date.

Conclusion

The HDC is a huge and important public institution, so any serious ‘breath of fresh air’ must decisively tackle this legacy of failed accountability and the lack of good governance.

This situation at HDC is not a unique one and can be found at a number of other public institutions. That is no excuse since this is an interlocking web of culpability within which the various administrations have traded. The approach of seeking the least-worst answer does not serve the public interest since we are witness to repeated selective and well-timed disclosures. The proper standard is for routine and regular reporting to international standards.

This situation requires strong leadership capable of simply doing the right thing and following the law.

Next, I will be outlining an OPEN DATA proposal for the HDC.

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Property Matters – Housing Issues – part 5

hdc-logo

SIDEBAR: CORRECTION

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.

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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

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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)

    YEAR AMOUNT of SUBSIDY
    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

    CORRECTION
    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.

Conclusion

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.

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Property Matters – Housing Issues – part 3

SIDEBAR

  • We all know of single persons who get new three-bedroom HDC homes, while entire needy families remain trapped on the waiting-list.
  • We have all seen nifty HDC developments and known that ‘That development is way too nice for any poor person to live in there’.
  • The actual distribution of new HDC homes shows the actual targets. HDC figures on distribution of new homes as at September 4th 2013 show 22% for rent and 78% sold (approx).
  • In 2014 the monthly income limit to apply for a new HDC home was increased to $45,000. According to the Salaries Review Commission’s 2013 Report, that figure exceeds the salaries paid to Ministers in our Cabinet, Appeal Court Judges, The Ombudsman, The Auditor General and the Head of the Public Service/PS to the OPM. That is how far astray our housing policy has gone.
  • The Housing policy is being implemented so as to promote home-ownership. This approach does not benefit the poorer applicants who cannot afford mortgages.

This week I will be examining the allocation policy in greater detail.

The PP administration took issue with the housing policy, very late in their term of office and only in reference to disabled persons and persons whose life had been threatened –

Moonilal plans to review housing policy” in Newsday of Sunday, July 26 2015

“…Moonilal said Government has been satisfying the Cabinet-approved National Housing Allocation Policy 2008, which allows for 60 percent of housing to be distributed by random draw, 25 percent by ministerial discretion, ten percent by protective services, and five percent for senior citizens and the physically challenged….”

Those intentions to review housing policy were limited and in any case, the PP lost the September 2015 general election.

hdc-logoIt was staggering to learn that the monthly income limit for HDC housing had been increased to $45,000 at some point in 2014. That significant and detrimental policy shift must have been done very quietly.

One of the early policy announcements of the new PNM administration was that the monthly income limit would revert to the previous level of $25,000. That policy change caused some controversy and even sparked some baseless talk of lawsuits. One of the concerns was as to the status of those persons who had qualified under the $45,000 limit – Would they lose their place in the queue? The decision was made to preserve the entitlements of those who had qualified under the $45,000 income ceiling.

All of that concern was in my view misplaced, since it did not address the needs of the poorest applicants. Read the rest of this entry »

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Property Matters – Housing Issues – part 2

The previous column outlined the provisions of the current housing policy and some of the implications arising from those. I provided data on housing distribution by tenure and also stated a preliminary view, dismissing the major allegations made against Marlene McDonald – the current Housing & Urban Development Minister.

To understand just how a supposedly-redistributive policy could be used in this fashion, it is necessary to examine how it was changed and how those changes work with the provisions of the Housing Development Corporation Act 2005.

What is the Housing Policy?

Showing Trinidad and Tobago A New Way HomeShowing Trinidad & Tobago a new way home‘ was launched on 18th September 2002 by then Housing minister, Senator Danny Montano. At that stage, the policy for allocation of the new homes produced by HDC were –

…How is housing allocated?
All housing that becomes available is allocated in the following way:

  • 75% is reserved for public applicants through a random selection system.
  • 10% is reserved for the Joint Protective Services – Police, Army, Prisons and Fire Services.
  • 15% is assigned to deal with special emergency cases, senior citizens and physically challenged persons…

The rules to qualify for these homes were –

…Do I qualify?
To qualify for a new home, applicants must be:

  • A resident citizen of Trinidad and Tobago.
  • Twenty-one years of age or over.
  • Neither owner nor part owner of a house or land.
  • In possession of a Board of Inland Revenue tax file number…

These details are from ‘Applying to Buy a Government House‘ on the TTConnect website, but they are outdated, as they refer to the 2002 position. I was very critical of this ambitious new housing policy, since it was located within this context –

“…The Housing Policy of the Government of Trinidad & Tobago is based on the understanding that every citizen should be able to access adequate and affordable housing regardless of gender, race religion or political affiliation”

Those are important policy guidelines, but they are inadequate to the task, given that they are silent on the single common cause of housing need or homelessness. The point is that all homeless persons, or those with serious housing needs have one thing in common, poverty. Yet the policy is silent on that. That silence was a fatal one since the allocations were being made in accordance with a lottery amongst those who fit the four criteria set out above. I recall attending the 2007 conference of the Caribbean Association of Housing Finance Institutions (CASHFI) and the PS of the Housing Ministry stating that about 95% of the applicants in the system did not qualify for a mortgage.

With no specific allocation numbers for rental units and no weight given to poverty or housing need in the process, the results were predictable. The poorest applicants, the ones who could only afford to rent, were sidelined, as shown in the distribution figures shown.

As I wrote in August 2007 –
“…This is a flawed policy which gives you a ticket in the lottery for a new home, only if you can afford one. But, as the old National Lottery slogan used to say ‘if you haven’t got a ticket, you haven’t got a chance‘…”

In January 2008, the new Housing Minister, Dr Emily Gaynor-Dick-Forde, announced a housing policy review with the specific aim of making housing need a part of the assessment criteria. Despite this encouraging news, it was a case of ‘giving with one hand and taking away with the other’, since the category for ministerial discretion was increased to 25%.

The outcomes are shown in these diagrams, with the greater number of units going to those who could afford to purchase. The perverse policy reached its nadir with the recent revelations that the maximum qualifying monthly income for HDC new homes had been increased to $45,000 at some point in 2014. This was obviously done to cater for persons who were in no housing need whatsoever. I tell you. At least the monthly income limit has now been returned to $25,000 – still way too high for a program which ought to be serving the needy persons in our society, but a step in the right direction.

These charts show just how the housing has been distributed, in terms of tenure.

propmatters graph1

propmatters graph2

The table of data from which those charts were derived is here –

HDC ALLOCATION of New Homes

Tenure Type August 8th 2011 Percentages September 4th 2013 Percentages
Rental 256 3.3% 1,962 21.7%
Rent to Own 111 1.4% 66 0.7%
Purchased 7,290 95.2% 7,029 77.6%
Totals 7,657 100 9,057 100

SIDEBAR: Secret Policy in Public Bodies

The housing policy is not available online. The allocation policy which is shown online is 14 years out-of-date. The HDC does not issue annual reports as it is required to do by law, but that is for later in the series.

I had enquiries made at HDC last week, but when my staff requested the housing allocation policy, the reply was ‘we don’t know what you are asking us for’. Take that, it is almost like an echo of the widespread official denial of the existence of the 1992 National Land Policy, which became evident in my 2015 ‘Land for Everybody‘ series. I also personally contacted the top person at HDC to request the allocation policy, but got no reply.

The Minister’s powers

A Statutory Corporation is a public body established under a special law to perform specified functions. The HDC is a statutory corporation and under the HDC Act – The powers of the Minister are specified at S.12 as –

“…12. The Minister may give to the Board directions in writing of a specific or general nature to be followed in the performance of its functions or the exercise of its powers under this Act, with which the Board shall comply…”

That means that the Minister has the power to order the HDC to perform specific tasks and the HDC has to comply with those directions. As such, the HDC would be required by law to follow a direction from the Housing Minister, as seems to have been the case in the Marlene McDonald episode.

Policy monitoring

All of this points to the question of how well can public policy be monitored in the current situation of a ‘virtual vacuum’ in terms of any details as to actual decisions taken. As demonstrated in the distribution figures shown last week, the outcome can be strikingly different from what one might think from reading the declared policy.In the absence of readily available data, it is possible for applicants who already own property to sign false declarations and obtain houses to which they are not entitled, further depriving the needier citizens. Applicants to the protective services have their names and photos published in the newspapers, as a safety-check against any unsuitable persons being admitted. Despite that safeguard, we all know that unsuitable persons do get admitted to the protective services, so just imagine for a moment what has taken place within the secretive arena of public housing.

Open data is a useful approach which would require all the critical data to be easily available in relation to our public housing program. That approach would enable anyone to get these details –

  • Identity of Applicants, together with the details of the category of their applications – i.e. is the person applying as a member of the protective services, a disabled person or a person in housing need.
  • Identity of those persons to whom housing has been allocated, together with the category of their applications, as outlined above.
  • Numbers of new homes built by HDC.
  • Numbers of new homes distributed by HDC.
  • Analysis of distribution of new homes by tenure, category of application and development.

The advantages of a system which promoted the routine online release of this information are obvious. Equally obvious are the kinds of strong objections which would be raised by such a proposal, after all, sunlight is the best disinfectant.The key questions which arise on the issue of the Ministerial discretion are –

  • Rationale – what is the rationale for allowing a politician to have direct control over such important and scarce resources? Is that an acceptable arrangement?
  • Proportion – If one assumes that there is a case for some Ministerial discretion, what part of the output of new homes should be subject to that? Is 25% too high a proportion?
  • Monitoring – In the current secretive arrangements, how can we really know just how many new homes have been distributed by Ministerial discretion? Is that complete secrecy an acceptable way to proceed?

Conclusion

Next, the land use implications of the HDC program will be addressed together with the potent estate management issues.

4 Comments

Property Matters – Housing Issues – part 1

marlenemcdonald

Marlene McDonald, MP

The ongoing and serious allegations against Housing & Urban Development Minister, Marlene McDonald, and UDECOTT Chairman, Noel Garcia, are obvious distractions launched for plainly political reasons. That is not to dismiss the details of those serious allegations, since at this early stage it is impossible to make any real judgment as to guilt or blame. The current furore over these allegations detracts from any serious discussion of real issues about public housing, while at the same time being emblematic as to the depth of the problem.

Subsidised housing is an important part of the ‘welfare state’ provided by our Republic’s wealth and it is therefore necessary to establish the most effective policies and operational arrangements to maximise the benefits to the most needy.

It is now time for us to convene a comprehensive and transparent review of our housing policies and delivery mechanisms.

The current housing policy was published in September 2002, with a headline proposal to build 100,000 new homes in a decade. Since late September 2012, I have been proposing a full policy review to the various responsible officials, but the responses were lukewarm. Once again, I am proposing that we now undertake a full review of national housing policy. I have been in recent preliminary discussions on this review with the principal policy advisers and it seems likely that this will be commenced shortly.

On the operational side, the Housing Development Corporation (HDC) was established on 1st October 2005, so after a decade of operations, it also seems timely to examine HDC’s operations and performance, especially in light of the serious allegations now emerging. The HDC was closely examined in a 174-page Joint Select Committee Report laid in Parliament on 24th June 2014 – that Report contains very interesting material and recommendations which I will delve into later in this series. Read the rest of this entry »

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