Housing under the right roof

Second, past booms in energy prices have repeatedly left housing too expensive for many people.

The energy sector accounts for around 42 percent of GDP but only 3.3 percent of employment, as such the direct benefits of improvements in the country’s terms of trade do not flow directly to many households.

During the 1970s the government increased the supply of housing as the sector was used as a means to materialise its social value system. After the collapse of energy prices in the 1980s, the economic recession that followed increased the burden on the state to provide mass owner-occupied housing as individuals found it difficult to buy houses from the private sector. This led to government switching priorities, placing emphasis on the provision of subsidies to lower-income households. In the early 2000s, home ownership reached as high at 77 percent suggesting policy efforts had borne fruit.

The government and its agencies not only provide housing but also real estate management and mortgage finance. Since the mid-2000s, the government has placed emphasis on intervention in the mortgage market, focusing the provision of mortgage finance at below-market rates to low-income households as well as construction of affordable housing for lowincome earners.

The literature suggests emphasis is now placed internationally on incorporating housing into social and economic policies, which promotes inclusiveness.

Development that is inclusive encourages a cohesive society, which increases the mobilisation power and inspires people towards realising national development goals.

Should the housing sector be treated as an economic sector or social sector or consumption sector? What is the role of housing in economic development? What priorities should be given to the housing sector in national development? What stakeholders/ resources should be mobilised to promote housing development, particularly low income housing and slum upgrading? Should the latter fall to the government alone? Should the private sector be mainly involved in the provision of medium and high cost housing? These are the central questions to determine the direction and effectiveness of housing policy.

There are a number of arguments for governmental involvement in the housing market and the type of involvement that should take place. This includes preventing the fall in house prices which can affect household wealth and lead to negative equity. The effects of a fall in consumer wealth can lead to reduced confidence and consumer spending, in so doing reducing the Aggregate Demand (AD) that likely leads to a recession and quite possibly a banking crisis.

Another argument is to reduce house price volatility by encouraging fixed- rate mortgages, use of higher stamp duty to discourage speculative buying which is a major cause of house price volatility and increase supply in property hotspots. The latter increase in supply should dampen price increases, therefore reducing volatility.

Admittedly there are those who suggest price movements such as a fall could discourage speculation, in addition government intervention could run counter to markets forces which may not be best.

Modern housing policy includes a paradigm shift in the nature of government intervention in the housing sector from the direct supply of dwelling units and housing loans to an enabler and facilitator of housing action. Going forward the development of such an enabling housing policy for Trinidad and Tobago will involve action on six key components.

First, the development of holistic property rights regime and second, the housing finance regime. Third, better targeted housing subsidies.

Fourth, better functional designs of residential infrastructure.

Fifth, an effective regulatory regime; and sixth an institutional framework independent of political interference. Despite relatively high household incomes, a developed construction sector, an active housing finance sector, good infrastructure services, and continued government intervention in the housing sector in Trinidad and Tobago, the low– income people continue to resort to squatting on public and private lands.

The existence of these large squatting communities suggest that supply of building plots and basic core houses are not affordable. While the stated objectives of all subsidy programs are to satisfy the needs of the low–income population, a diverse set of substantial housing subsidies has failed to reach low– income groups.

Increasing the supply of more affordable housing should have some impact in prices. But there are two pitfalls to consider. The first one is the construction takes time. So by taking action now to providing more land, what it really means is to increase supply 3 years later. What if the property bubble burst? The supply will hit the market when the market crashes.

We also have to think about the amount to new supply relative to the total housing stock. Especially at a time when there are scarce resources, a housing policy has to carefully thought out. This means the role that the government should take has to be discussed and guided not only by available resources but by assessing the impact its involvement can have on prices and supply ultimately