Economics of Gov’t housing

This is only one of the several controversial questions that Dr Rowley and the NHA continually gloss over. On the face of it, providing affordable houses to average citizens seems an entirely laudable goal. However, things are rarely quite so straightforward in a modern economy, and they never are when the government is directly involved.

The NHA, in the first instance, has a reputation as one of the most corrupt State institutions, second perhaps only to the Licensing Division. The corruption is of a very specific kind — that the distribution of houses is heavily influenced by personal contacts and political patronage. This cloud has been hanging over the NHA for years, yet it is instructive that the Government has never done an audit to determine whether the pattern of distribution follows the supposedly impartial system which is supposed to operate.

An equally fundamental problem, and one which has also remained unexamined, is the rationale of government-provided housing itself. Speaking at a sod-turning ceremony on Monday, Rowley said that the new TT Housing Development Corporation will revolutionise housing development to ensure that all persons "regardless of their socio-economic status" will be able to afford the type of units being offered through the national housing programme.

That promise can be put another way — taxpayers will be buying NHA houses for other people to live in. This, after all, is the real effect when the government provides houses for people regardless of their socio-economic status. It is not that the government is incorrect to build cheap houses (although it is more efficient to give such projects to private contractors under flexible pricing terms). But providing affordable housing must operate under one absolute constraint — that the government breaks even on the deal. That is, the government should not make a profit but neither must it subsidise the houses.

Subsiding has all kinds of bad economic effects. When the taxpayers subsidise State housing, it diverts money from more productive investments. If the government guarantees home mortgages for such housing, it increases the number of bad loans and also encourages people to buy houses that they cannot really afford. Since there are still many NHA tenants who are defaulting on their rents and mortgages, this puts an additional burden on taxpayers. government housing also raises the cost of building for everybody and, financed by the temporary boom, can create an artificial construction expansion which is all the more damaging when the boom ends.

All this seems moot only because of the country’s energy-dollars cushion. But the dire economic effects, though they may be postponed, cannot be eradicated. State housing is a workable idea only if the government follows strict guidelines and keeps in mind the effects on all groups, not just those who want NHA houses. Rowley’s comments do not lend assurance that the government is operating within such a framework at all.