Housing problems

If there is one Government ministry which clearly has not learned from the past, it is the Ministry of Housing. This has been most recently demonstrated by Housing Minister Keith Rowley’s announcement that the Government has decided to lower the income ceiling to get more people to take out loans to repair their Government-subsidised homes, while simultaneously increasing the amount being given. This plan will have several bad effects. It will increase the number of bad loans in the economy, which will become a factor in reducing production by wasting more capital resources than would be the case if these loans were accessed through private financial institutions. The certainty of this outcome is shown by the fact that these persons do not qualify for loans determined by strict fiscal criteria — after all, if they did, the Government would not be making this offer. (The Government might argue that banks’ criteria are too strict, even prejudicial — but the collapse of the State-owned Workers Bank and the original First Citizens Bank shows what happens when “flexible” standards are used for financial dealings.)

This can only exacerbate the problems caused by the initial conditions for getting the State-built homes in the first place. A government-guaranteed home mortgage, especially when a negligible down payment is required, means more bad loans than otherwise. Now, with this additional facility, people with already low incomes will be encouraged to borrow money they can ill-afford to pay back, to spend on items that will not generate additional income for them. In the end, it is the taxpayers who end up paying for these loans, as well as the houses requiring them. And, when the taxpayers subsidise State housing, it diverts money from more productive investments. In housing, money is taken away through taxes from families of higher incomes to force them to subsidise selected families with low incomes and enable the latter to live in better housing for the same or lower rents.

To argue, as Government does, that housing construction creates jobs and wealth that would otherwise not be produced is misleading, since taxation for public housing destroys as many jobs as it creates. Government subsidies also over-stimulate building, raising the cost of construction for everybody. Indeed, one of the reasons offered by Dr Rowley for the increased loan is that the prices of construction materials have increased. Just as pernicious as these economic effects are the social ones. The low-housing programme undermines the savings mentality which is crucial to national development.

It is no accident that certain groups, who have a culture of thrift, have been able to build their own homes within two generations, or even within one, despite starting from circumstances no less economically disadvantaged than the persons being given State-subsidised homes (over 60 percent of them, by Dr Rowley’s own official reckoning, being in the East-West corridor). So what this programme does, by not adhering to market criteria, is increase the dependency syndrome — which may be good for the PNM’s political stocks, but which is certainly bad for the country. Additionally, the housing programme has the effect of putting less educated, lower income, dysfunctional families into one neighbourhood — a situation which helps increase social problems such as teenage pregnancies, drug use, sexually transmitted diseases, and crime.

None of these outcomes is guesswork. Trinidad and Tobago has already seen all these consequences from the housing schemes constructed by an earlier PNM regime in the 1970s. A few of these housing schemes by the State have been very successful and have helped families who could never have hoped to afford a house to acquire one. But clearly a new plan must be devised with respect to helping people house themselves. Putting them into deeper debt does not seem to be the ideal way to go.