One cannot start a discussion on Housing without mentioning the efforts of former Minister of Housing – Michael ‘Mikey’ Pilgrim for his outstanding contribution to this sector. Many know Mikey as a man for all seasons. For those who were with him at St. Mary’s College would remember his scholastic achievement and his records in sports. For those who have interfaced with him professionally would know his business acumen and knowledge in the accounting field. For those who have faced him in the political arena would know him as a firebrand politician with a charisma that is the envy of many.
The aspect of his contribution to St. Lucia which is least spoken about, is his contribution as Minister of Housing in the period 1992 – 1997. If one goes on the website of the National Housing Corporation, you would observe that in that period the most houses and the most housing lots were constructed in the entire history of St. Lucia. Some 1471 service lots were constructed and 305 houses in that 5 year period. One has to applaud Dr. Brian Michael Pilgrim’s efforts in his stint as Minister of Housing.
During that period he was assisted in achieving this goal by Chairman Peter Philip and Chairperson Charmaine Gardner and General Manager Adrian Dolcy and John Peters. So I will boldly recommend that he be given a knighthood for his contribution to St. Lucia.
In the Budget Address, the Minister of Finance sought to provide a platform for the housing sector to contribute in the economic growth of the economy. The removal of duties on certain construction materials and the discussions with the Bank for temporary interest payment relief were the cornerstone of the approach. One has to examine the adequacy of these measures at this early stage to ensure that the much needed growth is achieved and the Gov’t has to be bold enough to come back to Parliament to ‘ tweak’ their proposals if needed.
How much reduction in the cost of materials will the measures of removal of taxes create? One very experienced professional has offered a comment that the measure will create a maximum of 3% reduction in the cost of building. Let us assume that this figure is bumped up to 5%, which is a very conservative estimation.
On the issue of the temporary reduction of interest payment, we have to ask the Bank of St. Lucia to confirm whether their lending policies are based on the interest rate in year 6 when the rate returns to market rates or are they basing the loan application on the 5% rate? In simple terms, if I go tomorrow for a loan will the bank base their decision on my present capacity to service a loan at 5% or my present capacity to service a loan at the projected market rate in 2018. Does Risk Management procedures of the Bank of St. Lucia mandate that loan officers must assume that salaries will not change in the next five years?
I recently read an interesting article entitled “An ARDL Model of the Demand for Housing in Barbados” in which a housing demand model based on Autoregressive Distributed Log ( ARDL) was developed. The economists will be more interested in the mathematical modelling of the research, but the conclusions are of great interest, which I will list:
• The demand for housing depended on the conditions attached to mortgage lending due to the inability of most individuals to build a house without a mortgage, the primary condition being the ability to repay the loan
• The price of other goods must also be considered since individuals must make choices between satisfying their housing needs and their non-housing needs
• The terms on which mortgage finance is available – interest rates, the down payment required and the amortization period – determine whether people at certain levels of income can afford a house
It is clear that these issues are also relevant in the St. Lucian context and thus any housing policy has to be driven based on the above conclusions.
Let us put it in a simpler format, if we can get people to own homes and pay the same as they are now paying in rent, then everyone will be able to construct and own a home. So the existing rent prices are indicative of the targets, as that figure represents the considered choice of the amount that can be allocated to housing needs apart from non- housing needs by individuals.
The private sector will not engage in an activity where there is no demand, and thus the ability to service a loan is the determinant of the effect of any stimulus package in construction.
The following recommendations are presented:
RECOMMENDATION # 1
The National Housing Corporation pursue high rise buildings with minimum finishing (starter unit) to reduce the cost of the units. These are spread across the island and will be maximum three stories high and having say thirty apartments. It is estimated these units should be about $ 120,000 per unit.
RECOMMENDATION # 2
The peculiarity of the St. Lucian society of “Family Land’ must be embraced and thus a recommendation is to expand the materials for duty free concession to include all materials with a local input ( roofing and windows )to capture those who will build over time on ‘family land’ and to create local employment.