Friday 25 May, 2018

Budget 2018: Gov't to engage private sector on affordable housing

Effective January 1, 2018, private developers will be eligible for an incentive of up to $100,000 to provide middle to upper-middle income housing for eligible Housing Development Corporation (HDC) applicants.  

Government has allocated $50 million in the 2017/2018 budget to facilitate the cash incentives for the construction of up to 1000 additional new private sector financed and constructed affordable houses.  

This, as Finance Minister Colm Imbert announced that the HDC’s focus will be returned to its “original moorings: to provide affordable housing for lower and lower-middle income families with an emphasis on rental units and rent-to-own arrangements.

The income from sales of houses under this incentive programme for private developers will be tax-free and government will contribute a cash bonus, or state land as appropriate to all approved developers who construct housing developments in accordance with designs, specifications, and prices set by the government.  

According to Imbert, as an example, the price of a standard 3-bedroom unit could be fixed at $750,000. Private developers would be required to find their own land, raise their own financing and mobilize their own resources to construct these units.

Minister Imbert said developers would be provided with the list of eligible HDC applicants for this tier of housing, estimated to currently be between 30,000 to 40,000 qualified applicants.

The Minister said that it can be expected that developers will expedite the construction process to take advantage of these incentives, allowing for the completion and sale of approved units in nine months or less.

With the current 2 percent subsidised mortgage interest rate and 10 percent deposit required, and a 25-year mortgage, a typical purchaser in this new housing programme could expect to pay a monthly installment as low as $2865 for a house or apartment costing $750,000.

Government also plans to engage commercial banks to design a suitable housing loan regime with government input including, if necessary, a suitable mortgage loan interest subsidy.

The Minister said that through these arrangements, the state and by extension taxpayers can thereby save the treasury up to $400,000 per housing unit.

According to Imbert, this should allow the government to quadruple the construction of affordable housing once fully implemented.

To ensure the success of this new programme, the government will establish a ministerial oversight committee, chaired in the first instance by the Prime Minister, to monitor and expedite the process of procuring building approvals from regulatory agencies including town and country division and the regional municipal corporations.

Imbert said the provision of fiscal incentives to stimulate the construction of affordable public housing by the private sector is “a feature of modern democracies the world over and a tried and tested solution to public housing demand”.