"The Government has embarked on a programme of activities to construct new homes in light of the more than 160,000 outstanding applications from our citizens. We are also rehabilitating and maintaining the existing housing stock. We are committed to meeting the public demand for housing over the course of the next decade and we will do so through an all-encompassing plan of action which focuses on construction, rehabilitation, provision of land and subsidies for home improvement...
"I propose to expand the existing 2.0 per cent mortgage programme by increasing property values from $625,000 to $850,000 and increasing the combined monthly income of households from $8,000 to $10,000 and to supplement that programme by introducing a new 5.0 per cent mortgage programme for households with a combined monthly income of greater than $10,000 and less than $30,000 toward accessing a mortgage of greater than $850,000 but not exceeding $1.2 million, this measure will benefit 26,100 applicants within the HDC framework and a similar amount in the private sector; and I propose to improve the tax allowance from $18,000 to $25,000 per household, per annum on mortgage interest paid in the year of income for first time homeowners for five years, including those years utilised by existing beneficiaries."
Finance Minister Larry Howai
Excerpt from the budget statement 2015.
In the very first issue of the Sunday BG, we addressed what we termed the "middle-class syndrome." This is what appears to be the increasing inability of this country's middle class and middle income groups to afford housing.
We shared the stories of John and Mary and Michael and Sarah, two couples who were looking for homes. John and Mary were an educated, professional couple, living in a $4,000 apartment in the West, while Michael and Sarah, were spending $2,500 in rent while waiting for word on an HDC apartment.Even though John and Mary had a combined income of $20,000 and Michael and Sarah, one of $12,000, they both shared a similar problem–the inability to access mortgages to buy a home.
In our initial report, the Sunday BG sought the views of housing stakeholders, such as Ingrid Lashley, CEO of the T&T Mortgage Finance Company (TTMF) and managing director of the HDC, Jearlean John, on what options were open to both couples.Now, we have asked them to talk about the new provisions made in this year's budget which appears to open up new avenues to accessing financing for home ownership for those of middle class and middle income.
Q: How do you believe this will affect the ability of middle class, middle income homeowners to purchase homes?
Ingrid Lashley: While we are not yet privy to all the terms and conditions of the proposed 2.0 per cent and 5.0 per cent programmes, given the increase in qualifying income levels and property values, it is anticipated that a wider community will qualify for access to mortgage financing.
Jearlean John: Middle class and middle income earners will be impacted positively as they will now enjoy increased "purchasing power"; which gives greater access to more housing options. homeownership is also made significantly less onerous and more equitable.
Q: Are there any areas where these provisions are unclear that you would like to see addressed. For example, will this new 5.0 per cent be administered by the TTMF, or will commercial banks and other mortgage offering entities be included?
Ingrid Lashley: We await guidance from our line Ministry in respect of the specific application of the programmes.
However, as an "approved mortgage company" under the Housing Act and the administrator of the Government's 2.0 per cent mortgage programme, it is anticipated that TTMF will be intimately involved in any extension of the Government's affordable housing programme.
Jearlean John: These provisions will be administered solely by TTMF at this time. This could set the tone for other banks and financial institutions to step up and be more competitive in mortgage lending rates.
Q: Where did this figure of 26,100 middle-class applicants within the HDC framework and the corresponding amount within the private sector come from?
Ingrid Lashley: The statistics provided are representative of applications to HDC where the prospective homeowner earns in excess of $8000–the current household limit for the 2.0 per cent mortgage programme.
Private sector information is not as easily collated but based on enquiries that we have had from people in the income bracket of $10K+, I can endorse the minister's position that it is likely to be of at least similar amount.
Jearlean John: The HDC can only verify what is reflected on the database of the Ministry of Housing and Urban Development.
(At the time of the writing of the article, "Middle-class Syndrome" in April, John quoted those of middle class and middle income to be as much as 20 per cent of applicants to the HDC which has been quoted by the Finance Minister as numbering 160,000)
Q: What other arrangements/interventions you believe the Government can make to increase housing for the middle class, middle income group?
Ingrid Lashley: Besides affordability and the availability of financing, housing to the middle income group is constrained by the availability of suitable properties that match that income group. The Government has attempted to ease this burden by constructing appropriate units through the HDC but their focus is on the lower to lower middle income group by virtue of the social needs of that group.
The private sector must now support this initiative by expanding the availability of housing units in the $850K to $1 million value band. Incentives have also been provided to the construction sector in this regard.
Jearlean John: In his 2013 budget presentation, the Minister of Finance announced certain amendments to the Income Tax Act Chap 75:01 which provided tax exemptions for traders in newly constructed houses subject to certification by the Minister of Housing, thus providing strong incentives for the construction of houses by the private sector.
The HDC has been working very closely with the Ministry of Finance and the Ministry of Housing and Urban Development with respect to the implementation of a trader in houses exemption process.Additionally, we recommend the private sector get more involved, not only in the construction of private housing but also conceptualising, financing, construction, marketing and sales.