Finance Minister Colm Imbert says the preference which will be given to people who invest in housing bonds will not take low-income earners out of the State's housing mix since all categories of homeowners will continue to benefit from State housing.
Explaining the logic behind the housing bond on Friday, during an exclusive one-on-one interview on CNC3 Morning Brew, Imbert said, “What we are doing with the housing bonds is that we are giving the Housing Development Corporation (HDC) the cash flow it needs to construct new houses.”
As it now stands, he said, “the HDC is constrained by the amount of money it generates from the construction and sale of houses and the subvention it gets from the Treasury. There is simply not enough money available to the HDC to build enough houses to satisfy demand.”
In addition, he said, the housing bond is intended to “allow persons to save.”
Persons, he said, can buy “as many bonds as they want or that they can afford, the cash is given to the HDC to build houses."
Imbert said when someone goes to the HDC to get a house, “they will assign the bonds to the HDC, if you have one thousand bonds this will go to the HDC, they will assign the bonds and the cost of the house will be reduced by that amount, so the HDC will take the bond from you.”
Using an example, Imbert said, if the house costs the HDC $700,000, “you will give the HDC the bonds and the house will cost you $600,000, it’s a form of savings for individuals and it also provides the HDC with the cash flow for the HDC to build the house.”
Imbert said it makes sense that people who can afford the bonds will “get preference because you have given the HDC the cash to build the house.”
The housing bond, he said, will be “similar to the NIF Bond, you getting an interest paying bond, you getting an asset.”
Imbert said the decision was not meant to create an “elitist class” for those who could afford it, but “was using the cash from the bonds which will be sold to those who can afford.”
The HDC, he said, will continue to provide housing to those who want to rent, or rent to own, “we are targeting two different groups of potential homeowners.”
Imbert explained that most of the people on the HDC list “cannot afford to buy a house”. He said when evaluations are done many times they can’t afford it because of their expenses. “The government will build houses for that group who will still be able to get access to a unit.”
On the second tranche of the National Investment Fund bonds which he announced will take place next year, Imbert said the assets will be different to those in the first bond offer which comprised Republic Bank and Angostura Shares recovered from CLICO.
Imbert said NIF part two “obviously has to be additional assets either recovered from the CLICO group or State assets that are put into a second offer separate and apart from the original NIF assets. They stand alone and they will secure the second wave of NIF bonds on their own, they have nothing to do with the original NIF offer.”
He said there is a “big asset that is still there, some shares in a Methanol Company (MHTL), those shares will go into another NIF offering and the income stream from those shares will repay bonds in the second NIF.”
Imbert said the first NIF bond offer had been over-subscribed and contrary to what has been said it was not dependent on the National Insurance System.
He said $4 bn in bonds were offered, “we got offers of $7.3 bn.”
Private insurance companies, the Unit Trust Corporation and the National Insurance Board, he said could not get what they asked for, “in fact, the insurance companies only got 30 per cent of what they asked for, private insurance companies were offering $1 bn in bonds and we could only give them $300 million. We ended up having to give back $3.4 bn,” Imbert said.
National Insurance Board, he said, also did not get what they asked for, “the success of NIF had absolutely nothing to do with what was taken up by the National Insurance Board and Unit Trust, there were 7,500 citizens, individuals almost $1 bn of $4 bn was taken up by private individuals who made bids for the bonds.”
The rest of it, he said, was taken up by commercial banks, private companies and some of the remainder went to institutions.