By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A FOUR-TIME Bahamas Real Estate Association (BREA) president is urging the Government to “put a dent in the housing crisis” by offering home buyers lots at a 70 percent discount, adding: “It’s not rocket science.”
Patrick Strachan told Tribune Business that such a move would significantly enhance home ownership prospects for many Bahamians by giving them equity they can then use to finance the high down payments demanded by mortgage lenders while also covering closing costs such as legal and real estate fees.
Speaking out after Keith Bell, the housing minister, recently said this nation was suffering from a 12,000-unit affordable home shortage, the ex-BREA chief writes in today’s paper (see Page 6 in the main section) that the lack of availability can be solved if the Government would put its vast reserves of Crown Land to productive use.
He argued that it should identify suitable sites in areas where there is coming or existing demand for housing, then partner with private sector developers via private-public partnership (PPP) arrangements. Mr Strachan said that by taking out the land acquisition costs, and conveying such sites to private developers for a nominal fee, the latter would be able to construct affordable homes while still making a profit.
Calling for fresh thinking and creative vision, Mr Strachan argued that key officials in the housing sector are “bankrupt of ideas” when it comes to overturning the status quo. And he warned that the Government will have “to work through the bureaucracy” if much-needed housing reforms are to succeed.
“Under the previous administration I worked as a consultant in the Department of Housing on contract,” Mr Strachan said in a letter also sent to Tribune Business.
“At that time, I believed the Government was on the right course in that it was making it possible to own a lot by offering a 70 percent discount off the appraised value.
“This was perfect in that it allowed the financial institution to use the equity owned by the prospect towards his/her down payment and closing costs for a pre-constructed home. The fact of the matter is the Government owns hundreds of acres of Crown Land in New Providence.
“For example, the Government’s newest subdivision, The Renaissance, formerly known as Carmichael Estates, has almost 400 lots. I am advised that those lots are being sold for $80,000 to $85,000 as part of the cost of a newly constructed home,” Mr Strachan continued.
“If the Government really wants to put a dent in the housing crisis it would discount those lots by 70 percent. This would now enable hundreds of Bahamians to qualify for a home. The house and lot package price remains the same. The financial institution understands that it is an incentive for new home buyers. That would make a hell of difference for many Bahamians.
“It is Crown Land. The Government never paid a red cent for it. And the 30 percent [of the purchase price] collected on the lot by the Government should cover the cost of infrastructure. This can be done. It should be done for those hundreds of Bahamians who dream of owning a roof over their heads. I believe it is incumbent for the Government to push those persons over the finish line.”
Speaking subsequently to Tribune Business, Mr Strachan reaffirmed of his 70 percent discount plan: “That would enable many more Bahamians to qualify for a home. The point I want to make is that if these guys want to make a change they can do something. It doesn’t take a rocket scientist.
“You can cuss Minnis out as much as you want but what he was doing was very good for prospective home buyers. Any financial institution, if you go to them and you have 60-70 percent equity in the project they are going to give you a break on your closing fees and down payment.
“What I’m suggesting doesn’t take a rocket scientist. This talk, talk, talk. I believe only 20 percent of home buyers can qualify under the present system. But they [the Government] have to have the desire and be committed to this thing. What do they say about insanity? It’s doing the same thing over and over again and getting the same results,” he added.
“The real problem is that people in key positions are bankrupt of ideas. You never hear them come up with any creative ideas. We continue down the same road we have always been doing. We have got to take some chances, be creative and see where we go.”
Describing increased home ownership and related construction activity as a “win-win” because of the economic boost generated, Mr Strachan reiterated: “We’ve got to get excited and do some- thing new. There has to be a commitment there to do it, and also we need people to work through the bureaucracy. Who is willing to work through that?
“If we can find some people to work through that and see the vision of what I’m suggesting then we are on the road to putting a dent in the housing crisis.” The ex-BREA president also called for reform at the Bahamas Mortgage Corporation, arguing it had drifted away from its original purpose “to assist the small man” with home ownership to competing with the likes of Royal Bank of Canada and other commercial lenders.
“Their interest rates should not be more than 2 percent above Prime,” he argued. “There are creative ways where down payments can be as low as zero or 2.5 percent. They need the ability and creative vision to make it happen.”
Mr Strachan also called on the Government to put its “acres and acres of Crown Land” to more productive use and partner with developers to ease the housing shortage. “Let them develop it with the understanding they would give prospective purchasers a discount on the lot,” he added. Providing the land at a discount, and agreeing terms on price and construction costs, would also ensure developers keep units affordable.
The former BREA president, in his letter, wrote: “Because the government is in possession of thousands of acres of Crown Land, it may want to entertain the idea of assigning 25, 50, 75 or 100 acres to private home developers with the understanding that when the land is developed, it will offer lots at 70 percent off the appraised value assuming the prospect is buying a new home.
“I can almost guarantee that this will enable hundreds of Bahamians to own a piece of the rock. The point is we need creative solutions to solve our housing crisis. If we continue with the status quo we will continue to get what we are getting.”
He added: “As for the Bahamas Mortgage Corporation (BMC), they have lost their way a long time ago. They were created to help ‘the small man’. However, nowadays they are competing with the commercial banks. BMC’s interest rate ought to be in the ball park of 2 percent.
“The down payment should be 5 percent maximum or zero down payment. These would enable many Bahamians to qualify for a home mortgage. In the US, federal mortgage agencies provide mortgages with zero down payment. This can work in The Bahamas if our desire to help is strong enough.
“The question is: Do we really want to help the single mothers? The less fortunate? I believe government has a duty too. And if they really care about putting a dent in the crisis it will happen. But it will take effort and focus. And a commitment.”