If only they'd heeded warning on NHT surplus

Alva Anderson, GUEST COLUMNIST

As a former two-time chairman of the National Housing Trust (NHT), I have viewed with concern the numerous occasions when misleading information has either been made public by the media or by politicians in Government or in Opposition about the affairs of the NHT.

I cite two issues of news which stand out:

a) That the Simpson Miller administration has twice been responsible for the withdrawal of funds from the NHT; and

b) The claim made by the then Prime Minister Bruce Golding in 2007 that the NHT was either almost bankrupt or would be bankrupt in a very short while.

With respect to (a), I wish to set the record straight. The Government of Jamaica has used money from NHT's funds on three different occasions. Prime Minister Portia Simpson Miller has only been leader of the Government of Jamaica on one of these occasions, which is the recently announced withdrawal. The other two occasions were:

When it was officially announced that Cabinet, in September 2003, gave approval for an award of contract to proceed with the building of 3,000 Inner City Housing Project units (ICHP) over three years at a cost of $2.7 billion; and

In 2005, when the NHT transferred $5 billion over two years from the company's operating income ($3 billion in 2005 and $2 billion in 2006) to the Education Fund.

NEED TO EXERCISE CARE

Members of the media should carefully peruse the sources of public information which are always available, prior to making hasty and incorrect announcements, since credibility was once both a feature and a hallmark of Jamaican news reports. Prime Minister Portia Simpson Miller is due an apology from the media with respect to this mistake.

Regarding (b), the claims made by Prime Minister Bruce Golding, I contend that they were totally erroneous and misleading. Dealing specifically with the claims of bankruptcy, the facts are that the only year that an operating loss was recorded by the NHT was in 2005-2006 when $5 billion in funds was withdrawn to be placed in the Education Fund. At no time, before or after, has the company recorded an annual loss in its net profit. Therefore, to convey an opinion of bankruptcy was indeed more than unfortunate.

Perhaps Mr Golding's primary intent was to bring to a screeching halt any thoughts which either the board or management of the NHT, in particular, and the public, in general, may have harboured for an extension of financial support for the ICHP.

NHT records will show that during the period 2005-2006, the level of compliance, particularly by several large public companies, in addition to the Government, indicated a growing practice of delinquency. This was because of the non-submission of annual contributions (for both employer and employee for public-sector and private-sector companies) and for employers contributions for the Government. However, the NHT introduced measures that effectively reduced this level of delinquency which, together with the increasing costs of the ICHP, could never have triggered any form of bankruptcy.

These records also indicate that for each year since the company's inception, annual and monthly progress reports on every activity undertaken by the NHT are submitted by management to the board. The board will, whenever necessary, submit its recommendations to the minister of government responsible for its portfolio, who is the prime minister.

NEED FOR REVISION

Thus, in January 2007, a report titled Rethinking the Inner City Housing Project was submitted to the board of directors. In principle, it stated that the ICHP had to be revised because of a varying number of critical reasons, the major arguments for which are summarised below:

1. The communities that were the raison d'être for initiating the ICHP, have remained untouched to date and for which three such reasons were given:

There was a lack of suitable land for the contractor's design;

The stubborn and unwilling attitude of residents to relocate, especially where such relocation will take place within short physical distances; and

The impossibility of identifying suitable destination locations, if households were prepared to move.

2. The budget for supporting psychosocial training would keep increasing in spite of the efforts by NHT to curtail same. Too few of the persons for whom the new housing units are intended are prepared to undergo the level of training needed to enable them to become more qualified to earn wages to at least meet their loan-repayment obligations.

3. Support from public-sector agencies, along with the downtown business sector, was exceedingly low and would likely never be forthcoming, even if the NHT's investment in training produced large numbers of graduates. This level of non-cooperation was mainly because their buy-in and commitment with respect to both time and personnel were not sought initially.

4. Fundamentally, the project, with its relevant numbers and cost of solution, was announced before any detailed research was conducted and the 'core reason' for its spawning was never presented, i.e., what was the real reason(s) for the ICHP and what was the best way to accomplish this? Answering this would have genuinely affected several aspects of the project.

5. The assumption that 'poor housing' was the central problem in each beneficiary community was never challenged. However, time and circumstances revealed that there are several other pressing problems, the solution of which potential beneficiaries consider to be more urgent, the two main ones being:

Infrastructure improvements.

A reassurance of improved security conditions.

6. Housing is a 'derived demand'. As such, the solution to any of Jamaican's housing problems does not lie within the NHT, but in the economy expanding at a sizeable rate over a long period of time. On the other hand, the ICHP is a high-risk project, and to expect 'normal' behaviour from mortgagors is not logical.

UNFORTUNATE CRY FOR WOLF

In 2007, the NHT clearly understood that it was overexposed in its commitment to the ICHP, that the supporting facilities for the project were excessive, and that the project had indeed oversubscribed its merit. Consequently, decisions had to be made with respect to the restructuring and redirection of the way forward, and most important, the number of housing units which should be constructed annually in the ICHP.

This was common knowledge to Mr Golding, and for him to cry wolf, or bankruptcy, in February 2008 was most unfortunate.

Regrettably, this approach only served to undermine the confidence of the executive management of the NHT and, in particular, the character of its managing director, Earl Samuels, an outstanding executive.

Returning to the level of surplus funds within the NHT, I must mention that at my first meeting in 2005 with the board and executive management, I stated that the company should not continue to make boast of the high level of these surpluses accruing annually from investments, without publicly demonstrating new and well-planned ways and means by which the company proposed to effectively use these surpluses to increase the range of benefits to its contributors.

I warned that the continued perceived absence of any new benefits from such surpluses would ultimately give rise to an open invitation for Government to contemplate its utilisation in various ways to the benefit of the country, other than for their sole use to the benefit of NHT's contributors.

It is unfortunate that the Government, in making this recent announcement to withdraw funds from the NHT to satisfy IMF conditionalities, did not make known to the public at the same time a number of new and attractive housing benefits which the NHT proposed to make available to its contributors.

CONDITIONS FOR WITHDRAWAL

It is likewise important for the public to be made aware of the legal conditions which have always been in place, for the Government of Jamaica to utilise whenever it seeks to withdraw available funds from the NHT for whatever reason.

The company was created in 1979 by an act of the Parliament of Jamaica. It follows, therefore, that any proposal by the Government to legally withdraw funds from the Trust must first be tabled in and approved by the Parliament of Jamaica.

This was the method used by the Government of Jamaica in 2005, to effect the transfer of the $5 billion to the Education Fund, and which procedure is already known by the management staff of the NHT.

If the proposal to withdraw a total of $45.6 billion over four years from surplus NHT funds had been tabled in Parliament, supported with information on new housing benefits that the Trust would be offering, also from the same surplus funds, I am positive that a great deal of the expressed anger and or objections by the public could have been averted.

Let us not forget that the Government, also at that time, had every intention to ask members of the police, the civil service, the teaching profession and others to forego salary increases for at least two years. Just think, a slew of new housing benefits, targeted directly at assisting and/or relieving the pressing housing needs of this key group of NHT contributors, could only have resulted in the achievement of a high level of customer satisfaction.

There would have been far fewer voices echoing anger and disappointment over the method of withdrawal of the surplus funds from the NHT, and most certainly, in its place, expressions of appreciation, citing a caring proposal, all to the advantage of the Government of Jamaica.

Alva A. Anderson is a former chairman of the NHT. Email feedback to columns@gleanerjm.com and corpie@cwjamaica.com.