The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government must “bite the bullet” and absorb land costs, a Bahamian engineer asserted yesterday, arguing that it is “the only way” to resolve this nation’s affordable housing shortage.

Nick Dean, principal and director of risk management and resiliency at Integrated Building Services, told Tribune Business that providing “a social service” involving the elimination of, or sharply reducing, land acquisition costs via its Crown Land holdings represents the quickest, most effective way for the Government to make homes more affordable for a greater number of Bahamians.

Calling for “a paradigm shift and rethink” on how The Bahamas approaches construction and housing, he called for policy changes to “incentivise” contractors and developers to enter the affordable homes market that would include tax breaks, loan guarantees for potential buyers and public-private partnerships (PPPs) involving identifying suitable Crown Land for subdivision development.

Describing such proposals as “relatively low hanging fruit”, Mr Dean told this newspaper that land acquisition costs are “a big part of the equation” for any housing project. He added that slashing or eradicating these would facilitate the construction of lower-priced homes that are more affordable for middle and lower income Bahamians, while still enabling developers and contractors to earn their accustomed profit margins.

Meanwhile, Leonard Sands, the Bahamian Contractors Association’s (BCA) president, argued that the recent International Monetary Fund (IMF) analysis of this nation’s housing crisis had ignored another “low hanging fruit” - the hundreds of distressed, or repossessed, residential properties that banks and lenders have been unable to offload due to an inability to find qualified buyers.

Asserting that it did not make sense to construct new homes until this existing “dilapidated” inventory was put back into use, he argued that doing so would represent an all-around “win-win” as more persons would end up with their own house; the banks would benefit from them paying on mortgage loans that were current; and contractors and other sectors will benefit from fixing these properties up.

And Franon Wilson, Arawak Homes president, in a recent interview with Tribune Business also agreed that “one possible way to help the housing challenge is to try and get properties that have title issues or probate [estate] issues, and try to get those addressed so they can be available. Try to resolve those”.

The Bahamas’ housing crisis came back into sharp focus last week following an IMF report which revealed that the gap between rising property prices and people’s incomes, and thus inability to afford them, was widening. While property and rental prices were said to have increased by 14 percent between 2012 and 2022, in contrast per capita wages in this country rose by just 2 percent.

Keith Bell, minister of housing and urban renewal, last week reiterated that The Bahamas faces a 12,000-plus shortage of housing units in the wake of the IMF’s report and said the issue will have to be tackled firm numerous angles as multiple factors including challenges in accessing mortgage financing are involved. 

Mr Dean, though, said yesterday that “there’s some policy things that need to happen” - the most important of which is smart use of the Government’s Crown Land holdings. Targeted sites, based on population demand and projected growth, would be made available from these holdings at much-reduced prices to private sector developers with the stipulation they offer completed homes at prices Bahamians can afford.

“I think that’s the only way it can happen,” Mr Dean told Tribune Business on resolving the affordable housing shortage. “The cost of land is a big part of the equation, and a big part of what makes those houses affordable. It’s a social service. The Government will have to bite the bullet and absorb the cost of that land because they are not paying anything for it.

“A lot of contractors are not comfortable with operating in that [affordable housing] space because they are used to higher margins on more expensive properties. The Government is going to have to incentivise contractors to build affordable homes.

“I think it’s going to have to be duty concessions, PPPs on government-owned land, and some kind of assistance with getting those units sold such as guaranteed loans for potential purchasers. There’s a lot that can be done that I think is relatively low hanging fruit.”

Mr Sands, too, argued that action at the Government policymaker level is required to address housing affordability for Bahamians. However, he argued that the emphasis must be placed on resolving an issue that was not touched upon in the recent IMF analysis.

“For a long time I’ve argued that the existing inventory be utilised differently. That’s not part of the report at all,” the BCA president said. “We have hundreds, thousands of unoccupied and repossessed homes. That’s hundreds, thousands of potential home owners.

“If the banks and the Government can’t jointly work together to fill them, what’s the point of building hundreds, thousands more. You’re still going to have hundreds, thousands of dilapidated homes. The IMF only looked into building more; they’ve not addressed the existing inventory, so they were not as comprehensive as they thought in their review. None of it was addressed.

“We don’t have as big a problem as suggested. What we have is a lack of pure leadership.” Mr Sands said this applied both to the Government and the banks, with the latter often dictating the model and other terms governing how residential homes are to be built through the mortgage terms.

“Across the Commonwealth of The Bahamas there are hundreds, thousands of vacant homes waiting to be occupied,” the BCA chief added. “That seems to be the low hanging fruit to me. The benefits of addressing that are two things.

“First, banks get people into their homes paying on mortgage loans, and then contractors and others benefit from renovating and upgrading the homes. It’s a win-win. Thousands of persons could then move into those homes. Not a lot of people need to be involved. It’s two people - the Government and the banks. The banks provide the financing, and the Government provides the land that it could leverage to gain the financing.

“The woe we have is because we have left the public to fend for themselves in a marketplace that is incredibly competitive based on the number of people looking for homes, and you’re fighting for the same thing someone else is trying to buy. Things go incredibly quickly when you have to buy. We have to be aggressive and figure out ways to get persons into the existing real estate market out there.”

Mr Dean, meanwhile, acknowledged that there is often “a gap between what people can afford and what’s on the market”. He added: “I think a lot of times people try to address it with material changes. They explore different types of construction systems. That helps, but only marginally. We need a paradigm shift and rethink as to how we approach construction and housing.”

The Bahamian engineer said The Bahamas needs to assess the benefits from switching to multi-family zoning and “attached housing”, and away from single family. Besides increasing the value per acre, this would also decrease construction costs per square foot and lower the amount of utilities and other resources required to maintain yards that many Bahamians struggle with.

Mr Dean explained that the reduced construction costs would make such homes more affordable and bring them within range of more Bahamian buyers. And he also called for Bahamians to focus on whether they can have the same amenities, and living comforts, in a smaller home of, say, 900 square feet as opposed to 1,200 square feet.

Pointing out that Bahamians often “end up with more space than you need”, which inevitably increases construction costs, Mr Dean also urged persons to consider “ownership costs” associated with living in the same home for 25-50 years. Smaller homes, he said, typically fetched lower insurance costs as he warned: “All these things add up over 25-50 years. You’d be surprised at the cost of owning the home.”