The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE BAHAMAS Mortgage Corporation’s deficiencies have forced a $50m affordable homes initiative targeted at helping low and middle income Bahamian families to double the number of rentals to 77 percent of all planned new units.

Assessments by the Inter-American Development Bank (IDB), which have been analysed by Tribune Business, reveal that the Government-owned mortgage financier’s existing financial weaknesses mean it simply cannot provide enough loans to increase the number of units available for purchase/ownership beyond 23 percent.

The ‘Sustainable housing opportunities for urban transformation’ project had targeted two-thirds, or 65 percent, of new homes constructed or made available being put up for sale to Bahamian affordable home buyers. However, the situation at the Bahamas Mortgage Corporation has forced it to trim and revise its ambitions.

An IDB report, revealing that the $50m project is to be implemented over a six-year period, said: “The programme is being prepared by the Government of The Bahamas with financing from IDB to improve access to adequate housing for low to middle income households in The Bahamas, guided by three specific objectives.”

These were identified as “strengthening institutional capacity and the regulatory framework for adequate housing; increasing the supply of adequate housing; and expanding access to housing improvement solutions for the existing stock”. The second of these three goals involves increasing the housing supply “via serviced lots for private investment, direct construction and rehabilitation of underused or abandoned units”.

However, confirming the shift from home ownership to rentals, or rent-to-own, the IDB paper disclosed: “The rental share of new solutions was raised from 35 percent to 77 percent since the Bahamas Mortgage Corporation currently can't mortgage finance more for-sale units than that.”

The IDB, in an earlier study, cited the Bahamas Mortgage Corporation’s “inefficiencies and under-capitalisation” as a particular impediment to improving home ownership access for families since its mandate is to provide mortgage financing for the very income groups struggling to purchase housing.

The study said it is only capable or originating $2m-$3m in new mortgages per month - between one-sixth to one-third of the $12m required by already-qualified borrowers. However, given what the IDB described as the risk aversion of commercial banks and other private lenders to financing mortgages for low and lower middle income Bahamians, it warned the project has little choice to rely on the Bahamas Mortgage Corporation.

The state-owned lender, which had $110m in bonds coming due for repayment in the four years up until 2026, is “characterised by legacy balance sheet issues - mortgage default rates in excess of 25 percent, a high cost-to-income ratio above 70 percent, and severe under-capitalisation”.

“Yet it remains the primary source of mortgages for lower income households who qualify for long-term finance, providing mortgages for 70 percent of housing solutions that were completed by the Ministry of Housing and Land Reform in the last five years,” the IDB said.

The dependence on the Bahamas Mortgage Corporation spotlights the likely ‘Achilles’ heel’ of the $50m affordable housing drive - access to mortgage financing. Observers have long argued that The Bahamas’ housing woes require a comprehensive, holistic solution involving all stakeholders, but the banks and other private lenders to offer the necessary financing do not appear to be part of the IDB-led project.

The initiative is targeting the development of 30 new homes at the Clifford Darling Estates subdivision just south of Pinecrest Drive in southern New Providence, as well as housing projects in Freeport and for Central Pines, in Abaco.

“The project is located on the southern side of Pinecrest Drive, approximately 800 feet east of East Street South,” an IDB report disclosed. “The project consists of the construction of 30 one-storey single family homes with supporting infrastructure within the existing Clifford Darling Estates Subdivision in New Providence.

“The proposed development site comprises an undeveloped parcel of land located immediately south of established residential neighbourhoods. The project will be developed on a 30.25-acre parcel of land conveyed to the Ministry of Housing and Land Reform by the Accountant-General [Treasurer] of the Commonwealth of The Bahamas.

“The project includes construction the residential buildings, together with associated site infrastructure, including internal access roads and parking areas, pedestrian walkways, stormwater drainage, potable water supply, wastewater infrastructure, electrical, landscaping, outdoor lighting and other ancillary facilities required to support the residential community.” The necessary permits and approvals, though, have yet to be obtained.

In Freeport, the focus is on Garden Villas with the goal of improving “housing conditions through the redevelopment of aging residential properties and the provision of safe, affordable and climate-resilient housing”. The Government is said to be in the process of acquiring the necessary land for the initiative, with three parcels in particular being targeted.

These are the Garden Villas site, “which contains occupied residential structures in advanced states of deterioration”, plus the Bain buildings that feature “unoccupied deteriorated apartment buildings” and, finally, the Drake Apartments site on which sits “partially occupied apartment buildings in a deteriorated condition”.

“Following their rehabilitation, the site will serve as the permanent location for residents displaced during the redevelopment,” the IDB report pledged. “The project area is situated within an established urban neighbourhood characterised primarily by residential land uses, together with local commercial establishments, public roadways, community facilities and places of worship.

“Existing municipal infrastructure, including road access and utility services, is available throughout the surrounding area. The Government of The Bahamas is in the process of acquiring the parcels required for redevelopment.

“Following property acquisition and the relocation of affected residents, the project will involve demolition of unsafe structures, site clearance and remediation, construction of new climate-resilient housing, installation or upgrading of supporting infrastructure and utilities, landscaping and other associated site improvements.”

The third and final targeted project, Central Pines in Abaco, will feature the construction of 35 single family homes plus the necessary utilities and supporting infrastructure. “The project is situated in Central Abaco, in the Marsh Harbour area, near shopping, dinin, and local recreation areas,” the IDB noted.

“The project will include the construction of 35 new single-family homes together with the supporting infrastructure required for their operation. This will include an internal access road, connections to the electrical distribution network and potable water supply, and individual on-site septic systems for wastewater treatment and disposal.

“The focus of the currently-planned interventions is on existing land subdivisions in Abaco’s Central Pines community in the Marsh Harbour area. These interventions will increase the housing supply in the Family Islands, supporting regional development and contributing to the ongoing recovery and reconstruction efforts following the impacts of Hurricane Dorian in 2019.”

When combined, the 30 Clifford Darling Estates single family homes, plus the 35 eyed for Central Pines, join the 35 buildings and 420 units planned for Freeport’s Garden Villas as totalling some 105 new, renovated affordable properties and as many as 485 individual units.

The IDB said 50 percent, or some $25m, out of the total $50m financing package will be allocated to new home construction. Of the balance, some $10m will be used to upgrade and refit existing properties, with $13m earmarked for reforming the existing housing regulatory regime.

The $10m housing improvement component will “finance urgent repairs, maintenance and capacity expansion of public housing rental buildings”, plus offer “concessional micro-loans to existing home owners to make urgent repairs and maintenance of their homes; add auxiliary or long-term rental units to their plots; and make resilience retrofits”.

As for regulatory reform, besides overhauling the Bahamas Mortgage Corporation, the multilateral lender also foreshadowed the creation of two new government agencies - a Public Housing Authority and a Housing Development Agency. The former would manage and maintain public housing, while the latter will develop it including through public-private partnerships (PPPs) with developers and contractors.

The $13m will be invested in “reforming the Bahamas Mortgage Corporation, including change management, staff training and modernisation upgrades” that involve “credit scoring systems, banking software and customer interface”.

Alongside this will come the “creation of a Public Housing Authority (PHA) to programme, manage and maintain public housing developments, and a Housing Development Agency (HDA) to undertake the construction and sale/rent of new housing solutions, alongside associated investments in management systems and training”.

The final element of this section will include “regulatory reforms to incentivise private housing investment and PPPs through mixed use, higher density and multi-family zoning, construction permitting reform and rent control reform to strike a better balance between tenant protections and incentivising investment in rental creation and maintenance”.