NHT Transfers, Deficits and a Budget That Divides: Jamaica’s Housing Review — April 2019

Publication Date: April 3, 2019 | Coverage Period: March 3 – April 2, 2019 | Category: Monthly Review

March in Brief

• Government tables budget for fiscal year 2019–20; NHT targets presented to parliament
• NHT transfer debate reaches peak intensity; opposition calls for funds to remain with Trust
• Housing deficit cited by multiple parliamentarians; government defends fiscal discipline
• HAJ announces new social housing targets for incoming fiscal year
• Construction sector reports steady progress; planning approval delays persist
• Jamaica IMF programme performance review positive; fiscal targets being met

Housing Market Overview

March 2019 was dominated, in the policy arena if not always in the transaction market, by Jamaica’s annual budget debate. The fiscal year ending March 31 and the new year beginning April 1 provide the occasion for the most concentrated political attention that the housing sector receives in any twelve-month period. Parliamentary debates about the government’s fiscal plans invariably surface questions about the NHT, about housing targets and about the affordability of homeownership for the Jamaican working population — questions that carry real electoral weight given the number of Jamaicans who aspire to ownership and have not achieved it.

Against this policy backdrop, the residential market itself continued to transact at a measured but healthy pace. March is not typically the market’s most active month — that distinction belongs to the January-February rebound and the post-Easter period in April and May — but activity was adequate, and the underlying indicators of demand remain positive. Prices held firm. New schemes were announced. Mortgage applications continued to flow through the banking system.

The structural story — a deficit of over 100,000 housing units, a population that is urbanising faster than the formal housing sector can serve, and an affordability gap that the NHT partially but not fully bridges — remains the dominant context for all near-term market developments.

The Budget Debate and the NHT Transfer

The parliamentary budget debate in March 2019 produced what has become a ritual confrontation over the NHT’s annual transfer of J$11.4 billion to the Consolidated Fund. The transfer, originally introduced in 2013 as a temporary measure to support fiscal consolidation under the IMF’s Extended Fund Facility, has become a permanent feature of the fiscal architecture — and a permanent source of political controversy.

The opposition’s case is straightforward and politically resonant: NHT contributors pay a mandatory 3% of their wages into the Trust in exchange for access to housing finance and, in some cases, scheme units. When J$11.4 billion of those contributions is redirected to general government revenue each year, contributors are being denied the full benefit of their mandatory participation. The opposition argues that this money should be used to build more houses, lower interest rates on NHT loans, or reduce the contribution burden on workers.

The government’s response acknowledges the tension but frames it within the macro-fiscal imperative. Jamaica’s debt-to-GDP ratio — while declining — remains among the highest in the Western Hemisphere. Primary fiscal surpluses are essential to sustaining the debt reduction trajectory. The NHT transfer is one component of a broad fiscal consolidation programme that, the government argues, creates the macroeconomic stability within which housing investment can ultimately grow. A Jamaica that loses fiscal discipline, in this argument, is a Jamaica that cannot build houses at any meaningful scale.

Both positions have merit, and neither is fully dispositive. What is clear is that the J$11.4 billion transfer — maintained year after year since 2013 — represents a significant diversion of resources from an institution whose core mandate is housing delivery in a country with a severe and growing housing deficit. The accumulating total of transfers since 2013 now exceeds J$70 billion — enough, critics note, to have funded a very substantial expansion of the NHT’s housing programme.

NHT Targets for 2019-20

Alongside the transfer controversy, the budget season brought a presentation of the NHT’s housing targets for the incoming fiscal year. The Trust’s construction programme for 2019–20 is expected to continue at broadly the levels of recent years, with scheme starts projected across all fourteen parishes. The Joint Venture programme, through which private developers partner with the NHT to deliver units accessible to Trust beneficiaries, is projected to expand its contribution to overall supply.

The Guaranteed Purchase Programme — through which the NHT commits to purchase units from private developers, providing the developer with the sales certainty needed to finance construction — remains an active instrument for expanding supply. This programme has enabled a number of private sector projects that might otherwise have struggled to secure construction financing, and is seen by the industry as a valuable complement to the Trust’s direct construction activity.

Construction Sector

Construction activity through March was characterised by the end-of-fiscal-year push to complete projects targeted for the 2018–19 financial year. Sites across the island were active as contractors sought to meet completion targets before the March 31 fiscal close. The NHT’s 2018–19 performance — in terms of units completed and housing starts — will be detailed in the Trust’s annual report, but field evidence suggests that the year’s output was solid.

For the private sector, the fiscal year boundary is less operationally significant, but the budget season does create a political moment of heightened attention to construction sector issues. Industry bodies took the opportunity of the March parliamentary engagement to raise, again, the issue of planning approval delays — with municipal corporations cited as the primary bottleneck. The government has acknowledged the problem and committed to process improvements, but the pace of change has been frustratingly slow from the industry’s perspective.

Major Developments

Across the parishes, the NHT’s active schemes span a range of scales and typologies. In St Catherine — by some measures the busiest construction parish in Jamaica — multiple schemes in the Portmore, Caymanas and Linstead corridors are at various stages of development. In St James, the combination of NHT activity and private sector development reflects the parish’s economic dynamism and its large population of NHT contributors employed in the tourism sector. In rural parishes including St Elizabeth and Westmoreland, smaller schemes address the housing needs of agricultural and mining sector workers.

The apartment development trend in Kingston — firmly established through 2018 and early 2019 — continues to attract new announcements. Developers who have seen their early projects perform well are proceeding with new sites, encouraged by demand from a professional class that has proven both willing and able to pay apartment prices that, while above NHT affordability, are well within the reach of dual-income professional households.

Infrastructure

Infrastructure investment continues to support residential development activity across the island. Road rehabilitation under the MIDP programme is proceeding in multiple parishes, improving access to growth corridor communities and thereby stimulating residential land values. The government’s capital expenditure on road, water and utility infrastructure — maintained despite the fiscal consolidation constraints — is a positive signal for the medium-term residential development landscape.

Water supply infrastructure in St Catherine and St Andrew — the parishes under greatest residential development pressure — remains the area of most acute concern. The National Water Commission’s investment programme, while ongoing, has struggled to keep pace with the rate of residential development, creating a situation in which new scheme completions sometimes outrun available water supply capacity.

Investment and Finance

The mortgage market continues to operate in a broadly supportive rate environment. The Bank of Jamaica’s policy rate — approximately 2.0–2.5% — has remained stable through the March period, reflecting the absence of inflationary pressure that would compel a tightening. Mortgage rates at commercial banks and building societies remain at levels that, while higher than the BOJ policy rate, are historically manageable for households with adequate incomes.

The exchange rate, now in the J$131–135 range, is a watch item. The Jamaican dollar’s gradual depreciation against the US dollar — consistent with the BOJ’s managed float approach — has not accelerated to levels that would trigger inflationary concern, but the trajectory is being monitored. For property investors with US dollar income or savings, the depreciation provides a marginal valuation benefit on Jamaican assets.

Diaspora

Diaspora buyer activity is in a positive phase for US and Canadian Jamaicans. The North American economy is performing well, employment is high, and the earnings power of the Jamaican diaspora in those markets supports continued property investment activity in Jamaica. Estate agents who specialise in diaspora buyers report a healthy pipeline of enquiries and transactions.

The UK diaspora continues to hold back, for Brexit-related reasons that have not changed materially through March. The UK parliament’s failure, again, to approve a withdrawal agreement — and the consequent extension of the Article 50 deadline to October 31 — prolongs the uncertainty that has suppressed UK buyer activity. Until Britain’s economic relationship with Europe is settled, UK-based Jamaicans with property aspirations on the island are likely to maintain a watching brief.

Affordability

The budget debate’s housing dimension shone a light on Jamaica’s affordability challenge with unusual directness. Parliamentarians on both sides of the aisle acknowledged that the housing deficit is growing, that NHT waiting lists are long, and that the median Jamaican household cannot access homeownership at prevailing prices through conventional financing channels. The disagreement is about the solution, not the diagnosis.

The NHT’s loan ceiling — in the J$5.5–6.5 million range — enables beneficiaries to access meaningful financing, but in a market where even a modest two-bedroom house costs J$10–16 million in urban areas, the gap between NHT financing and purchase price requires supplementary commercial borrowing. For households at the lower end of the income scale, this supplementary borrowing may be inaccessible, excluding them from the formal market entirely.

Regional Context

Jamaica’s macro performance relative to Caribbean peers continues to compare favourably. The tourism sector — whose March performance benefits from spring break and early Easter season traffic — is on track for another strong year. The IMF programme’s positive performance reviews, which confirm Jamaica’s compliance with its fiscal targets, provide external validation of the government’s economic management approach.

Looking Ahead

As April 2019 begins, Jamaica’s housing market enters the post-budget period with clarity about the fiscal framework within which it will operate for the coming year. The NHT transfer will continue. The Trust’s construction targets are set. The affordability challenge persists. But the broader macro environment — improving but fragile — continues to provide a foundation for market confidence that would have seemed improbable as recently as 2013.

The property market’s trajectory remains upward, underpinned by structural demand, constrained supply and an improving macroeconomic backdrop. The budget debate will fade from the headlines; the housing need that it highlighted will not. Jamaica’s challenge is to convert the political acknowledgement of that need into sustained, scaled delivery — a challenge that the NHT, the HAJ, private developers and the financial sector are together working to meet, with partial but real success.