Morning After the Vote: What the PNP’s Election Win Means for Jamaica’s Housing Crisis

Jamaica Homes Housing Affordability & Cost of Living Review — April 2012

• The People’s National Party won the January 5, 2012 general election, ending seven years of JLP government; Prime Minister Portia Simpson Miller leads a new administration with broad popular support but severe fiscal constraints
• The incoming government inherits public debt near 140 percent of GDP; interest payments continue to absorb more than half of government revenue, leaving minimal space for new housing investment
• Three months in, the new administration has maintained the fiscal framework required to sustain discussions with the IMF; a formal programme has not yet been announced
• Commercial mortgage rates remain in the double digits; the formal housing market continues to be inaccessible to the majority of working Jamaicans without NHT support
• NHT mortgage disbursements continue, providing the structural floor beneath Jamaica’s affordable housing market during the political transition period
• The construction sector watches the new government’s signals on infrastructure investment and planning reform, cautiously hopeful but constrained by the same credit conditions that preceded the election

The January 5 election produced one of the clearest verdicts in Jamaican electoral history. The People’s National Party, under Portia Simpson Miller, won forty-two of the sixty-three parliamentary seats, returning to government after seven years in opposition with a mandate that was as much a rejection of the JLP’s difficult tenure as an endorsement of the PNP’s programme. The result was celebrated in communities across the island, including in the many housing developments and residential schemes where the preceding years of economic difficulty had been most directly felt. The people had spoken. Now the new government had to govern. And governing Jamaica in April 2012 means confronting, immediately and without flinching, an economic inheritance that leaves very little room for the housing investments that the election campaign’s promises implied.

Three months into the new administration, the housing market is reading the signals with characteristic patience. The change of government has not changed the fundamental arithmetic of Jamaica’s debt position. Interest payments still consume the majority of government revenue. Capital spending remains compressed. The IMF discussions, which the PNP government has continued from where the JLP left off, have not yet produced a formal programme. And the commercial mortgage market, which determines the affordability of homeownership for the working and middle class, is operating in the same high-rate environment that it occupied before the election. Political change, even decisive political change, does not immediately transmit to mortgage rate relief.

What Changed on January 5 — and What Did Not

The most significant change that the election produced was intangible but real: a shift in the mood of expectation. The JLP’s final years in office were characterised by a sense of management under siege — a government aware that its fiscal choices were broadly necessary but equally aware that the political costs of those choices were being borne by a population whose patience was running thin. The PNP’s election on a platform that promised a more socially sensitive approach to fiscal management — while not abandoning the commitment to fiscal discipline that Jamaica’s creditors and international partners require — has reset that mood. Whether the mood reset translates into improved consumer confidence and, eventually, into housing market activity, depends on how the new government manages the tension between its social commitments and the fiscal reality it has inherited.

What has not changed is the macro environment. The debt ratio is what it is. The IMF’s programme conditions are what they are. The Bank of Jamaica’s monetary policy constraints are the same constraints they were under the JLP. A change of government in a heavily indebted, IMF-monitored small open economy does not produce the kind of macro reset that would immediately alter housing market conditions. The new government’s room for manoeuvre is bounded by the same arithmetic that bounded its predecessor. The difference, if any, will lie in how that arithmetic is managed and communicated over the coming months and years.

The NHT Through the Transition

One of the quietly reassuring aspects of Jamaica’s political transition has been the uninterrupted operation of the National Housing Trust. As an institution with its own governance structure and funding base, the NHT does not depend on government budget allocations for its core mortgage function. Through the election period and the transition of power, the NHT continued to receive contribution income, continued to process applications and continued to disburse mortgages to qualifying contributors. This institutional continuity is more valuable than it might appear at first glance. In economies where the government is the primary housing finance provider, political transitions carry significant risks of interruption. Jamaica’s NHT design buffers the housing finance function from exactly that kind of political exposure.

The new government has signalled its support for the NHT and its interest in examining ways to extend the Trust’s reach — potentially through higher loan limits, broader eligibility criteria or new housing development partnerships. These signals are encouraging. Their translation into policy will depend on whether the government can identify the fiscal and institutional space to make meaningful changes without compromising the NHT’s financial health, which is the foundation of everything the Trust does.

Planning and Land: The Slow Reform Agenda

Among the structural barriers to affordable housing delivery in Jamaica, the planning and approval system and the land titling regime are among the most significant and the most resistant to quick reform. The process of obtaining subdivision and development approvals in Jamaica is characterised by multiple agencies, long timelines and costs that developers routinely describe as prohibitive for affordable housing schemes. The land titling problem — the fact that a large proportion of Jamaica’s residential properties are occupied under informal arrangements that do not generate a registered title — creates a permanent class of assets that cannot be used as collateral, cannot be easily sold and cannot be insured against loss.

Both of these problems predate the current government and will survive any single administration. They require sustained institutional effort, legislative reform and the willingness to challenge vested interests that benefit from the current complexity. The PNP has the political capital of a fresh mandate. Whether it will choose to spend some of that capital on the slow, unglamorous work of planning and land reform is a question that April 2012 is too early to answer.

What This Means

For buyers, the new government’s election does not change the immediate calculus of affordability. NHT-eligible buyers with qualifying properties in view should proceed on the merits of their individual transactions. Waiting for a government-driven improvement in commercial mortgage conditions is a waiting game with an uncertain timeline and a real cost in foregone equity and continued rent.

For developers who had deferred projects through the final months of the election period — a common behaviour in pre-election Jamaica, where policy uncertainty depresses investment decisions — the post-election period provides a moment of clarification. The new government’s fiscal orientation is broadly known. The IMF discussions are proceeding. The basic parameters of the operating environment for the next one to two years, while not easy, are at least visible. Developers who have been deferring decisions on the basis of election uncertainty now have one fewer reason to wait.

The Outlook: A New Government, the Same Long Road

Jamaica’s housing affordability challenge is deeper and older than any single government. The deficit of affordable formal housing, the dysfunctional commercial mortgage market, the planning system’s burden on development costs, the land titling problem, the gap between NHT capacity and household need — these are structural features of the housing landscape that will not be resolved in one political term, or perhaps in two. What the new PNP administration can do is govern well within the fiscal constraints that exist; make the institutional improvements that lie within its capacity; sustain the IMF programme negotiations that will eventually produce the debt reduction that the credit market improvement requires; and build the political credibility for the longer-term housing reform that the island genuinely needs. It is a long road. The new government has just taken office. The housing market is watching, patiently, to see which direction it chooses to walk.

This review is produced for informational and journalistic purposes only and does not constitute financial, legal or investment advice.

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