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Monday 21 January 2019
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Housing deal

Private investors to get cash, land in HDC plan

File photo: Housing Development Corporation (HDC) managing director Brent Lyons, at his Port of Spain office.
File photo: Housing Development Corporation (HDC) managing director Brent Lyons, at his Port of Spain office. PHOTO BY JEFF K MAYERS.

Launched in January 2018, the Housing Development Corporation's (HDC) Housing Construction Incentive Programme (HCIP) was designed to achieve four things: satisfy the current demand for affordable housing by low and middle income families while reducing the HDC's 176,000-plus waiting list, tap into private funding, stimulate the economy and present developers with a sound option for return on investment.

Business Day recently spoke with HDC managing director Brent Lyons to find out more about HCIP and how soon the public can expect new, affordable homes to come on the market.

Seated in the conference room of the HDC's offices on South Quay, Port of Spain, Lyons said with "reduced money available," the HDC had to find more creative ways to meet demand while placing priority on lower income families and individuals.

Under HCIP, a cash or land incentive is available to successful participants for the construction of two-bedroom and three-bedroom single family units – the most-requested type of housing by HDC applicants – three-bedroom duplexes (side by side), three-bedroom townhouses and two-bedroom apartments in a four-apartment building.


HDC prototype for a 3 bedroom single family unit

HDC prototype for a 4-apartment complex

The HDC has even provided pre-approved detailed designs for these five specific housing units, available in the HCIP information booklet.

Lyons said while builders/developers "don't necessarily have to follow the HDC's approved unit drawings in order to qualify for HCIP incentive payment, the units they do build must meet the accepted quality standards, completed within the price point and should ideally be 1,200 square feet."

Cash Incentive

A cash incentive will be awarded as follows:

• For units to which the HDC ascribes a value of no more than $550,000, the developer/contractor will receive $75,000 per unit; and

• For units to which the HDC ascribes a value of between $550,000-$750,000 the developer/contractor will receive $100,000 per unit.

Government will pay the cash incentive once the HDC has confirmed that:

• The required works have been completed in accordance with all specifications and agreements of the programme;

• All defects (if any) have been suitably rectified;

• The sale of units to specified applicants from the ministry’s housing application fulfilment system (HAFS) database is completed; and

• The established handover process has been completed.

Once all four requirements have been met, the Housing Ministry will prepare a certificate confirming the participant satisfied the HDC's conditions, completed the project and the sale of the housing unit/s and is now entitled to receive the cash incentive.

As stated in the HCIP information booklet, the ministry will provide the relevant details to the Finance Ministry "and request the release of funds to settle the liabilities due to the participant within three months of the issue of the certificate." Once the housing ministry receives those funds, the participant will be paid.

Land Incentive

Government will provide State lands on terms and conditions to be agreed to approved builders/developers without lands who wish to finance the construction of housing units in accordance with designs, specifications and prices fixed by the HDC/government.

The HCIP information booklet says, "The State will identify suitable available lands, with or without infrastructure and will invite, through a tender process, persons or firms selected from the list of registered applicants on the HCIP database or from the HDC’s list of pre-qualified contractors, to submit proposals in accordance with the approved housing unit designs."

Trinidad's East-West Corridor is where there's currently the greatest demand/need for housing. Commenting on this in relation to the land incentive option, Lyons said in a subsequent e-mail to Business Day, "once land is available in an area where there is a great demand/need for public housing, the HDC will facilitate the process."

Providing some more detail on the land incentive, Lyons said State land would only be provided if required by a developer.

"The intent is to allow the developer to build on the land while still being able to realise a reasonable profit – on average 30 per cent."

Regarding the time-frame of the tender process, Lyons does not expect it to be too long.

"In fact, it's expected the process will be a smooth because the HDC tender process is normally a smooth, well-established one. The statutory approvals can be fast tracked through the assistance of the Housing Task Force."

Lyons also said there would be no difference in how HCIP works when building on private land versus State land.

Construction is to be done in accordance with established construction procedures and guidelines provided by the HDC as well as all other statutory requirements, including the Town and Country Planning Division (TCPD), the Environmental Management Authority (EMA), the Water and Sewerage Authority (WASA), the TT Electricity Commission (TTEC), the TT Fire Service (TTFS) and the Occupational Safety and Health Authority and Agency (OSHA).

The Housing Task Force

Recognising that not everyone would have all of the statutory approvals in place at the time of their HCIP application, Government established the Housing Task Force.

Lyons said the ministerial committee is made up of representatives from TCPD – which falls under the Ministry of Planning and Development – the EMA, the Ministry of Works and Transport’s Draining Division, Highways Division and Designs Division, TTEC, WASA, the Commissioner of State Lands and the respective ministers for these divisions and authorities.

Asked if the task force would be guiding all HCIP contractors through the process or only those who request help, Lyons said, "the task force was established to facilitate the various approvals which are required for development."

Why Lyons believes HCIP will be a success

Turning his attention to the numbers, Lyons, in the interview at his office, estimated 50 per cent of HDC's applicants are low income while another "25 per cent, 30 per cent are middle income and the last 20 to 25 per cent are upper middle."

For this, the first year of HCIP, Government allocated $50 million to pay cash incentives for up to 500 new private sector-financed and constructed units.

"Given that there's a lot of private financing available in TT but limited investment options," Lyons said, "HCIP is a great alternative for folks looking for something to put their money into. This is a viable opportunity, one where you'd get a return on your investment.

"So, people who have money and are looking for ways to make a return on it, they could partner up with a construction firm and take part in HCIP. That is the model, bring people into housing construction to help meet demand at more reasonable prices."

He recalled when HCIP was presented in the 2017-2018 budget, Finance Minister Colm Imbert said on average, it costs the HDC $1.2 million to produce a three-bedroom single family unit.

"That includes operating costs, infrastructure, value of the land and prepping the land. Under HCIP we'd be paying an incentive of $100,000 for that same type of unit, so it's a win-win situation. The developer gets a cash payment for selling that unit to someone on our list and we save money and resources because we don't have to build it."

Business Day asked Lyons why it's expected that a developer would choose HCIP over a higher profit in areas where demand far exceeds supply.

"Yes, they could potentially make more money on the open market. What we bring to you is a ready clientele. A lot of developers want to build houses but they don't want to worry about selling or dealing with so many buyers at one time.

"We have a ready market, we have families on our database who would be able to qualify. We would be able to supply buyers, so between the incentives and the guaranteed market, developers/contractors would do well," Lyons said.

It took three months to complete the necessary paperwork, get approvals for HCIP registration and information booklets as well as the subsequent printing of said booklets. Once this was done, HDC issued a notice that effective March 20, anyone interested in participating could pay a non-refundable, VAT-inclusive, fee of $1,000 to receive an HCIP package.

Completed packages were then sent back to the HDC, indicating key information such as whether or not the developer has land, financing, approvals in place and of course, how many and what type of units they want to build.

Lyons said as of June 4, 60 people/companies had paid the $1,000 fee – that money offsets the administrative and printing costs associated with the booklets.

"To date we've gotten eight confirmed proposals. About 60 per cent of the proposals that we've seen so far have been people with money, land and construction expertise. Many of them already have approvals in place. The other 40 per cent have money and would like to be put together with somebody who has land.

"The first phase was people sending in proposals. Phase two, which we just entered, involves meeting these folks, reviewing their actual documentation, approvals and so on and see how we could take it to the next stage – construction."

Lyons showed Business Day a spreadsheet of the eight proposals, in which six areas in east, north and south Trinidad had been identified for housing units to be built under HCIP.

"The amount of land and the number of units varies. To give you a sense, one person has five acres, another 22, a third has half an acre while someone else wants to develop 169 acres. Most of them own the land but one man is in the process of finalising a purchase and said he's considering going into a partnership with the land owner. The land under consideration is in Penal, Santa Cruz, Fyzabad, Arima, Sangre Grande and Rio Claro."

Lyons said these are semi-urban areas which could really benefit from HCIP-priced housing.


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