The National Housing Trust (NHT) was created in 1976 under the National Insurance Amendment Act. Proclaimed in a statement to the House by Prime Minister Michael Manley on October 8, 1975, the bill was tabled on December 17th with provisions for contributions to commence January 1, 1976. The first deduction began on January 9, 1976 ahead of the passing of the legislation.
Purpose of the Trust
In 1976 it was estimated that over the next 10 years 22,000 housing units would be required annually to meet the need of the country. The main purpose of the Trust was to add to and improve existing supply of housing by:
(i) Promoting housing projects;
(ii) Making available to employee contributors, loans to assist in the building, purchase, maintenance, repair or improvement of houses; and
(iii) Encourage and stimulate improved methods of production of houses.
In summary, there were three aspects to achieving the housing objective: Promotion, financing and research and development (R&D). The NHT has failed on all three counts- with the second objective being the most measurable the Trust has provided only 101,084 mortgage solutions in almost 30 years.
Based on the latest estimate, the country now requires 30,000 housing units annually over the next 5 years; that should take the NHT roughly 45 years to achieve.
Contributions and refunds
Under the Act, employees and employers were mandated to contribute 2% and 3% respectively of gross wages. Household help and the self-employed were also required to contribute. Householders were responsible to deduct $0.40 per week for the purchase of stamps and affix to stamp cards and submit annually. Self- employed was to pay 3% of projected earnings quarterly to the Collector of Taxes. Those earning up to $50 per week could elect to pay by the purchase of stamps at the rate of $0.30 for each $10 in earnings.
The contributions to the Trust were regarded as loans with the proviso that it would be repaid after 7 years to employees and 25 years in the case of employers. Both accrued interest tax- free based on the earnings of the Trust and were payable on repayment to employees and semi- annually in arrears to employers.
Early return of the employees’ contributions were allowed in the following cases:
1. Purchase of owner occupied house by employee
2. Trust loan for home improvement
3. Retirement
4. Bankruptcy
5. Death- contribution paid to estate
Financial Report 2004- 2005 (Abridged)
NATIONAL HOUSING TRUST
BALANCE SHEET AT MARCH 31,2005
(Expressed in $’000)
2005 2004
Notes $ $
ASSETS
Cash and cash equivalents 4 5,332,826 4,581,139
Interest and other receivables 5 2,170,448 1,870,821
Income tax recoverable 49,933 392,434
Loans receivable 6,7 44,126,523 40,683,473
Investment securities 8 17,356,219 13,382,236
Inventories 9 1,834,251 2,105,594
Intangible assets 10 31,795 34,774
Investment in associate 11 685,046 277,073
Retirement benefit asset 12 201,900 136,500
Property, plant and equipment 13 1,084,529 861,951
Total assets 72,873,470 64,325,995
LIABILITIES
Accounts payable and accruals 14 703,190 871,146
Employers’ contributions refundable - 1,038
Bonus payable to employers 62 3,407
Refundable contributions 15 25,103,757 21,834,847
Deferred taxation 16 755,745 671,990
Total liabilities 26,562,754 23,382,428
Net assets 46,310,716 40,943,567
Financed by:
ACCUMULATED FUND
Non-refundable employers’ contributions 2(c) 24,886,011 21,377,650
Fair value and other reserves 17 934,261 908,905
Peril reserve 18 920,441 911,861
Loan loss reserve 19 901,652 854,733
Surplus on income and expenditure account 18,668,351 16,890,418
46,310,716 40,943,567
NATIONAL HOUSING TRUST
INCOME AND EXPENDITURE ACCOUNT
YEAR ENDED MARCH 31,2005
(Expressed in $’000)
2005 2004
Notes $ $
INCOME
Interest on:
- Loans receivable 3,370,432 3,144,506
- Investments 3,344,784 3,320,356
Gains on projects - 141,065
Service charge on loans to beneficiaries 6 75,573 61,446
Miscellaneous 13 290,837 351,708
7,081,626 7,019,101
EXPENDITURE
Operating expenses 2,174,312 1,756,312
Bonus on employees’ contributions 947,525 865,353
Provision on loans receivable 6 165,904 420,228
Losses on projects 60,862 -
Special subsidies and grants 21 953,590 440,554
4,275,193 3,482,447
SURPLUS BEFORE EXCEPTIONAL ITEMS
AND TAXATION 2,806,433 3,536,654
Exceptional items 22 48,325 2,312
SURPLUS BEFORE TAXATION
Taxation 23 924,676 872,343
NET SURPLUS 24 1,833,432 2,661,999
Financial viability
As at March 31, 2005 the net assets of the Trust was $46.3 billion of which loans receivable accounted for $44.1 billion. In other words, if the Trust paid off all its debt at the point in time it would be left with $46.3 billion to lend to contributors, and so far it has lent $44.1 billion.
Looking further down the balance sheet at how the Trust is financed shows two significant sources:
1. Non- refundable employers’ contributions- $24.9 billion
2. Accumulated surplus- $18.7 billion
Excluding reserves (loan loss reserve etc.), the accumulated fund is really $43.6 billion against loans receivable is $44.1 billion.
On the income side, net surplus has averaged $2.2 billion over the last 5 years. This is unlikely to continue for two main reasons:
a. Average yield on investments over the last 5 years of 20% will fall significantly as interest rate decline and the equities market live through the bear phase.
b. Loan loss provisions will rise substantially as the folly of the “Inner City Renewal” project ($15 billion) takes root. And to prove the point, according to a report carried in the Jamaica Observer, April 16, 2006, of the 353 mortgage accounts held by the NHT against properties in Trench Town and Denham Town, only 13 of those are current. Another 8 have been in arrears for less than a year, while the majority has arrears exceeding a year.
Breach of trust
Contributions made by employers in respect of periods beginning on or after August 1, 1979 are not refundable and no bonuses are payable on such contributions. These non-refundable contributions have been credited to the accumulated fund.
As expected, a large number of employers have not been paying over their portion of what is in effect a tax. In 2005 it is estimated that some $1.9 billion was withheld and preliminary estimates for 2006 puts it at around $2.2 billion for the year.
Apart from that, the government awarded itself a grant of $5 billion in 2006 for Education Transformation, yet the majority of contributors have no hope of ever receiving housing benefits. No matter how it is viewed it is significant: it represents more than what was loaned to contributors in 2005, it is more than 10% of the net assets of the Trust, it consumed more than the net surplus for the last two years and it utilized over 90% of the available cash at the end of March 2005.
Social housing
In 1962 then Minister of Development and Welfare, Mr. Edward Seaga took taxpayers money and transformed Back-o-wall to Tivoli Gardens; it has turned out to be the most organized garrison community in the country. Forty years on, former Prime Minister Mr. P. J. Patterson launched the Inner City Housing Project (2003) and it will no doubt extend and re-establish garrison constituencies.
For how can an organization set up to benefit its contributors, failing to do so, then turn around and hand out housing solutions in volatile communities without political bias!
Sources: National Housing Trust, Jamaica Observer and Jamaica Gleaner
