The Decent Housing for a Decent Living initiative to help poor and low-income Jordanians has been hit by episodes of controversy from the get go. Delays and counter-delays by the executive branch and reported malpractice may have derogated the initiative. It is possible that the very construct of implementing this initiative should be revised.
The initiative, announced by His Majesty King Abdullah in 2007, was supposed to provide 100,000 housing units for the poor and low-income groups at a cost. The significance of the initiative and its intent are tremendous for the Jordanian poor, since only one-third of them live in their own houses and the Rent and Housing Law is likely to be implemented in 2010, which is drawing near, making one-third of tenants possibly homeless.
The cost of such a programme is estimated at JD7 billion. Initially, it was estimated to be JD5 billion, but rising costs, sticky prices (apparent adamant refusal by suppliers to lower prices once they go up) and monopolistic practices in the economy have increased the cost. The cost level is forbidding in a country where the government budget deficit is expected to top JD1 billion this year. Furthermore, the overall budget is 90 per cent committed annually to cover current expenditures (salaries, pensions and debt repayment).
The initial tendering of the project was viewed by media observers as a mess, causing cries of foul play from every corner (the tendering period was reportedly too short, the "winning" consortium was lead by a company that was owned by the then-minister of public works, etc.). Official responses were muted and the process, consequently, received significant criticism as mainstream media and competent Jordanian bloggers, who are growing in significance and reach, reported.
On the positive side, the initiative seemed to allow the poor to secure a decent living, low-cost housing at affordable prices and long payback periods - which are uncommon in real estate financing in Jordan. The mass and size of the project would create flagship opportunities for work and investment in the economy, and the government would recoup its investment while getting the private sector to work.
Conceptually, the project design itself had certain deficiencies. For starters, it may create ghettos of the poor as they would be concentrated in certain areas and thus stigmatised for life for living in low-income housing units. Ghettos are known worldwide to create other social problems, as they concentrate hopelessness and help escalate crime and social problems, from which the poor would have no escape. Furthermore, the prices of real estate (already plummeting due to the obvious lack of liquidity and stringent measures by the Central Bank of Jordan and a seeming collusion of private banks) may fall further as supply increases. Moreover, the applicants have had a hard time accessing loans from banks, as would be expected, especially given the current ceiling (20 per cent) on real estate loans of the total lending of banks.
International best practice, however, provides a better methodology for implementing this honourable initiative. Instead of providing built housing units, the initiative could provide cheap financing and loan guarantees for the poor to participate in the programme.
Let's face it, banks only lend the rich and ask for collateral for loans. Even if one applies for the current scheme, he or she may be rejected without collateral.
With cheap financing and loan guarantees, the poor would have the option to choose their own locations. Usual preference is close to the family or clan, or may be in an area they had inherited but which has no buyers or little value. Most importantly, they would live outside the stigma of poverty that would be passed on from one generation to another.
Also, since the poor have varied demographic characteristics which no overall master plan underpinned by a drive for lowering costs could capture effectively, they would have the chance of having their own designs, number of rooms and building sizes, built to suit their current and potential budgets. The emerging varieties could be beautiful, replacing the boring homogeneity necessitated by the required economies of scale.
All the government would have to do is to guarantee the loans at banks at a lower cost (discount rate plus half a point); special application forms would be designed; training could be provided to the poor and banks to fill the forms; international organisations such as the Aga Khan and Islamic funds could be approached and they would help finance the whole scheme. The Central Bank has excessive reserves and banks now have their highest ever level of deposits and they are only lending at very high rates.
Thus, no immediate financing pressure would be placed on the government; in fact work could proceed really fast and results would be felt everywhere. One additional benefit of this reshaping of the implementation design of this great and highly appreciated initiative is to enable small contractors to bid and work for it without subcontracting to the large companies - since SMEs are the main drivers for growth in Jordan, this would be an overall economic bonanza. In addition, the supply would be demand driven and thus building activity could become frontloaded as demand for own housing units surges next year. The interest rates would fall nationwide in a spillover effect and liquidity would ultimately return. In other words, this simple approach is a win-win solution.
By all means, a quick review and assessment, as in all small and great schemes, is warranted at this stage. No major development in implementation has taken place and therefore no loss can be generated from the redirection. Efficiency gains will be garnered everywhere. On the airport road, there used to be a sign that said, "Jordan, a small country with big dreams". Big dreams can be achieved by small steps everywhere.
By Yusuf Mansur
© Jordan Times 2009
