Never make a crisis go to waste' - Rahm Emanuel - White House chief of staff

Crisis, an opportunity to think and act 'outside the box', unshackle ourselves from outdated paradigms, create new solutions. Science, if unhindered by social interests, responds to crisis with speed.

For the influenza A (H1N1) virus, science has analysed its DNA structure and has defined an approach which limits its spread, so the world is unlikely to repeat the 1918 Spanish-flu pandemic.

Social science, by contrast, filters knowledge through vested interests, with the result that we suffer consequences even when they are predictable. Take the world financial crisis, for example. Many respected thinkers - Roubini, Stiglitz, Soros, Buffet, said the collapse which took place in September 2008 was inevitable. And they said why. There was asymmetric information between buyers and sellers of a pyramid of sophisticated but tainted financial instruments. As a result of total world wealth being concentrated in a few financial centres, US$4 trillion will be realised in bank losses, credit has contracted and the world is in recession. Like the experimental laboratory frog, we didn't feel the heat until it was too late - and suffered the consequences.

Industrial expansion

Jamaica's conduct of housing policy has displayed similar characteristics. Real investment in housing has dwindled from the heyday of the 'schemes' which were developed to support workers needed in the industrial expansion of 1950s and 1960s - Wilton Gardens, Tivoli Gardens, Arnett Gardens, Olympic Gardens, etc. They filled a need as older, worker residential areas such as Rollington Town, Whitfield Town, Jones Town, etc had reached their capacity. The new schemes may have been linked to political interests, but they were built and absorbed most of the population that the new industries attracted, and they were affordable.

Then, as government money tightened in the 1970s, a new stimulus arrived through international funding. It was fuelled by new thinking mainly by John Turner, the English architect who, through his work in Peru, convinced the international agencies that more basic shelter would be more affordable to the poor, hence "Sites & Services" financed by the World Bank and, Urban Upgrading financed by United States Agency for International Development (USAID).

Inefficiency in implementation

This gave rise to Nannyville, De La Vega City, Seaview Gardens, Catherine Hall, as well as upgrading of several inner-city communities - Black Ants Lane, Cassava Piece, etc under a succession of Housing Investment Guarantee programmes. There were issues - of inappropriateness of site selection, of inefficiency in implementation and even allegations of corruption which featured in the press at the time - but the solutions were built and they were affordable.

The biggest schemes of them all, Portmore and Greater Portmore financed by Caribbean Development Bank (CDB) and National Housing Trust (NHT), gave us great comfort. Despite the issues raised by environmentalists, for which there is much credible evidence, can you imagine Kingston in the absence of such a safety valve?

But what we did not notice was that the international agencies, one by one, walked away from us, with the official explanation that Jamaica had been classified as 'middle income' and was no longer eligible for development funds for housing. What they meant was that we were squandering our wealth upon consumption, emphasised by chronic Budget deficits and, yes, corruption, denying ourselves our potential for development. Hence 'Structural Adjustment'' followed, with nothing for housing, save and except for the NHT. This is an indigenous institution of which we were all justly proud, as its selection policies were demonstrably impartial, its solutions were delivered in respectable numbers which gave us all, hope, and they were affordable.

What we did not appreciate was the catastrophic progressive decline in workers real incomes, effective housing demand and the ultimate folly of relying on a single source of funds, NHT contributions, which were applied, unleveraged, to a fixed range of housing solutions which would give rise to the huge gap between expectations and delivery from which we are now reeling. Jamaica's workers lost both affordability and quantity.

Let's look at affordability. The lowest paid worker, the sugar worker, could in 1977 (Sugar Industry Housing Limited Archives) afford a completely built two-bedroom unit costing $12,500 on a single wage of $2,500 per annum, utilising a graduated payment mortgage (GPM), which established a wage/mortgage ratio of 1:5. This was achieved with annual interest charges of eight per cent to 10 per cent. The graduation meant that workers paid a constant percentage of income, 25 per cent to 30 per cent, for the life of the mortgage, which was fair to those who received benefits, and fair to those in the queue, as the real value of the fund was maintained despite inflation. We failed to notice and so failed to change policy over time as the construction cost index, maintained by Brian Goldson, quantity surveyor, statistician for the construction industry, crept from a base of 200 in 1979, walked and then 'Bolted'.

The 2009 index is a multiple of 590 of the 1979 base, while the comparable wage index, the minimum wage, has risen to approximately $200,000 a multiple of 80 over the base of $2,500 meaning that the worker can afford 80/590 = 13.5 per cent of the housing value he could afford in 1977.

The GOLDSON INDEX

1993 - 1998 - 2003 -2008- 2009

1,320 - 3,656 - 5,049 - 10,287 - 11,869

It now requires eight minimum wages to afford a two-bedroom 700 sq ft house. The only significant change in housing policy in all this time has been the abandonment of GPMs and the substitution of low-interest fixed rate mortgages, using a sliding scale of interest dependent upon beneficiaries' incomes. Further, access to solutions has become regressive, meaning better off contributors monopolise the benefits (NHT research).

Concurrently, and even more significantly, has been the diminution in the number of solutions annually produced, which was always less than the need, ever so long ago estimated at 20,000 pa (1976, Derek Gordon and others), and production has now been reduced consistently into the region below 5,000 pa (inclusive of the private sector) because the real value of the NHT fund has diminished due to inflation.

This is a crisis indeed when the vast majority of the working population cannot afford and statistically have no hope of selection for available housing solutions. Stripped of bias, the motive for squatting becomes obvious.

"We can't live in the air or on the sea, we have to live somewhere," said a Whitehall squatter in October 2008 while being evicted.

Hence, squatting is essentially not a crisis created by opportunists, political or otherwise, although there may be some in their ranks, or primarily of the destitute among us because squatter income data indicate rates of employment from 70 per cent-85 per cent with less than 25 per cent of those equal to the minimum wage (or below). It is a national crisis, deriving fundamentally from low wages and productivity and also arising from the exclusion of investment in housing from our development priorities, leading to gross under supply in quantity, and in limitations in the range of feasible solutions, which have been virtually unchanged for a generation.

Squatting, the default button, has persevered because it is a feasible option for those excluded from the formal housing market and because its unfavourable consequences do not hit us with the immediate impact of a decline in bauxite or tourism earnings or remittances.

However, if visual impact counts for anything, look at the ugly noose of squatting around Ocho Rios or Montego Bay (Google Earth), evidence of the country's greatest ever internal migration, in search of employment in tourism, and you realise the threat to our social, and economic survival that those settlements present if we do not bring feasible mass housing solutions to the centre of development planning.

Renowned urban geographer Mike Davis in his book published in 2006, Planet of Slums, paints a grim picture of a world overrun with 'favelas' or otherwise described slums comprising one-third of the world's urban population of three billion out of a total of six billion from Latin America through Africa and South East Asia to China in which there will be apocalyptic, never-ending contests between haves and have-nots and in which the favelas are a natural haven for insurrection against established nation states.

The stimuli for insurrection may vary from religious fundamentalism, narco-terrorism or just plain opportunism if there is a power vacuum. We already have evidence of an incipient threat through the power of gangs rooted in some of our settlements.

Heat of crisis

Yet, there is no use reflecting on what we could have done because there are policies that can extricate us from this mess, but, just like the apocryphal frog, until we recognise the heat of crisis, we will not jump, will not prepare new financial models which engage the private sector and boost production in the settlements, or seek renewed opportunities for international development funding, nor engage the squatters to properly discharge their responsibilities as citizens, or rectify our deficiency in well-planned housing solutions.

With $3 billion of Tourism Enhancement Funds recently dedicated to settlement redevelopment in MoBay and Ocho Rios, we twitched. Will we jump? Our crisis must not go to waste.

Carlton Cunningham is a former managing director of SIHL and is currently a developer of Affordable Housing. Feedback may be sent to carltoncunningham@yahoo.com or columns@gleanerjm.com.