Thousands of working Barbadians are to be targeted to move from tenants to homeowners under a new “social mortgage” plan designed to bridge the affordability gap in the housing market, Housing Minister Chris Gibbs has announced in the House of Assembly on Wednesday.
The rent-to-own model was unveiled as the housing ministry sought a $138m appropriation in the House Estimates. The programme was developed in response to the growing number of working Barbadians who are unable to qualify for traditional mortgages, he said.
“The term social mortgage is actually a program that was coined and invented by our team members and essentially that is rent-to-own,” he told the fellow lawmakers. “There are too many Barbadians out there… desirous to have home ownership.”
A ministry database of more than 4 000 people seeking housing solutions contains a significant number of employed applicants who do not meet the lending requirements of banks of credit unions, according to Gibbs.
He said: “We realise that there are a lot of Barbadians who just do not qualify. They are hard working, they go to work every day, but they feel left out of the process of home ownership, and that is the basis and the foundation for our social mortgage programme.”
Under the initiative, a percentage of units developed through joint ventures with the National Housing Corporation (NHC) and HOPE Inc. will be allocated to the social mortgage scheme.
“Every development, whether it be through our joint venture programme with NHC or HOPE, we hope to allocate a pretty decent-sized percentage of those developments to rent a home,” he explained.
Gibbs also described the programme as a way of reducing the risk typically associated with lending to lower-income earners.
“We see this as a way of also derisking mortgages. The fact of the matter is that a lot of the financial institutions are simply not willing to take the risk. The onus is on the government through the Ministry of Housing and its state-owned entities to deliver social justice to these individuals who cannot acquire mortgages.”
NHC General Manager Ian Gill outlined how the social mortgage model differs from traditional rent-to-own arrangements.
“The idea behind the social mortgage initiative is that when we do rent to own … the person doesn’t actually have ownership,” Gill said. “With the social mortgage initiative, the aim is that this is an actual mortgage that you’ll be getting, paying to the National Housing Corporation, and you’ll be able to use your house now in the future as an asset.”
He noted that individuals currently paying between $500 and $800 in rent – but unable to secure bank financing – would instead pay a mortgage directly to the NHC, building equity in the process.
“The simple person who probably doesn’t have the capacity … is now actually getting to own their home as a mortgage,” Gill said, adding that homeowners would then be able to leverage the property as an asset when needed.
Gill further acknowledged that previous rent-to-own arrangements had not delivered the desired outcomes.
“We’ve found too that rent to own … is not actually working as we would want it to work at National Housing Corporation,” he said.
A key difference under the new model is that homeowners will assume responsibility for maintenance and repairs, relieving the NHC of that financial burden.
“With the social mortgage initiative, the fact that you’re owning your home, you’ll be responsible for the maintenance and repairs of that home,” said Gill. “We will have more income at National Housing Corporation to do more units … so that we can offer a wider package to those persons who make between $1 000 to $2 500 per month.”
What to know – social mortgage:
- The government’s new social mortgage scheme will let low-income Barbadians move from renting to full home ownership by paying a mortgage directly to the National Housing Corporation (NHC).
- Targets those earning between $1 000 and $2 500 a month who can’t secure commercial bank loans.
- Converts rent payments into equity, with participants responsible for their own maintenance and repairs.
- Jointly developed with HOPE Inc., to expand access to affordable housing and free up NHC funds to build more homes across Barbados.
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