Rawle Lucas is a Guyanese-born Certified Public Accountant and Assistant Vice President of the Lending Services Division.
Mr. Lucas has agreed to serve as a columnist with the Stabroek Business and will be contributing articles on economic, financial and development matters.
By Rawle Lucas
Households
Apart from giving individuals a feeling of financial security and accomplishment, a house is a place to call home, and to relax and enjoy cherished and memorable moments with loved ones and friends. That makes it a place of comfort, safety and entertainment. For a majority of Guyanese, the place they call home may not be as comfortable, safe and as hospitable as they would like it to be. It may just be a place to rest their head for a moment and then step aside for the next person to do the same.
The challenge for many Guyanese is to find accommodation whether through ownership or rental as they try to assert their independence and establish families of their own. According to data found in the Statistical Bulletin produced by the Bureau of Statistics, there were about 154,000 households in Guyana in 1991. By 2002, the number of households in the country had increased by about 29,000 to 183,000. Over an 11 year span, the number of households had increased by an average of 2,636 each year.
Using this linear trend, it could be concluded that the number of households in Guyana is probably close to 200,000 at this point in time.
The growth in households indicates that people are leaving an already existing family grouping to form one of their own and to shoulder their own responsibility. Despite this positive behavior, there has not been a significant change in the average size of households based on the ratio of total population to households.
In 1991, the average size of each household was somewhere between four and five and that is not different from the household size reported in 2002, except in Region 6 which has shown a marked decline in household size.
The measure of household size however masks a problem with the living arrangements of many households that is probably undermining privacy, health and self-esteem of those caught up in the poverty cycle.
Construction Activity
The growth in households spans all regions of Guyana and is no doubt responsible for some of the increased construction activity in the country. The value of building materials imported for construction has shown a 64 percent increase from 1998 to 2007 and now accounts for more than one-third of the value of all capital goods brought into the country during that period. The up-tick in construction activity in the country and its rise in prominence in the economy can lead to the belief that the country is making headway in solving the accommodation needs of the expanding number of households.
In my view, the observed and reported construction activity might not be making a significant impact on the unfavorable quality of living arrangements in the country. According to the National Development Strategy (NDS), Guyana needed, at the minimum, the production of 5,200 housing units each year for at least ten years if it were to begin satisfying its housing requirements. That was over 10 years ago when the development strategy emerged.
Mortgage Recordings
It is not easy to find published data to measure incremental changes in the housing supply or even capacity and to get a realistic idea of how many new dwellings are being added to the housing stock each year. In the absence of a reliable industry yardstick, a useful proxy for measuring new additions to the housing stock is the number of new mortgages recorded each year with the Deeds Registry. The assumption here is that each new recording is associated with the construction of a new house. That is not quite true since mortgage recordings merely show ownership of real property and the money interests of the lenders. Further, not all construction is for housing.
In addition, mortgage recordings do not necessarily translate into completed construction and while they give an idea of the number of new units that could become available within a given year, they do not tell us about the capacity being added. The actual number of completed construction also depends on the timing of the construction, the reliability of contractors and the speed at which they are able to deliver a finished product. Nonetheless, using mortgage recordings as a metric on housing supply offers some help in gauging the gap between demand and supply of housing.
Sloping Downwards
A clear picture of mortgage recordings could be drawn from the official table on new mortgage recordings in the Statistical Bulletin, and the data used herein are from the updated online version of the report. A review of the data reveals that a total of 18,814 new mortgages were recorded from 1991 to 2002. The new mortgage recordings could be viewed as the equivalent of 1,568 housing units coming on stream each year when measured over an 11-year period. From 2003 to 2007, the annual equivalent in new housing units was about 1,304. These calculated averages must be seen as a crude measure of production since the acquisition of financing does not necessarily mean completed production.
Despite the positive numbers, the run rate offered by this approximate measure of annual new housing supply is not nearly enough to meet housing demand as called for in the National Development Strategy (NDS). Moreover, based on the 2002 household data, at least 2,636 new households look for their own accommodation each year and apparently housing production is not even keeping pace with that lower level of demand.
During a period when the housing stock should have been growing, the mortgage recording numbers were sloping in the opposite direction. The recording of new mortgages in Guyana has been on a steady decline after peaking at 2,521 new recordings in 1998. Every year since 1998, the number of new mortgages that were registered fell and reached 1,284 by 2007. This decline represents a near 50 percent drop in the number of recorded mortgages from the observed high of 1998.
Uncomfortable
The preceding observations should leave Guyanese wondering where the new households that form every year end up living. I believe the answer is that many end up in overcrowded, unsafe and uncomfortable living arrangements. According to existing data, more than half the Guyana population, 53 percent, could be in unsatisfactory living arrangements. This simply means that every other Guyanese is most likely unhappy with his or her living arrangement and perhaps feels deprived of his or her privacy as a result.
The gravity of the situation is of such that as much as 20 percent of the Guyanese population find themselves sharing a one-bedroom dwelling, at some point in time, with between four to 12 others. That is rough! The published data also reveal that another 20 percent end up sharing a two-bedroom dwelling with between five to 12 other people.
An overcrowded environment is neither healthy nor acceptable and suggests that an urgent review of the entire housing supply chain is needed to unclog critical points and help bring more units faster to market. Policy action has been taken at the point of land distribution and mortgage financing. Now new policy action is needed in the other parts of the supply chain to help speed up the construction and availability of new housing.
At the same time, with more rooms needed to accommodate the increasing number of households, the housing construction industry remains an attractive industry for investors.
