Creating wealth through planned housing developments: Time to act!

Image: http://lngwatchpng.blogspot.com
Image: http://lngwatchpng.blogspot.com

By Thomas Webster*

Last Monday, my incoming Air Niugini flight into Port Moresby allowed a bird’s eye view over housing and property developments that are taking place in the city.  What was quite startling is the rapidly increasing growth of houses going up on the fringes of planned developed areas. Some were obviously well designed and constructed whilst others were merely shanty houses clinging to the hillsides. These were clearly the ordinary people’s response to a desperate situation to house ones family where Governments have failed to take decisive action. Here I argue why it is time to act in creating the conditions for planned and orderly development of proper (i.e. serviced) settlements.  The launch of the Boera estate development is an example that we can all learn from.

We all know that there is a housing crisis in Papua New Guinea. Sadly, our inability to deal urgently over the last decade is now resulting in an informal housing and properties development to meet the populations critical housing needs that is fast turning our capital city Port Moresby as well as other cities and towns into largely unplanned squatter settlements.

If we do not take urgent steps now to address key issues in developing properly planned towns and cities, we run the risk of unplanned developments that have no proper roads, water and sewerage systems as well as other utilities. Worse still, no land has been set aside for schools, health facilities and sports and recreation areas, putting great pressure on existing facilities generating potential for future law and order problems. More importantly, we squander an excellent opportunity to create wealth for ordinary Papua New Guineans.

The Need for a Multi-Pronged Response- Not Just Construction of Houses.

The NRI engaged in 2007 as Strategic Advisor to Government on development of a Housing Policy had advocated a multipronged approach. Following some analysis combined with public consultations with government and private sector interest groups, a Housing Strategy combining a multi-pronged approach that included; Land Development and Release, Design and Construction of Affordable Houses, Home Purchase Financing Schemes and where needed Institutional Housing schemes was proposed.

Unfortunately, the unwillingness by political and some senior bureaucrats to accept advice provided resulted in the lack of understanding of the key drivers behind the shortage of affordable accommodation has led to the current status.

Those responsible thought that they knew what the problem was and had preferred solutions. Or rather, as I would say; they had ready-made solutions looking for a problem.

In the first instance, a Cabinet submission on a Housing Policy and Implementation Strategy put together by the Department of Treasury with the Advice of NRI was not taken to cabinet because the Minister responsible for Housing did not like the multipronged policy approach. He simply wanted to build hundreds of houses.  The NEC Secretariat refused to allow the Minister for Treasury to take the submission to the NEC as this was not in his area of responsibility.

The Minister for Treasury then on the advice of his Department commissioned the ICCC to do a report.  ICCC did a comprehensive report and again supporting some of the key principles identified and proposed in the original draft Housing Policy. Whilst the ICCC report was completed and submitted in January of 2010, it has taken three years for an NEC submission to be made. A few months ago, the NEC formally considered the report and in a related decision, has established a Ministerial Committee chaired by the National Planning Minister to work on a National Affordable Lands and Housing Program. More on this later, but let me continue my story on the comedy of errors.

Meanwhile, the Department of Personnel Management wanted to build houses for public servants in Port Moresby. During the consultations, NRI had continuously pointed out to Central Agency Heads that financing and constructing houses was not the main problem, the main binding constraint was getting access to properly serviced LAND.

If we wanted to increase the stock of housing, we needed to have a multi-pronged approach that would allow steady release of land not only for public servants but the private sector as well – there are no reasons to discriminate between employees in the private and public sectors of the economy as everyone needs housing.  There were large areas of State Land in Port Moresby as well as other parts of the country that could be allocated to large scale property developers to put in infrastructure and then release allotments to the market. We were also working on the new laws that would allow for customary land to be registered and released for large-scale estate developments – where the landowners would lease land and collect land rentals just like what the State does.

More generally, the key principle of the National Housing Strategy document was that the Government’s role in the housing sector should be confined to regulation and facilitation rather than provision of housing, and the policy focus should shift to developing the private sector housing market. A housing strategy needed to allow individuals to buy house and land package that they would pay for over time and at the end of their working career, they would have an added financial asset to retire upon.

The Department of Personnel Management did purchase a block of land and engaged a developer for a house and land package public service home ownership scheme. This arrangement fell through for reasons that are not clear today.

Since then, a number of departments have pursued various accommodation arrangements. It became clear that these ad-hoc arrangements was not sustainable and getting out of control as every agency wanted to have their own home ownership scheme.

More than three years after the ICCC report was released, and five years since NRI had been engaged in the development of a Housing Strategy, we now have a Ministerial Committee appointed by NEC to take responsibility for addressing the housing crisis.  The Committee has been given a broader mandate to address the critical housing shortage. This is a more sensible approach requiring a multi-pronged approach and not just construction of houses.

However, building houses and release of land and housing packages is not enough. Some other broader institutional reforms need to happen in order to give greater economic value to land and properties as well as sustained growth.

Critical Institutional Reforms Needed for Physical Planning, Land Development and Land Administration.

Institutional reforms are required for the orderly development of our towns and cities as well and for facilitating a well-functioning house and properties market. At the moment, there is confusion and no clear demarcation of responsibility between municipal authorities and the Department of Lands and Physical Planning to plan, regulate and oversee the proper and orderly developments of our towns and cities.

In NCD for instance, the NCD Physical Planning Board approves physical plans for the city and more specific locality plans. However, the allocation of land is done by the Department of Lands through the Land Board. However, the NCDC is not informed of who obtained development leases for large areas of land that had been approved for release and the development conditions. Hence, there is no follow up on those who obtained development leases over large pieces of land. In other instances, developers are doing their own thing. The ongoing problems between the NCDC and the Lands Department are also contributing to limited release of developed land for housing and properties development.

First, there is a need to establish a separate National Physical Planning Authority to take responsibility for development of an overall National Plan for development of physical features such as towns and cities, transport and other infrastructures, preservations of areas for natural parks etc. This authority can also provide and support physical planning services to municipal authorities of our towns and cities where they do not have the capabilities.

The second entity to be created where a Municipal Authority is unable to do so is a National Land Development Authority. Ideally, each municipal authority would develop a town development plan and then separate locality plans for residential and other property developments. Once the plan is approved, the Land Development Authority then develops strategic implementation steps, bringing in private sector developers to put in infrastructure and release land for housing. Failure to do so may result in the continued expansion of squatters on state land as well as on customary land.

The third is for the Lands Department to be given responsibility for just maintaining a sound proper records and administration system.  Such a system is essential to support a sustainable housing and properties market that is bankable and adds to the wealth creation of Papua New Guineas as owners of property and to Incorporated Land Groups who will lease land to generate revenue for their ILGs.

The current Government has finally taken the first step needed to address the housing crisis that is now leading to the development of unplanned settlements in our towns and cities by establishing the Ministerial Committee.

We need to take urgent action on all fronts as PNG faces a deluge of affluent squatter settlers in poorly planned towns and cities. This would be a wasted opportunity to create wealth as envisioned in Vision 2050 for a large majority of Papua New Guineans from a well-developed Land and Properties market.

*Thomas Webster is the director of the National Research Institute. He is currently on sabbatical leave

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