Report submitted by Cooperative Housing Foundation
II. Narrative Description of the Proceedings
A. Ministers Address
B. Workshop Objectives Jinx Parker
C. Overview of CDMP Pilot Hurricane Resistant Home Improvement Programs Jinx Parker
D. Summary of the Structure of Hurricane Resistant Home Improvement ProgramsGlenn Moller
E. Credit Unions Project Stephen Hodges
F. Training of Artisans Bryan Walcott National Research and Development Foundation of St. Lucia
G. Caribbean Development Bank
H. Accessing Financing Brian Walcott, NRDF
I. Credit Unions Renford Douglas CCCU
J. Sustainable Hurricane Resistant Home Improvement Programs John Chromy, CHF
III. Recommendations from the Breakout Groups
A. Outreach & Training
B. Minimum Standards & Inspection
C. Loan Fund Management
D. Policy Framework
F. Linkages with other Sectors
Appendix A: Participant List
Appendix B: Official Workshop Agenda
Appendix C: Caribbean Development Bank Lending Guidelines (See http://www.caribank.org)
Houses have become a substantial asset for families throughout the Caribbean. Expensive building materials, home-based businesses, and a general increase in material possessions have made the home a significant financial investment. This investment is not without risk, however. The regions numerous and violent hurricanes have destroyed shops, equipment, and supplies; damaged valuable material possessions such as televisions and radios; and ruined clothing and uniforms required for work and school. Families are often left homeless, out of work and in financial peril.
The technical know-how to make homes secure enough to withstand even Category III hurricanes has already been developed, tested and disseminated across the region by Caribbean Disaster Mitigation Project. To be effective however, these ideas need to be implemented and financed at the national level.
By including these techniques at the national level, the majority of families will have the required state-of-the-art construction methods, but more importantly they will have the necessary financing to build or improve their homes to withstand the catastrophic winds and rain of the Caribbeans deadly hurricane seasons.
The 1999 Safer Housing Workshop was organized by the Cooperative Housing Foundation (CHF) and the Caribbean Development Bank (CDB) and was sponsored by the Caribbean Disaster Mitigation Project (CDMP) of the USAID Office of U.S. Foreign Disaster Assistance (OFDA) and Organization of American States (OAS). The workshop brought together national policy makers, housing practitioners, and financial institutions to discuss:
The 1999 CDMP Safer Housing Workshop was held in the city of Basseterre in St. Kitts, West Indies. This location was chosen because of a recent Caribbean Development Bank authorized hurricane resistant home improvement loan program for St. Kitts and Nevis. A portion of the workshop was set aside to discuss the status of this loan program and participants were invited to offer their comments and ideas to the CDB representative and the local implementing agencies, the Foundation for National Development, St. Kitts and Nevis.
While the St. Kitts experience was a highlight of the workshop, the agenda offered a broad array of technical presentations and discussions that reflected experiences across the Caribbean region. Ten countries were represented by the 31 invitees and featured presenters. A detailed list including contact information can be found in (Appendix A: Participant List) of this report.
The primary goal of the workshop was to facilitate discussion among the participants on the issue of implementing safer housing. As such, the workshop consisted of a short series of presentations on technical and operational aspects of safer housing programs, followed by a more lengthy discussion period among participants. After the presentations, Ms. Jinx Parker of the CDMP outlined a list of topics for further discussion. The participants were then divided into breakout groups to address one of the particular topics. After a period of dialogue, the groups reconvened to present their recommendations and discuss them further with the rest of the groups. These recommendations can be found in Section III of this report.II. Narrative Description of the Proceedings
The Safer Housing Workshop began with an opening ceremony to welcome the workshop attendees. Participating in the Opening Ceremony were:
The Hon. Timothy Harris, Minister responsible for Housing in the Federation of St. Kitts and Nevis gave the keynote address for the Opening Ceremony. Highlights from the Ministers address are included below.
The Minister concluded by saying that the attendees recommendation will be much appreciated by my Government. In the spirit of the Ministers request, this report is a compilation of the discussions and ultimate recommendations of the workshops participants. It will be distributed to the Government of St. Kitts and Nevis, as well as all of the participants so that they might also take up the issue of safer housing with their own governments and local organizations.
To frame the days discussions and to clarify the goal of the workshop, Ms. Jinx Parker outlined the following general objectives for the workshop and breakout discussions:
For the first day of the workshop, participants focused on the process of the Hurricane Resistant Home Improvement Loan Program, the safer housing component of the CDMP. The presentations for this day focused on different aspects of the programs development process including: background on the CDMP pilot projects, an overview of the Hurricane Resistant Home Improvement Process, role of Credit Unions, and issues related to the training of artisans a major component of the CDMP safer housing program.
This Caribbean Disaster Mitigation Program has been a six-year, demand driven project that has addressed a wide range of disaster mitigation components including hazard mapping, disaster preparedness, and shelter rehabilitation. Safer housing has also been an essential component of CDMP since the beginning program. Initially identified as the Safe Roof Project, the program emerged out of post Hurricane Gilbert Jamaica. At this time, the focus was on easy-to-install and relatively inexpensive hurricane clips as a primary means of mitigating the impact of hurricanes on low-income families.
The Safer Roof Project has since developed in to a wide-scale housing program and was renamed the Hurricane Resistant Home Improvement Program to more accurately reflect the programs objectives.
The Hurricane Resistant Home Improvement Program began with two pilot projects, in St. Lucia and Dominica. The principal goals of the pilot projects were to:
From these pilot projects, OAS and CHF have gleaned a number of valuable lessons:
Proper building codes, however, are only part of the solution. How do you make a difference in the quality of the housing stock? Look at Floridas experience with Hurricane Andrew. An extensive building code existed but even expensive houses were flattened. Policy makers must look at the larger issues surrounding building codes such as:
CDMP has offered numerous workshops and forums for discussing the technical aspects of hurricane resistant home improvements. The goal of the St. Kitts workshop was to move beyond the technical issues and address the large task of institutionalizing Safer Housing at the policy level. However, because many of the participants at the St. Kitts workshop were new to the CDMP, the workshop provided an opportunity for a brief overview of the structure or processes that are involved in a hurricane resistant home improvement.
Figure 1 below was compiled from the CDMP document, Tool Kit for Implementing a Hurricane Resistant Home Improvement Loan Program, and was distributed to each of the workshop participants as a quick reference to the Tool Kit. The diagram illustrates the overall process of designing and implementing a program and is followed by further details on the process.
Project Design Studies and Initial Start-up
Lessons learned during the Pilot Phase the reflect the structure of the Hurricane Resistant Home Improvement Program include:
In Jamaica, the Co-operative Union League (CUL) operates a housing mortgage program. Mr. Hodges worked with the CUL to see if it was possible to amend the CUL mortgage guidelines to effect a safer housing program in three main areas.
Using local Credit Unions, the project focused on:
The CUL project had some problem areas:
The objective of the project was for the CUL to develop minimum acceptable standards (e.g., to design for 120-mph winds, install 3/8" bars at 16" on center). These standards would recommend proper design elements as well as the use of reinforced concrete foundations instead of stilts.
The outcome of the work done in Jamaica is a technical manual, Safer Building Toolkit for Credit Unions, similar to the CDMP Tool Kit but focused instead on Credit Unions as the implementing agencies of the program.
Copies of the manual were made available to participants for further review and feedback
NRDF entered into Safer Housing and retrofitting by forming a pilot group in the informal sector. NRDFs assessments of local demand demonstrated that the primary need was for home improvements and not retrofitting. At the outset of the program NRDF completed a survey to determine who were building for low-income, and identified nine builders.
The Foundation used two lecturers from a local college to develop a technical booklet which was then financed by local insurance companies. Talk shows, print, radio and churches were identified as avenues for public relations to promote the new program. Churches in particular, according to Mr. Walcott, were good at disseminating information regarding the training sessions.
NRDFs first training session was held in May of 1995. The second was held three years later in 1998. The sessions covered two weekend days. Subsequent training sessions were condensed into a 1-day session. The current cost for each session is US $1500 including fees, travel, and material for retrofitting of one house. Artisans who have successfully completed the training are presented with certificates. Homeowners/applicants have also been involved in the training sessions. Since the program began NRDF has trained 126 artisans.
The Foundation for National Development has recently presented to the Development Bank of St. Kitts and Nevis for funding a proposal for a safer housing program. The highlights of this proposal are:
The major players in this program would be Government of St. Kitts and Nevis Nevis Island Administration, Chamber of Industry and Commerce, Contractors Association, Social Security, Foundation of National Development and the Development Bank.
Note: At this point the Workshop participants were divided into break-out discussion groups. Recommendations from these groups can be found in Section III of this report.
Day two of the workshop began with a Panel discussion on "examining financing options that will make funds available to the greatest number of families."
Mr. Clairvair Squires of the Caribbean Development Bank regretfully could not attend the workshop so Mr. Yolande Yaw represented the Bank during the workshop.
Mr. Yaw informed the attendees that CDBs lending guidelines for loan programs can be found on the Banks webpage www.caribank.org.
Mr. Yaw also clarified that CDB approved the St. Kitts loan program last year and recommended further discussions with the National Development Bank to move the program forward. He did also note that the CDB recognizes that land titles are a problem in St. Kitts, which could severely limit any future program, since proper land titles are a primary requirement of CDB loans.
The Foundation for National Development in St. Kitts welcomed the news that CDB had confirmed its approval of the program and will again approach the St. Kitts National Development Bank to access the funds.
St. Lucia is the next country scheduled for a Shelter development Program. Mr. Yaw encouraged the workshop participants from St. Lucia to contact P. Desmund Bruntland, the CDB Project Director for this region (246 431-1600).
Mr. Yaw further outlined the current process for accessing post-disaster and disaster mitigation funding as follows:
Strong demand for the home improvement program in St. Lucia quickly exhausted the foundations' available capital.
To extend the use of the existing capital, NRDF attempted to reduce the loan size, as outlined in the CDMP guidelines, but it reported a rapid decrease in demand for the product. The Foundation chose to follow a different approach than the CDMP formula of smaller loans, by targeting median income families and seeking outside sources of funding.
To finance NRDFs loan program, the Foundation turned to commercial banks with favorable loan terms. In addition, the foundation tapped an alternative source of funding, namely the St. Lucia National Social Security. NRDF was able to access EC$500,000 over 7 years in Social Security funds.
With its current funding sources, NRDF has been able to disburse 202 loans for a total of over US$666,000. The average size of the NRDF loans are $9,000.
NRDF pointed out that it requires its borrowers to insure their homes against all perils. This is an important point because many insurance companies will not insure the homes involved in this type of low income housing program. NRDF was able to solve this problem by encouraging insurance companies to offer community wide policies. Individual homeowners could then buy into the communitys policy.
Mr. Walcott acknowledged Mr. Yaws remark that CDB was interested in a program in St. Lucia since the NRDF has been trying to access CDB financing.
Some of the Caribbean Confederation of Credit Unions members are operating housing programs in their respective regions. In Jamaica, for example, the Teachers Credit Union is providing mortgages to its members.
These Credit Unions typically purchase land, which they then subdivide and finance the construction of basic two bedroom starter homes for their members.
In the future the CCCU sees itself as a possible facilitator of financing for housing projects.
The key to sustainability, according to Mr. Chromys presentation, is affordable, long term financing for hurricane resistant home improvement programs. Mr. Chromy highlighted the three main financial issues that have emerged from the CDMP pilot project and their impact on the long-term financing and ultimate sustainability of safer housing initiatives:Client Demand
The experience in St. Lucia, Antigua, Dominica and Belize indicates:
The pilot projects have demonstrated that many low-income families would appreciate having access to home improvement loans, however they do not have the reliable income to support loans large enough to complete all of the necessary improvements at one time. Efforts to assist such families in a progressive home upgrading manner (a series of two to three small, short-term loans to complete construction sequentially) has not been sufficiently tested. Pilot project participants were reluctant to test the progressive lending model because they judged the administrative costs of such loans would be too high.
Families with incomes at or above the median levels have demonstrated strong demand for larger more comprehensive home improvement loans. At this level of income, loans of US$2,000 to $15,000 meet the needs of most borrowers.Availability and cost of capital
The pilot programs demonstrated that a number of National Development Foundations and Credit Unions have the administrative capacity to process and handle the Hurricane Resistant Home Improvement loans. After receiving some initial technical assistance, these organizations have successfully included hurricane resistant construction technical assistance in the planning and estimating stages of the loans.
An analysis of pilot loans (and a similar program in Belize) indicate that the retail lenders, whether they are NDFs, credit unions or charitable organizations, need a spread (the difference between the cost of capital and lending rate offered to borrowers) of at least 6% to cover the cost of managing hurricane resistant home improvement loans. This is accurate at least in the initial phase when a retail lender is disbursing small numbers of loans.
Depending on operational expenses and applicable loan terms, CHF estimates a portfolio of at least US$400,000 is needed to make the entire process sustainable. Larger loans with lower interest rates may require additional capital and processing fees to supplement the reduced loan reflows and maintain a sufficient capital fund for new loans.
The retail lenders participating in the pilot programs are generally of the mind that their loan interest cannot be significantly higher than the rates offered by the various formal banks (10 12%). Therefore, they need to access capital at a cost of 4 - 5% in order to conduct a Hurricane Resistant Home Improvement Lending Program.
During the pilot phase, OAS provided grant funding to cover the administrative costs of the development foundations. CHF has made its loan capital available initially at 4%, and for the past year at 5%, with a 9-month grace period on repayments. NRDF of St. Lucia has accessed some insurance funds at 5% and may succeed in accessing additional similar government funds.
A significant point that Mr. Chromy and others raised during the workshop was the idea that housing organizations need to approach financial institutions with the perspective that safer housing loans are profitable investments based on sound business decisions. As Figure 2 indicates, a huge untapped market exits in the Caribbean market and it is up to housing practitioners like those participating in the workshop to quantify this market and attract new sources of financing.
Figure 2: Estimated Aggregate Demand
|2,000 loans per country X 5 countries @ US$6,000 =||US$60,000,000|
|Belize and Jamaica with 5,000 loans each @ US$6,000 =||US$60,000,000|
With such a demand, the final question is how can the retail lending institutions, such as NDFs, credit unions, and microfinance organizations access sufficient capital at the affordable rate of 4 to 5%?Alternative Sources of Funding
Targeted groups should include: Development control, disaster management, local government, financial institutions, insurance companies, churches, service clubs, community groups, media, professional associations, contractors, homeowners and merchants.
- Building World
- Building and Trade associations
- Ministries (Health, Housing, Education, Finance)
Participants in this group addressed various topics related to managing a home improvement loan program
This group focused on recommendations for changes at the policy level that could help to institutionalize the hurricane resistant home improvement process
|Seeking National Government guarantee for funds||Housing implementing NGO||Use BOD lobby|
|Access insurance Co. funds||
|Lobby local Ins. Heads.
Heads to lobby head quarters
|Regional/international fund raising/admin.||CCCU||Petition CCCU through head quarters|
|National housing policy and safer housing||Government||Lobbying of Government by OAS/CDB|
A theme that seemed to run through the workshop presentations and breakout groups was a general need for innovative thinking when it comes to financing. Traditional sources of capital for low-income housing, such as the large bi-lateral donors, are no longer an option for housing practitioners seeking to offer housing loans. New alternative financing must be explored.
As with all financial institutions, organizations must remain operational on the revenues earned, based on the difference between the cost of funds they must pay for capital and the interest rate that they charge their borrowers. Given the level of servicing required for this type of loan program, organizations must access sufficient amounts of affordable financing.
The Caribbean Development Bank is the largest financial institution in the region capable of making affordable capital available. Currently, local housing finance organizations such as the NDFs, Credit Unions, and NGOs must go through their National Development Bank to access CDB funds. While in some cases, such as in Belize, this approach has been successful other organizations such as the Foundation for National Development have not been as lucky at tapping into CDB financing.
Through its numerous housing programs, CDB has demonstrated a commitment to improving the living conditions of families across the Caribbean. Local foundations have demonstrated an equal resolve to promote safer housing in their home lending program. Across the Caribbean, the major bottleneck appears to be at the level of the National Development Bank. Some agents are imposing prohibitive mark-ups to the interest rate charged on CDB funds. Others have been slow to move the funding through, despite clear directions from CDB.
Clearly new avenues need to be explored to facilitate direct financing between CDB and local NGOs. From the workshop some possible alternatives include:
In the end we come back to the Ministers remarks made at the beginning of the workshop:
"Safety is as much a condition of the mind as an amalgam of factors Housing and Safer Housing in particular is at the heart of Mans existence and is a right not a privilege"
-The Hon. Timothy Harris, Minister for Housing in the Federation of St. Kitts and Nevis
Workshop Proceedings | Appendix A: Participant List | Appendix B: Official Workshop Agenda