Selective affordability and housing

It might come as a surprise for the more capitalist minded, but housing is considered a basic human right. Under Article 25.1 of the Universal Declaration of Human Rights, everyone is entitled to an adequate standard of living, so how is this right manifested in the policies of Maldivian governance?

Everyone has the right to a standard of living adequate for the health and well-being of themselves and of their family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond their control. Nations such as the Maldives which are signatories to the declaration, barring a few select articles as per preference, are bound to this responsibility.

Affordable housing projects have been a surfboard on which recent administrations have been cruising the voter’s convictions, yet after the Yameen administration’s very aggressive approach, the MDP government seems to have switched gears. Looking back, the previous administration had made it a point to make housing not only widely available, but extremely affordable as well — at what cost it still remains to be evaluated — which would have quite an impact on the current housing market.

Looking at the facts; the current housing market is not only defying the rules of a democratic country, with law makers wrongfully claiming their hands are tied when determining rent controls, but when considering household income and expenditure levels, the rates can be considered extortionist.

There is the vicious cycle on repeat, obvious to a keen observer; lack of land availability in the capital, the high prices quoted by the oligarchy of construction companies, and the high rates of interest on housing loans. Then there is the fact that the land value is not considered as equity, which adds to the amount of the loan required to even begin building. For these reasons, construction companies and their finances are what holds the state bank afloat. Statistics published by the MMA indicated that in May 2021, the overall housing market, including construction loans and real estate, constituted over 71 percent of loan finances. Any disruption to this status quo is feared to cause economic ramifications that would bankrupt the state bank and, thus cascade into the general public.

Detailed studies is required to exactly account for the flow of finances, yet when nearly every third person living on rent claims 60 to 75 percent of their income is spent on paying rent, the suppressive nature of the current housing market is apparent. Affordable housing was to be the saving grace that would allow people to stop living from paycheck to paycheck, and give them the security they sorely deserve, but the sudden influx of cheaper housing alternatives would severely disrupt the current market players. 

To recap, a three-room apartment built on an acceptable-sized area goes for over MVR18,000 to 23,000 per month. To afford this type and size of housing, and remaining basic amenities such as food and transport, the occupants must be able to make at least MVR35,000  in income. Affordable housing was supposed to offset this lopsided balance as most families opting to utilise such three-room apartments would have only a maximum of four occupants who would be earning. This number is of course a speculation based on the fact that families have children, and coupled with expenditure on their further studies, a basic nuclear family with three children will barely be able to afford such a high amount. According to the 2019 Household Income and Expenditure Survey (HIES), the average household income in Malé is roughly MVR37,000, yet with the COVID-19 pandemic, it is likely that this will have changed, for the worse. 

Affordable housing at the Hiyaa Flats is claimed to max out rent at MVR7,500, up from the alleged MVR5,000 mentioned by the previous administration, and this is a welcome respite from the constrictive housing situation residents of Malé are currently experiencing. However, the availability of these flats are based on point systems, drawing lots, which, while fair, only addresses the problem for a select number of applicants that fit certain parameters.      

In addition, the Vinares apartment complex, to be completed in 2022, brings the very same issue as before; over MVR18,000 upwards for a three-room apartment with MVR5 million payable in a 20 to 25 year scheme does not sound like something a government for the common people should be opting for. According to the first page of their presentation, "delivering comfort and quality, the 'Vinares' residential complexes project is a product of the Housing Development Corporation, developed under the government initiation, to cater to the exponential demand for housing in the capital region."

How does this 'cater' to anyone except the very well-off? Does this not establish and cement the current status quo and not create a 'rocking of the boat' on the current housing prices? Since this is being administered by the Housing Development Corporation, then it only goes to show the current mindset of the administration, and their unwillingness to truly understand the housing economy, choosing to create an extension of the 'rich gets richer' concept of housing.

The detriments of unaffordable housing leads to many disadvantages. Unaffordable housing results in a less flexible labour markets, leading to labour misallocation because of the lack of human capital in what should be a sustainable civil service and lack of infrastructure development. It also leads to more investment in real estate rather than innovation, leading further to the great Maldivian brain drain. Thirdly, urbanisation is further affected, as people cannot afford to move and utilise the development and employment prospects also being touted by the centralised government.

To fix the housing crises and selective affordability, an administration needs to consider three main points. Housing cannot be fixed with the public sector alone, as the private sector is the party that had created the very extortionate rent prices in the first place. Incentives and better loan schemes would help the private entities in allowing lower rent prices, ergo more affordable housing. Added to this, policy implementation would need to be better enforced, and a clear direction must not only be present but committed to. Finally, the administration needs to actually assess the situation before touting populist solutions and build upon shaky ground. By understanding the income ranges of the public, the misallocation of both resources and expertise, and also the entrepreneurial scope of the common people, would allow the administration to make more informed policy decisions and create not only solutions for housing, but also a more self-sustainable economy.

Housing is a basic human right and it is time the government understood the responsibilities taken up by being a signatory of the Universal Human Rights Declaration. Policies need to be viewed not in five-year terms, but generational timeframes.