Housing in Papua New Guinea in crisis, needs urgent government action

Caption: Hard copies of the final report can be obtained at the reception counter of the ICCC’s Garden City complex or downloaded from the ICCC website www.iccc.gov.pg

 

Housing in Papua New Guinea is in crisis and needs urgent Government attention through a reform package, according to the Independent Consumer & Competition Commission.

The ICCC said this in its final report on the Review of the Housing and Real Estate Industry (HREI) to the minister for Treasury and Finance, Patrick Pruaitch last Tuesday.

“The final report contains the commission’s concluded views on the housing and real estate industry and recommendations of a reform package aimed at improving supply and making houses more affordable to ordinary Papua New Guinea citizens,” according to ICCC chief executive officer and commissioner Thomas Abe.

“The enormous scale of the housing problem in PNG dwarfs those in other countries and requires a paradigm shift in thinking and taking a completely different approach to that being currently pursued.

“The scale of the housing problem has reached crisis proportions – more than 40% of the people live on less than US$1 a day.

“Trying to ‘transplant’ developed country approaches in PNG will not work as the scale of problems in these countries, their stage of economic development and their business environments are completely different.

“Moreover, some of these approaches now sought to be implemented in PNG have been modified or discarded in those very countries.”

Mr Abe pointed out to the enormous potential for growth of the housing sector which would diversify the economy as a new contributor and generate employment, savings and investment which would raise living standards if this package of reforms was implemented.

“The commission, in devising the reform package for consideration by government, has considered various studies on housing, the current land reform initiatives and the feedback from consultations it has undertaken throughout the review process,” he said.

“The outcome sought to be achieved was governed by the principles of ‘the greatest good of the greatest number’, which provides housing for as many Papua New Guineans as possible, rather than giving weight to sectional interests, which would be inequitable for ordinary citizens.”

Mr Abe said the report described the constraints on the development of the housing sector as being largely attributable to ‘piecemeal’ and sometimes contradictory, attempts to address the symptoms rather than the cause of the malaise, which benefited some sections of society at the expense of others; and had been implemented efficiently.

“What is required was a holistic, externally-consistent, economically-sensible approach that was made known to the market and to the public, who are ultimately affected,” he said.

“This lack of certainty and direction has stifled investment in the sector.

“A key aspect of this review is that it recommends an approach which takes account of the scale of the problem and the limited resources of Government.

 

“Providing monetary assistance for housing to certain segments of society does nothing to resolve fundamental economic bottlenecks – they only create distortions which exacerbate the problems for others.

“Direct provision of housing by Government will not make much of an impression on the housing problems of ordinary Papua New Guineans across the country as budgetary resources are too limited to meet all the housing needs.”

Mr Abe said the review recognised that high prices and lack of affordability were only the symptoms of significant underlying failures, recognised by:

• Inefficient and insufficient supply of ‘raw’ land;
• Conditions of its allocation to developers, which are neither transparent, nor based on objective criteria, hence fail to encourage competition and efficiency at any stage of the vertical chain;
• Organisational deficiencies;
• Failure to address orban drift at its source; and
• Lack of clarity of Government policy, which, in turn, creates the conditions for divergent and sometimes conflicting, initiatives on housing, by various arms of Government.

“A lack of coordination within the National Government, and between that level of government and the relevant arms of the provincial and local level governments, in relation to issues such as zoning, building approvals and other statutory authorisations also holds back residential construction,” he said.

“The package of reform initiatives includes:

·        The immediate freeing up of supply of State land and encouraging the bringing of customary land to market to address scarcity of raw land;

·        Promotion of competition and efficiency at every stage of the vertical chain from release of land under Urban Development Leases (UDLs), through the sub-division stage, to home construction;

·        Generating efficiency and creating space for the private sector by winding back inefficient Government involvement in housing;

·        Encouraging innovation in building materials and design;

·        Implementation of an effective consumer protection regime to prevent exploitation of consumers and address ‘opportunistic’ conduct in the real estate industry and building sectors; and

·        Well-targeted incentives to private sector provider of micro-finance to rural dwellers for community-based housing credit.

“This report includes implementation strategies that cover organisational, sequencing, timing, accountability and probity issues and the adoption of these recommendations and taking a co-ordinated approach to their implementation will not only go a long way to resolving the housing scarcity, but will ‘kick-start’ the residential construction sector and create the conditions for its evolution into a key contributor to national economic growth, with resulting benefits for employment, incomes, diversification of the economy and general improvement in living standards for ordinary Papua New Guineans.”