Should houses have been built at all out of taxpayers’ funds?

Question is not who built more houses

“Boasting and bragging about who did more is a kids’ game like kan kan booru; sin sin noru”

 

False question

The question is not “who built more houses?” President Ranasinghe Premadasa, his son Minister of Housing Sajith Premadasa or the latest claimant for building houses, Champika Ranawaka. This is the question that has been highlighted as a one-way track issue in the newspapers these days. 

Sajith had rebuked Champika’s claim. This is a false question. The real question is whether taxpayer funds should have been expended to build and distribute houses free like this at all. It is surprising and unfortunate both that Ministers do not ask this question themselves and that the public seems impressed by a Government that builds and gives away houses out of the scarce public resources at its disposal. 

If these parties comprehend the meaning of “opportunity cost,” they would think differently.

 

Opportunity cost in economics

Any schoolboy knows that if he spends $ 100 in buying a textbook he cannot spend that money on a jaunt with pals. Sri Lankans have seen that if a government spends 800 billion on a war for a year, it has so little to spend on education or health or economic investment projects. 

The key thing is that any society has scarce resources at its disposal and that, therefore, it has to make optimal use and distribution of these resources. It is either this way or that way. Wherever we face scarce resources we have to make choices, choices would depend on the competing needs of the different sectors. Prioritising is crucial. 

 

Free rice scheme

The free rice scheme where every householder was given rice free to be obtained via cooperatives is perhaps the most foolish and deceitful government policy followed anywhere in the whole wide world. This is an excellent illustration of the lack of concern about opportunity cost. 

Sirimavo Bandaranaike won her election by promising free rice even from the moon. The policy was damaging to the economy and it stands as one of the major policies that put the economic clock back for Sri Lanka. The opportunity cost of that meant lesser money for economic regeneration, lesser money for infrastructure and lesser money to almost any area where the people could have been helped to flourish. We cannot make a dent on the housing problem this way.

Hundreds of houses, thousands of houses and so on cannot make a serious dent on the problem of housing shortage in the country. It is plain nonsense. The expenditure is, therefore, not tending toward solving the problem at hand. 

Minister Sajith Premadasa

Minister Champika Ranawaka

This suggests that the way to build the required stock must be looked at elsewhere in the range of optional social and economic policies. In saying so, I am not proposing that the Government should not build housing for the especially disadvantaged and vulnerable groups of our society such as the disabled, the war-injured soldiers and so on. This is another question altogether and that belongs to the area of public social charity. Some reasonable quantum of the State’s resources should be set apart for humanitarian housing of this sort. 

On the other hand, the general shortage of housing for the population must be tackled in different, more productive and more effective ways than Government coming in with such direct intervention.

 

Popularity?

Some may point out that this approach would be politically popular. The latter are in fools’ paradise, since the numbers of those left out of the sheer reality would be so much larger than the lucky ones. The chosen may be happy, provided they don’t complain and whine over some missing facilities. 

When it comes to repairs the chosen are going to be alienated anyway since it would be an unsurmountable task for the Government to attend to repair work amounting to millions in this way. Hence, this isn’t a politically appealing project either.

 

Real way, hard way

The real solution to the housing shortage must come from the people themselves by way of investment. How are they to invest with no money in their hands? Therein lies the way out: governments must have the right policies in process to drastically keep improving the economic capacity of average citizens. Banks must be restructured to meet the housing demands of a more affordable population. 

Here, in Australia (and I am sure this is the way of the developed West), when a person gets a job the bank gives a loan to build a house on the security of a mortgage. Banks don’t become too Shylock-like as they can sell the property of a defaulting borrower in a rising real estate market. The borrower, too, has the option of selling up, paying the mortgage and moving to a now lesser popular real estate block. 

 

Fund entrepreneurs

The money that Sajith or Champika spend on housing would do a better job if given as loans to individuals who show a desire for being entrepreneurs. This is why I applaud the new program of ‘Enterprise Sri Lanka’ planned and executed by Prime Minister Ranil Wickremesinghe and Finance Minister Mangala Samaraweera.

This seems a hard way. However, it is the most effective and sensible and sustainable way of solving the housing shortage. We will not be fooling ourselves in the way former President Premadasa, present Minister Sajith and Megapolis Minister Champika have done. Boasting and bragging about who did more is a kids’ game like kan kan booru, sin sin noru.

 

Land and tax policy

Land and tax policies should also be tuned in to enable persons to build either for investment or own use. There is a large number of abandoned blocks belonging to the railway, etc. that could be released for housing. Tax policies must weigh in favour of home owners who live in the homes they build. Those who build for investment can be taxed on an indexed basis. One should not frown at those who build as investment property since these entrepreneurs add to the overall housing stock, thereby relieving the general shortage.

Under Pieter Keuneman, the former Communist Leader and former Minister in charge of Housing, a policy of robbing from those who have more than one house and giving away the rest to those who do not have had been followed. That was stupid since that policy drove away investors in the housing market. Furthermore our renting laws should be more fairly revised in order to discourage both tenants and landlords who abuse. The laws must provide a fair go for all.

Since Sri Lanka is a small country with a burgeoning population our laws should encourage more high rises as done in Singapore.

I suggest our officials be sent to Singapore to study how it all happens over there.

(The writer can be reached via [email protected].)