By J. Yanqui Zaza
The rapid increase in rent or mortgage, which makes up a significant portion (45%) of the high cost of living (www.citylab.com), is making life difficult for citizens as well as governments around the world. And the high cost of living, experts complain, creates an unfavorable economic environment for good-paying job-investors. Instead of debating a reform policy in order to reduce the housing cost, politicians look for a scapegoat.
Well, reducing housing cost (i.e., a revenue for real estate tycoons) might be a hot issue for many candidates, who are friends of real estate owners. In any case, a debate of real estate reform might not only reduce cost, it could help owners to understand the impact of the cost of housing and encourage voters to remain engaged within the political process.
How does the cost of housing increase? Additional cost in housing begins with factors of the economy. However, the practice by private owners to increase rent through an economic policy such as reducing the number of housing units and, or violating pertinent regulations is a key factor. The high rent or mortgage increases cost of doing business as well as food, electricity, healthcare cost, education, etc.
In Liberia, the National Housing Authority (NHA), established to help solve the housing problem of Liberia, had already begun a housing reform in 2011. In its 2011 Report, NHA stated that the Liberian government must increase Liberia’s total housing units from 327,000 (www.unhabitat.org) to 678,000, if the country is to reduce the high cost of living and help become sustainable by 2030. Also, country must construct additional 278,000 units if 2 million additional residents will be added to its current population of 3.4 million, the NHA stated.
Sadly, the NHA 2011 Report also acknowledged a few reasons why Liberia might not build the housing units required by 2030. The government is not committed to the idea. For instance, in the 2012/2013 budgets, the Liberian government allocated $700,000 for NHA, while it allotted twice that the amount to the National Oil Company of Liberia, a fiduciary entity. Nor, did foreign and local partners respond to its funding request; therefore NHA has little capacity to finance the construction of the needed number of housing units.
One of Liberia’s external partners that could lend housing funds to NHA, but did not, is the International Bank for Reconstruction and Development (IBRD), one of the units of the World Bank. In fact, a chart on page # 16 of IBRD 2016 financial statement did not show any amount allocated to finance building construction in any country, even though IBRD reported a net income of $495M in 2016. So, why would an institution not allocate funds in order to reduce the cost of living, if it were organized to end poverty? I guess IBRD does not want to increase housing units, because profits of its allies would decline.
NHA 2011 Report is a good beginning, but the debate, if any, should not just be about peripheral policy issues such as constructing a few additional housing units without instituting a genuine reform, according to Mr. Connor Dougherty. In a May 8, 2017 NY Times article called “Cars Decline in Value, Why Not Homes,” he advised that if the U.S. government intends to reduce cost of housing, it should drastically cut back land-use regulations that cap new development. In the absence of effective reform, rental payments did increase even though the late President William R. Tolbert constructed additional buildings in Matadi, Barnesville, Gardnerville, etc. during the 70s.
Historically, higher rent payment had bred chaos, including the 1789 explosion in France, according to Thomas Piketty. Also, the increase in the cost of housing was partly responsible for the housing bubble in 2008 in the United States of America, as well as the bankruptcies of Greece and Cyprus in 2009 and 2012/2013 respectively, according to Mr. Paul Krugman, NY Times Columnist.
Nonetheless, these historical events have not provoked the thinking of the Liberian 2017 Presidential aspirants about the high cost of housing; hence, the need for Liberians to begin a dialogue now and not after elections. Assumingly, they forget or are naïve to realize that real estate owners will bribe policy makers and implementers for more profits, especially if voters do not participate in the debate. Describing the attitude of private-profit-making investors during elections, Joseph Schumpeter stated in 1942, that capitalism is not an ideology in which the will of the people is fulfilled. Instead it is a process by which elites compete to protect their interest.
Will Liberian elites use the capitalistic system to illegally protect their interest? If there is any doubt, let us visit and understand the article called “South Korea’s Powerful Business Ties could Be Tough to Cut,” since the two countries embrace capitalism. The article written by Jonathan Soble, Jeyup Kwaah and Choe-Sang-Hun describes how the rich manipulates politics, and by inference how the rich demand money from the poor in any country, including Liberia. They stated, “… that South Korea richest business clans have the game,” or they know how to thwart any reforms. For instance, they will bribe anybody, minimize tax liability, and, or merge old-entities in order to consolidate power.
The President-elect of South Korea Mr. Moon Jae-In had promised during the election that he would prevent families from using non-profit foundations, monopolizing businesses and exploiting regulations in order to reduce tax liability, they added. However, Mr. Moon will find it difficult to enact many of these constitutional reforms since his Democratic Party’s 119 seats cannot outdo the 300 seats in parliament.
In the Liberian 2017 election, a winning party will not gain a majority within the Legislature. And even if a winning party were to coopt a majority of the lawmakers, records indicate that real estate owners will continue to bribe lawmakers. Therefore, the debate for real estate reform should begin now, rather than later. Beginning the reform process now will allow voters to demand answers from candidates and also identify those candidates who might already be in the pockets of real estate tycoons. Finally, Liberians should not postpone the idea of debating reforms as we did in 2005. Without debate, we wrongly concluded then that the rich are honest and the poor are thieves, therefore, excessive salaries paid to advisers will encourage them to reject bribes offered by big
business. Guess what, such a financial reward to a privileged few has now replaced the idea of patriotism and honesty with the culture of “get rich quick,” a culture from which private profit-making capitalists usually win over society.