The Sint Maarten Rapid Housing Sector Assessment:
~ 5 KEYS TO IMPROVING LIVING CONDITIONS ON SINT MAARTEN ~
Access to safe and affordable housing is critical to Sint Maarten’s goal of building long-term resilience to natural disasters. The devastation caused by Hurricane Irma in 2017 impacted most homes on the island, leaving many houses damaged or destroyed. Under the Sint Maarten Recovery, Reconstruction, and Resilience Trust Fund, efforts have been made to address the housing repair needs of the most vulnerable Sint Maarteners. For example, repairs to 167 homes have been made to increase resilience to future disasters under the Emergency Recovery Project. Home reconstruction under this program will continue in 2021. An additional 182 roofs were repaired under the Red Cross Roof Repair Program, which also trained 60 local craftsmen to construct hurricane-resistant roofs.
However, like many small island states, Sint Maarten still faces challenges in developing a well-functioning housing market with affordable solutions for its people. As many Sint Maarteners know, finding safe housing for an affordable price on the island is a struggle. The housing sector faces many large challenges: scarce land, high construction costs, a growing informal rental market, limited insurance coverage, and buildings that remain in need of repair or retrofitting after the damages caused by Hurricane Irma in 2017. The recently published Sint Maarten Rapid Housing Sector Assessment by the World Bank, financed by the Government of the Netherlands out of the Recovery, Reconstruction, and Resilience Trust Fund, explores some of the market’s key constraints in greater detail and proposes some recommendations summarized below.
Constrained land market
Sint Maarten has a hilly terrain, which is not ideal for development. Large tracts of land are government-owned and under long-term leases, many of which are un- or underdeveloped. Many parcels of privately-owned land have unresolved inheritance issues, further hampering development. In addition, there is no enforced penalty or tax on vacant land, which contributes to land speculation and provides limited incentives for the holders of un- or underdeveloped land to build and increase Sint Maarten’s limited housing stock.
High cost of construction
Construction in Sint Maarten is expensive. Hilly terrain and hurricane exposure require large amounts of concrete, raising building prices. Furthermore, most housing projects are relatively small and lack economies of scale. Construction materials, and also skilled and unskilled labor for large projects, are often imported. Finally, contractors apply high profit margins to compensate for risks related to project financing, delays in obtaining permits, and natural disaster exposure.
Lack of access to finance
The price point of the cheapest family houses for sale in Sint Maarten’s market exceeds US$200,000. Even these “affordable” houses are far too expensive for up to 60% of Sint Maarteners. Many cannot access loans, either because their low, irregular, or informal income precludes any borrowing, or because the loan terms are too steep. Many families’ options are limited to renting or saving money to buy a plot of land and incrementally building their home over many years.
Informal market, little data
There is limited data available on the rental market. However, it is expensive relative to local wages. The smallest quality units in the “formal” rental market start at US$600 per month for a basic studio or 1-bedroom apartment. People renting in informal settlements pay slightly less, between US$300-600 per month for a small plot (with or without a house) depending on location and infrastructure connectivity. Informal settlements in Sint Maarten, locally referred to as ‘shantytowns,’ are growing in number and are home to many low-income households.
Social rental housing
The Sint Maarten Housing Development Foundation (SMHDF) is the only social housing provider on the island. It has not received regular government funding and is struggling to stay afloat. One of SMHDF’s biggest constraints is the restriction on raising rents. Rent levels are typically set upon initial lease signing, and by law cannot be increased until the unit is turned over to a new resident. In some cases, rents have not been increased for 20 years. Consequently, rental prices are far out of line with even the lower end of the market and as such there are no funds for maintenance, resulting in deterioration of properties. Still, tenants often choose to stay for extended periods of time, due to the limited alternatives available in the housing market. Meanwhile, the wait list has increased from 1,500 to 9,000 since Hurricane Irma, and delinquencies are high, a situation exacerbated by the COVID-19 pandemic.
FIVE RECOMMENDATIONS FOR A MORE ACCESSIBLE HOUSING MARKET
The study recommends five avenues to improve Sint Maarten’s housing market:
- Build affordable housing
To fully realize its role as the engine for social housing development in Sint Maarten, SMHDF needs institutional strengthening, including financial and professional resources to set itself back onto sustainable footing. At the same time, the government could incentivize the private sector to invest in more affordable options. Developers on Sint Maarten generally focus on the luxury housing segment, despite the great demand for affordable housing. Incentives such as expediting permitting processes, making land prices more favorable for constructing affordable housing, and abating turnover tax for low-cost units could contribute to further development of affordable housing. In conjunction with a suite of policy and regulatory improvements, activation of the Mortgage Guarantee Fund could help enable modest-income households to access a mortgage loan.
- Formalize the rental market
Many countries, including Chile, the United States, and the United Kingdom, have established rental voucher programs to temporarily help low-income households pay the rent on private market-rate units. Such a program could be established in Sint Maarten as well. For example, Chile’s program targets moderate-income young families and offers a flat-rate, time-limited subsidy, which simplifies program administration. In parallel, incentives to formalize the rental market could be made, such as a grant program that could be offered to small-scale landlords to bring their units up to resilient building standards in exchange for registering their properties. Formal rental contracts protect both landlords and tenants.
- Support vulnerable households
A variety of tools can be developed to help low-income households improve their homes and render them less vulnerable. The government could introduce subsidies for low-income households to improve their living conditions and the resilience of their homes to natural disasters. Also, the upgrading of shantytowns could be supported and stimulated by bringing adequate services and improved housing to those who are most vulnerable.
- Strengthen housing policies and programs
More effective land policies need to be developed. An inventory of public and private lands needs to be conducted, land rents need to be updated and collected, and a vacant land tax introduced. The Ministry of Public Housing, Spatial Planning, Environment & Infrastructure (VROMI) requires greater technical capacity to do so. In particular, the Domain Affairs department, which oversees 3,000 land parcels under long-term leases, with a small number of staff. Speed and efficiency in the building permitting process could be significantly improved through digitization. The collection of housing data, as well as additional expertise to analyze it, could inform the preparation of an effective and dynamic housing strategy for the country.
- Involve the community in defining a housing strategy
Sint Maarten would benefit from a formal mechanism for community consultation and participation regarding housing issues, which does not currently exist. Such mechanisms are needed to keep the community informed and involved in important decisions, as well as to sensitize people to key topics such as the benefits of resilient construction methods, higher density housing, and housing insurance.
To learn more about the Sint Maarten Rapid Housing Sector Assessment and its recommendations, download the entire report here.