Homeownership is a fundamental principle of the “American Dream.” A high rate of homeownership benefits not only the occupants but also serves as a cornerstone for mature and stable economies. The average net worth of homeowners is significantly higher than that of non-homeowners.
Homeownership is an excellent tool for building wealth, as seen in countries like Singapore, Japan, and South Korea, where robust middle-class growth has been fueled by homeownership. As mortgages are paid off, homeowners build additional equity.
A concerted effort
How have our neighbors achieved high rates of homeownership? Public programs and incentives play a crucial role in affordable housing. For instance, Singapore’s Housing and Development Board (HDB), established in 1960, now houses about 80% of Singaporeans. The government actively constructs new developments tailored to various income levels, ensuring a steady supply of affordable units. Similarly, Japan and South Korea have implemented inclusionary zoning policies that mandate affordable housing in new projects.
Effective urban planning and zoning optimize land use. The government engages in large-scale planning to maximize economies of scale, addressing infrastructure limitations and lowering construction costs.
Integrated developments incorporate affordable housing within residential areas, blending affordable and market-rate units seamlessly. These communities are designed with nearby commercial districts, providing residents easy access to goods and services, while fostering social cohesion with schools and parks.
The added value of private sector
Tax incentives encourage private developers to participate actively. The private sector brings essential expertise, sharing risks associated with construction and financing. Tax credits are often tied to the number of affordable units built, and land can be leveraged to encourage developers to provide affordable options in exchange for low-cost land acquisition.
Non-affordable units can be sold at market rates, maintaining value for all residents, including those in affordable housing. Once built, these units are transferred to public housing corporations for distribution.
Private developers also offer innovative solutions to reduce costs, utilizing modern technologies and construction methods like insulated concrete forms. This partnership is invaluable for government agencies aiming to deliver quality homes affordably.
The distribution of affordable units must be fair and transparent. A lottery system ensures equal chances for all eligible applicants, who must meet specific criteria like income limits. Priority is given to those with extenuating circumstances such as very low income, elderly status, disabilities, or young children. Early registration ensures that those who have waited the longest have the first opportunity to secure a unit.
The selection process is publicly announced to foster transparency and trust. Creative ownership structures, including rent-to-own options, provide flexibility for various financial backgrounds, allowing applicants to deposit minimal funds in escrow to cover closing costs.
Time for action
Having spent my whole life on Guam, I understand that while we can’t replicate other countries' strategies, we can adapt effective policies to our local conditions. So where does Guam stand in making affordable public housing a reality?
The Guam Land Use Commission (GLUC) regulates zoning and has the authority to require affordable housing in new construction. However, the government struggles to implement public housing initiatives, as most developments are undertaken by private developers with limited resources. The Guam Economic Development Authority (GEDA) offers tax incentives for affordable housing, but high construction costs remain a significant barrier.
Meanwhile, the Guam Housing and Urban Authority (GHURA) provides tax credits primarily for low-income rentals rather than homeownership.
A government-led initiative is essential to designate public land for affordable housing. The CHamoru Land Trust Commission’s Land for the Landless program allows low-income Indigenous residents to purchase public land at reduced prices, but financial constraints have hindered effective distribution.
Large parcels often lack proper infrastructure, leading to projects being abandoned or converted to ranches, failing to achieve affordable housing goals.
A public-private partnership with a reputable developer could provide the solution. By subsidizing land costs, the government could enable private developers to cover subdivision and infrastructure expenses. Managing risks by retaining land ownership until project completion could ensure quality homes are delivered, benefiting a broad segment of residents.
The role of Guam Chamber of Commerce
Addressing the challenges of affordable housing in Guam requires a concerted effort from various stakeholders, including government agencies, private developers, and community organizations. The Guam Chamber of Commerce can play a crucial role as a catalyst, bridging the gap between these entities.
By fostering collaboration and dialogue, the Chamber can facilitate partnerships that harness private sector expertise and innovation to develop effective housing solutions. By championing these collaborative efforts, the Chamber can help ensure that our island remains a vibrant and welcoming community for families, enhancing the quality of life for everyone. Together, we can create an environment where affordable housing is not just a goal, but a reality for all.
Tae Oh is the vice chairman of the Board of the Guam Chamber of Commerce. Send feedback to info@GuamChamber.com.gu.
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