FUNDING PLAN FOR DEVELOPING NATIONS
That Will Stimulate The Economy And Create Permanent Jobs
PAST AND PRESENT PLANS HAVEN’T WORKED VERY WELL.
The governments of the U.S. and other Developed Nations and the
numerous non-government organizations (“NGOs”) (collectively, “Donors”)
have contributed huge amounts of money to assist with housing needs in
the Developing Nations. Although their intentions were good, the results of
their time, money, and efforts have been disappointing. The focus seems to
have been to provide free, but very poor quality, housing.
The Donors have frequently provided the funds for contractors from their
own countries to construct, with their own forces, large numbers of very
small (~36 sq. meters) low-cost ($2000-$3000) houses. NGOs often use
volunteers and materials from their own countries. Neither of these do
anything to stimulate the local economy or create new jobs and skills
training within the recipient Developing Nations. Donated labor eliminates
paying jobs and skills training opportunities for the very people we’re trying
to help. The local business climate is suppressed because there’s no way
for the local businesses to compete with free labor, materials, and
components.
The houses have tended to be of such poor quality (e.g. tin sheds with thin
cracked concrete floors) that they probably should have been viewed as
temporary housing, although they have been touted as permanent. They
often have been constructed on tracts of land provided by the local
governments, but without any infrastructure to support the new community
such as streets, sewers, safe drinking water, electric service, schools, or
transportation to the population centers where the jobs may be. Frequently,
such things are intended to be added later, but seldom are. The houses are
then given to the poorest citizens who frequently have minimal job skills and
minimal sources of income.
Because the houses are of such poor and temporary quality and the
communities are never developed into satisfactory living environments, no
lasting market value has been created for the new homeowners. Even if the
new homeowners had the income to do so, there would be no incentive for
them to make significant investment or improvements in such housing. You
can’t tile a cracked concrete floor and how can you improve a tin wall or
make it more attractive? There is no value upon which a mortgage loan
could be obtained. There is no opportunity to build equity in a home that
could be sold in order to invest that equity in a better home. There can be
no pride of home ownership in these circumstances. The result is: no
equity--nothing to sell--no future! These new homeowners have, for the
most part, been given a permanent living condition with almost no way to
improve their lot in life. In short, we have built the next generation of slums.
On the other hand, we have the capacity and ability to present the
homeowners and their families with opportunities to build equity and wealth.
Such lessons have been learned in the U.S. even when good housing in
convenient locations with appropriate services have been provided free, or
substantially free, to its poorer citizens. People generally seem not to
appreciate and take pride in things that are given to them without any effort
on their part. When we have to work for something and contribute to its
achievement, we appreciate it more and take pride in preserving it and
improving it. Without that pride, such free housing communities soon
become deteriorating slums.
Under the foregoing programs, the local economies of the recipient
Developing Nations have not been stimulated since no new jobs were
created and no significant amount of materials or goods were acquired from
the local businesses. Although the new homeowners may have a temporary
roof over their head, they still do not have a home in which they can take
pride and in which market value can be created by improving the home. No
lender would make a long-term mortgage loan on such property and no
one, even if they had cash available, would be willing to buy the property. If
a prospective buyer had the cash available, he would be more likely to use
it as a down payment with a mortgage loan to purchase other property that
would be expected to have increasing market value potential.
PROPOSED FUNDING PLAN THAT WILL WORK.
Rather than give away free $2000-$3000 houses that are devastating to
both the short-term and long-term economies, build larger $10,000-$12,000
houses with solid floors, walls, and roofs and use the $2000-$3000 that
would otherwise have been given away as a secure government guarantee
rather than as a cash contribution. The mortgagee will be secure, and,
since the default rate experience in popular housing is only approximately
3%, the same guarantee fund can be used to provide guarantees for many
more houses than if cash equity were invested in every house. As the
Equity Guarantee Fund grows, use a significant percentage of it to buy
additional land at present prices for future residential developments as the
land appreciates in value (“hedging”).
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