Hope Inc

A Barbados Success Story

General Company Overview

Home Ownership Providing Energy Inc (Hope Inc) is a project by the government of Barbados providing affordable hurricane-resilient homes at below-market rates. The project targets employed individuals in Barbados earning no more than BBD 4000 (NET) per month who do not currently own a home.

Once an applicant is approved, the government provides them with the land for free, and they only need to pay for the construction of the pre-designed house, resulting in a twenty-five percent reduction in the overall cost of the home.

“The Prime Minister and her economic team initially created this plan to reduce the cost of housing for teachers, police, and nurses earning less than BBD 4000,” says Tony Hoyos, who chairs the Hope Inc board.

“We quickly realized this would be an extremely popular program because we were giving free land, and the program allows anyone in that bracket to qualify for a house without making a down payment.”

Due to this popularity, the government extended the program first to all public servants and then to those in Barbados who met the qualifications.

In addition, the government also mandated that applicants must be ready to occupy the property for at least ten years to foster community, maintain the properties, and discourage speculators who might acquire the homes for rental purposes.

How it Works

The ‘killer application’ of the project is the free land provided to applicants, which Hoyos says is not as crazy as it sounds.

“Hope Inc gives away the land in exchange for twenty years of using your rooftop to generate solar energy. We sat down and did the calculations and realized that the revenues from energy generated from these rooftops over twenty years would more than cover the cost of the land we are giving away.”

With thousands of homes planned for the program, the government intends to use the green energy generated to raise green bonds to pay off the land and buy additional land to expand the project further.

On the retail side, the project has created an entirely new segment of potential homeowners comprising individuals earning too little to save the large sums needed to apply for a traditional mortgage.

“Since the project does not require any down payment and does away with the need to buy land, this new market segment has mortgage providers very excited because it opens up a whole new marketplace to them that didn’t qualify before,” explains Hoyos.

And the excitement cuts across all market segments.

“When we launched, we expected a few thousand people to be interested,” Hoyos adds. “But the day we opened applications, our website crashed due to a sudden influx of traffic. After restoring the website, sixteen thousand applications came in within a short time.”

Hope Inc has processed three thousand five hundred of those applications, which all have approved mortgages and are waiting for Hope to construct and hand over their homes.

Hope Inc vs. Traditional Mortgages

Besides giving away free land, another major innovation the program employs is online applications, which traditional mortgage lenders in Barbados have not yet embraced.

Hoyos expounds.

“In the traditional model, someone interested in a mortgage would have to physically visit various lenders, fill out each provider’s lengthy application forms, and then decide the best offer.”

“Once you have an offer, you would need to hire an attorney to represent you in the transaction, which takes up more of your time and money.”

Hoyos points out that for first-time homebuyers, this process can be daunting, time-consuming, and a drain on resources.

Hope Inc’s process integrates all these steps in one online application and one integrated cost.

“Here’s how the process works,” says Hoyos.

“You set up an account and verify your email. We then invite you to fill out the loan application, upload your employment documents, and provide everything else lenders need. We first vet your details ourselves, and if there is a problem, our customer care reps contact you and help you amend your application.”

“Once your application is complete, we consolidate it with other applications, send them to mortgage companies and lawyers, and negotiate the best rate based on the high volume of business we offer them.”

Hope Inc uses this approach to negotiate significantly lower rates with lenders, law offices, construction companies, and other service providers in the project value chain. The final savings are passed on to the applicant as a significantly lower combined mortgage rate, including all costs associated with building and commissioning the home.

“Hope Inc is a government initiative and so not a for-profit entity,” Hoyos says. “Because of this, we can offer our homes at far below the corresponding market value of similar houses.”

Hope Inc Business Model

Although Hope Inc is not a for-profit entity, the project must make business sense to be sustainable. Hoyos argues that although the project does not focus on profit, it is based on a sustainable business model.

“Our first revenue source is a $1000 administration fee we charge for each approved mortgage, which although less than 1% of the total home cost, translates to around $1 million per year based on the number of projected homes.”

This amount pays for the program’s running costs.

“The next revenue stream is the green bonds we plan to raise from the solar generated from the homes’ roofs. This money will pay back the cost of the land.”

“The net cost to the government for our business is, therefore, nothing because it is a self-replenishing venture that will not drain the central government’s monies in any way.”

House Design

Hope Inc optimizes its house designs for resilience and solar capture optimization.

“Our houses are designed to be hurricane resilient, which extends to the slope of the roofs that use certain angles to minimize the effects wind shear can have in hurricanes. In addition, the designs maximize photovoltaic solar capture by minimizing the north face and slope to less than 25% of the overall roof.”

Helping construct the homes are small construction companies, which Hope Inc provides with working capital.

“Most of the contractors we use are skilled and experienced but lack the resources to win projects,” explains Hoyos, “so providing working capital is another way we are impacting the local construction industry.”

However, as the contract progresses, Hoyos expects Hope Inc to take on more construction responsibilities, allowing it to innovate and improve the building methods and processes.

Modular Sewerage System

As Hoyos explains, one innovation the company is exploring is using modular sewerage plants for each block of homes it constructs.

“City-based construction projects tend to benefit from a centralized sewer system, but when you move inland, builders rely on wells for water and septic tanks for discharge.”

“Our approach is to build smaller, more affordable wastewater treatment plants that can capture and treat discharge to an agricultural grade, which we can then sell to the surrounding farms for agricultural purposes.”

Project Progress

Hope Inc’s flagship project is Vespera Gardens, a 160-house development slated for completion by the end of 2022. Other projects earmarked to start construction this year are a 201-house project called Pool North in Saint John, an 80-house one called Fustic Gardens, and a significant development in Christ Church with two thousand units.

“Vespera Gardens is almost complete, and we are just putting in the electricity before handing them over to the new owners,” says Hoyos.

Looking Forward: Challenges and Opportunities

Looking forward, Hoyos says that the main challenge the company will face is finding suitable land to build homes in an island nation with limited land.

“In the wake of Covid and the supply chain challenges that emerged, food security has become a major concern for the Barbadian government, which has trained its sights on utilizing all arable land,” he explains.

“So, there’s a lot of competition for available land between housing, agriculture, and roads, but with proper management and utilization of all unused land, we can balance everything.”

Another reason Hope Inc’s project is so pivotal to Barbados is that it helps the country inch closer to its 100% renewable energy target scheduled for 2030.

“Barbados is experimenting with different renewable energy technologies. We are converting all cars to electric, harnessing solar, wind, and tidal energy sources, and exploring newer technologies like transparent PV panels that can be placed high up and allow the land below to be used for farming.”

“Those are all the things Barbados is doing to transform itself into a modern, sustainable economy, and Hope Inc’s work is just one plank in that platform,” concludes Hoyos.

AT A GLANCE

Hope Inc

What: Provider of Hurricane-resistant constructed residences

Where: Worthing Corporate Center, Worthing, CHRIST CHURCH, Barbados

Website: https://www.hopebarbados.com/