Outgoing chairman of the Bermuda Housing Corporation (BHC), Larry Burchall, has proposed that a small percentage of Government pension funds be loaned to the BHC to provide low income families with affordable loans.

Yesterday's announcement came at a Press conference held at the BHC in which Mr. Burchall outlined his vision for the future of the Corporation and introduced Wentworth Christopher as his successor as chairman.

Mr. Burchall said one of the limiting factors in providing affordable housing was the high interest the BHC, and consequently its clients, had to pay on loans.

He said the BHC had borrowed a total of $63 million at an average interest rate of roughly seven percent.

And although this rate is lower than the current market rate of nine percent, it is still too high for the BHC's maximum rent of $1,600. As a result, the BHC had to subsidise rents.

"The cost of money is just too high,'' said Mr. Burchall.

He said that in the UK, the US and Canada, houses could be bought for around $60,000, but a comparable unit in Bermuda would cost around $200,000.

Mr. Burchall said: "Broadly speaking, what the Corporation has been doing is using expensive money, and lending it out at expensive rates.'' He said that cheaper money must be used, and the BHC was currently trying to raise $25 million but at a lower cost than a similar amount recently borrowed from the Bank of Butterfield at a seven percent interest rate.

Mr. Burchall said: "We should be able to get money at four percent.'' Every one of Bermuda's 35,000 workers should now be paying into a Government pension and Mr. Burchall said: "A small proportion (five percent) should be reinvested in four percent housing bonds. We can then afford to lend that on at about six percent so that mortgages can become affordable.'' Mr. Burchall admitted the Government pension fund is supposed to be invested in high return funds of around 15 percent, and that the BHC would only guarantee a return of four percent.

But he said that pensions were invested over a period of 40 years before they were paid back to the contributors, and the BHC was only interested in five year loans, after which the money would be returned to the pension scheme and reinvested in higher yielding funds.

And he said that at the end of 40 years, the difference in the total realised gain would be negligible.

Mr. Burchall said: "Using a lower cost of money would enhance our ability to keep rents down.'' And he said that because the BHC was a Government appointed board, it could use Government "muscle'' to show that the scheme would make economic sense if the business community was not convinced.

Government was criticised by the United Bermuda Party in June for asking businesses to subsidise the building of 100 homes for poor families by buying BHC bonds at a lower rate than the market.

The BHC believes a large part of Bermuda's housing problem stems from the 15 year mortgage syndrome of past eras which resulted in very high mortgage repayment rates which in turn caused very high rental rates to be charged for those living in units which were either built or added on in order to help house buyers pay for the property they were purchasing.

At the end of last month, it was reported that 147 families were on the emergency housing list, and roughly 450 families were on the non-urgent list.