Monday, July 25, 2011

A Cuban housing market? Gov't is lifting a taboo

Posted on Sunday, 07.24.11

A Cuban housing market? Gov't is lifting a taboo
Associated Press

HAVANA -- Each morning before the sun rises too high, Cubans gather at a
shaded corner in central Havana, mingling as though at a cocktail party.
icebreaker is always the same: "What are you offering?"

This is Cuba's informal real-estate bazaar, where a chronic housing
shortage brings everyone from newlyweds to retirees together to strike
deals that often involve thousands of dollars in under-the-table
payments. They're breaking not just the law but communist doctrine by
trading and profiting in property, and now their government is about to
get in on the action.

President Raul Castro has pledged to legalize the purchase and sale of
homes by the end of the year, bringing this informal market out of the
shadows as part of an economic reform package under which Cuba is
already letting islanders go into business for themselves in 178
designated activities, as restaurateurs, wedding planners, plumbers,

An aboveboard housing market promises multiple benefits for the
cash-strapped island: It would help ease a housing crunch, stimulate
construction employment and generate badly needed tax revenue. It would
attack corruption by officials who accept bribes to sign off on illicit
deals, and give people options to seek peaceful resolutions to
black-market disputes that occasionally erupt into violence.

It's also likely to suck up more hard currency from Cubans abroad who
can be counted on to send their families cash to buy, expand and remodel
homes, especially since U.S. President Barack Obama relaxed the
50-year-old economic embargo to allow unlimited remittances by

"All these things are tied in," said Sergio Diaz-Briquets, a U.S.-based
demography expert. "They want expatriate Cubans to contribute money to
the Cuban state, and this is one big incentive for people who want to
help their families."

But few changes are likely to be as complex and hard to implement as
real estate reform.

From the earliest days of the revolution, Fidel Castro railed against
exploitative, absentee landlords, and enacted a reform that gave
property ownership to whomever lived in a home, regardless of who held
title. Most who have left the island forfeited their properties to the
state. The government, Castro preached, would provide everything a
citizen could need: employment, food, education and housing, all for
little or no money at all.

But the housing stock, already run down before the revolution, continued
to deteriorate, the U.S. embargo choked off the supply of building
materials, and new construction failed to keep pace with demand.

Meanwhile cyclones and salty air can start eating through metal bars in
a year and have decimated rural shanties and older quarters of Havana.
Empty lots dot the capital's seaside Malecon boulevard as once-stately
mansions regularly collapse following heavy rains. Many of those still
standing are merely facades or are propped up by scaffolding and wooden

While they wait for the new law to be enacted and the specifics to be
announced, Cubans' legal options are few. They can enroll in cooperative
construction projects, build on existing properties or join the long
waiting list for government housing. Or they can head to the open-air
real-estate market in hopes of negotiating a "permuta," which officially
is a swap of equal-value properties but in reality usually involves
illegal cash on the side.

Many enlist the services of "runners" like Manuel Valdez, an 83-year-old
ex-military man who has been brokering the transactions for four
decades. At the downtown bazaar, Valdez holds court on a concrete bench,
keeping track of real estate offers in a tattered notebook and on
posterboard that he tapes to a tree.

Gesturing at the people milling around hoping to strike a deal, Valdez
said housing is such a problem that legalization was inevitable: "This
is a situation that the state had to get off its back one way or another."

There's also, a kind of Cuban Craigslist that
has real estate ads asking tens of thousands of dollars. Site operators
claim the real estate section alone gets 30,000 unique visits a month
even though islanders must find a way around the web censors.

Some Cubans enter into sham marriages to make deed transfers easier.
Others move into homes ostensibly to care for an elderly person living
there; they register at the address and, after enough time passes, can
legally claim the "inherited" title. Nowhere is there an official record
of the money changing hands.

A Havana professional with a job that pays far more than most salaries
on the island told of swapping his tiny apartment about 10 years ago for
a bigger, historic home whose bathroom and roof were falling apart, and
whose occupants, a 60-something couple, could no longer manage.

The couple took over his recently remodeled and repainted flat. They
also got $1,200 cash - something that would no longer be illegal once
Castro's housing reform takes effect.

He reflected on the anomaly of people with money but no home to buy, and
people with bigger homes than they need, and the risk they all run
trying to change their circumstances. Some Cubans have had their homes
confiscated when their illegal sales came to light.

"It would be so helpful if you could do that legally," he said, speaking
on condition of anonymity because of the transaction's illicit nature.

"It is such a big problem, the housing situation," said Diaz-Briquets,
who estimated in a recent paper that the country of 11 million people
was short some 1.6 million units of "adequate housing" in 2010. "They
have been trying for years to solve it, and it's finally dawned on them
that the state is never going to do it."

The Cuban government puts the shortfall at closer to 500,000 homes.
Still, the result is legions of bickering divorcees trapped under the
same roof; newlyweds forced to bunk up with siblings, cousins, uncles,
aunts; old people unable to repair their crumbling homes.

Juana Ines Delgado's plight is typical. She shares her tiny studio in
Old Havana with her grown son, married daughter and 4-year-old
granddaughter, while her son-in-law spends nights at his aunt's place
down the street.

"It's a marriage that's not the way a marriage should be, you know what
I mean?" said Delgado, 61. "My situation is what it is. ... But I hope
my children don't have to end their days here."

Cuba experts caution that the new measure is just a first step toward
solving the housing crisis, and note that it deliberately stops short of
creating a freewheeling, capitalist real estate market.

Raul Castro has said home ownership will be limited to one per
individual to avoid accumulation of wealth. The government has announced
plans to extend credit for purchasing building materials, but specifics
are still unknown and no mechanism is in place for home loans. Duties
will be levied on both sellers and buyers, and if taxes are too steep it
could provide enough incentive to underreport transactions.

Only islanders and permanent residents will be able to buy property, but
there's at least a potential for Cubans to front for foreigners keen on
owning a waterfront art-deco masterpiece.

"You start down a path of property accumulation and who knows where
that's going to lead," says Rafael Romeu, a U.S.-based expert on the
Cuban economy.

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