Housing Insights

Renee Webb’s resignation may have dominated the news last week, but that didn’t stop the issue of affordable housing muscling its way back onto the agenda.

The week began with an interesting forum on the subject at the BIU on Tuesday evening. Chairman Calvin Smith is to be congratulated for pulling together four speakers who seemed knowledgeable about the issues and managed to speak confidently and persuasively, without politicising the debate. In a nutshell, the forum concluded that we should look for solutions that harness the power of capitalism, not fight it, recognise that supply and demand issues form the core of the problem, but understand that there may be social issues that must be addressed too.

There was general agreement that providing affordable housing is a complex problem - but not one that’s unique to Bermuda - and that enabling affordable home ownership is the key to solving it. As Craig Laws, manager and president of electrical company Brilliant Solutions pointed out, ownership gives people a stake in the problem and provides them with equity they can borrow against. Moreover, affordable rental units must be sold an affordable purchase price if the owner is not to be expected to rent at a loss. Mr. Laws suggested the need for an affordable housing alliance between government, industry and the private sector. Government would supply information on the need for housing and provide incentives for construction, as well as legislative support and continuity between different government departments. The private sector would supply initiative and financial assistance, while industry would provide fair labour, materials, expertise, methods and project design and management.

Raymonde Dill insisted that the housing problem is not just a supply and demand issue. He explained that those on the Bermuda Housing Corporation’s waiting lists are overwhelmingly black, single parents with one or more children, often on financial assistance. Most already have a roof over their heads, as they share with other family members, however families are often broken up, with one child living with one set of relatives and another with another. Since these sorts of living arrangements often lead to problems such as substance abuse or an inability to take care of property, Mr. Dill said that these social problems must be tackled as well as finding the affected families somewhere to live.

Mr. Dill said that something must be done to deal with the alleged preference of Bermudian landlords for expat, rather than Bermudian, tenants. However, just as many supposedly racial issues in Bermuda are actually more to do with class, I wonder whether this bias is also more of a class issue. Is it really Bermudians that landlords are reluctant to rent to, or low-income, possibly uneducated Bermudians?

One suggestion Mr. Dill made that I didn’t agree with was his assertion that breakdowns in family relationships are causing young Bermudians to want to move out of their parents’ house – either because they want their own car or more privacy. Unlike Mr. Dill, I don’t believe it’s dysfunctional for an 18-year old to want to leave home. Notwithstanding that Bermudians are generally closer to their families than us Limeys, I think moving out is perfectly healthy and does a lot to encourage self-reliance.

Cris Valdes-Dapena, managing director of real estate firm The Property Group, disagreed with Mr. Dill’s assertion that the housing problem was not fundamentally a supply and demand issue, saying that these factors probably constituted 80% of the problem, and could be solved by 20% of the overall effort. She explained how the housing market is a continuum, not discrete sectors, and how an influx of people in 1992 with $6,000 per month housing allowances created a knock-on effect which inflated the prices of houses lower down the property ladder.

She took a more pragmatic view of the effect of expats on the market than Mr. Dill. The housing problem would not go away with the departure of international business Ms. Valdes-Dapena warned, as the high-paying jobs would go with it. Killing the goose that lays the golden eggs is no solution, she said; rather, we need to consider goose management. According to Ms. Valdes-Dapena, no more work permits are being issued today than 15 years ago – it’s just that the demand for housing from the expat community has changed.

Nonetheless I wonder whether there's any mileage in the Government passing legislation to prevent international companies providing housing allowances to their employees. Because any unused portion of a housing allowance is lost, an employee has no incentive to try to bid down the cost of their accommodation. Require the company to incorporate the allowance into the employee's salary, however, and suddenly he has a reason to pay as little for his housing as he can.

Ms. Valdes-Dapena dismissed the oft-heard suggestion that the Government should do more to bring Bermuda’s disused housing stock back into circulation. In a free market economy, she pointed out, it’s very hard to tell people what to do with their private property. The simplest solution is to build more houses. Because of the continuous nature of the market, even building new homes in the mid price-range will help those lower down and slow the overall rise in prices.

Both her and Clifford Schoerer, the developer planning to build 200 new homes at Southside, said that Government’s role should be one of partnership, not ownership. At the lower end of the market, as the largest single land owner on the Island, the Government’s role must be to make land available to the private sector at less than market value. Elsewhere, Government must simply get out of the way and let new construction go ahead. Government is a failure as a landlord, Mr. Schoerer said.

Mr. Schoerer emphasised the need to harness the power of capitalism to solve the housing problem, not fight against it. The challenge is to create self-interest, for the developer, the home-owner and the government, he said. That struck me as one of the most pragmatic things that was said all night, and certainly much more constructive than Mr. Dill bemoaning the greed of the landlords.

Rent control is no solution as it discourages the provision of quality housing, makes it impossible for landlords to sustain their mortgages, and often leads to properties being abandoned rather than rented. Mr. Schoerer said that instead, Government should be providing incentives, such as land subsidies, bonding or finance programmes and building code reform. They might also consider introducing affordable housing covenants to allow property owners to build a second house on their property if they agree to its resale value being restricted forevermore. This could be used by the owner’s children, for example, and would enable the family to own a second car.

At several points Mr. Schoerer stressed the need for a master plan to help overcome people's resistance to new housing projects. You must know your need, then develop to it, he said. It was a clear message to Housing Minister Ashfield DeVent, who seems to think Bermuda’s housing problems can be tackled by a few ad hoc initiatives.

While Mr. Schoerer insisted that economic poverty must not be concentrated in large housing complexes where it's impossible for people to feel a bond with their neighbours, he did stress that the more units a developer can build, the more profitable a development will be to him. In view of this, he encouraged the Government to consider granting zoning relief at certain sites to increase the numbers of units that could be built there. One audience member suggested we should put all of our expats in such mega-developments. I agree there’s merit in providing incentives for expats to prefer a one-bedroom Hamilton apartment in a large complex to a suburban house. I don’t believe a sense of community is as important to an expat as it is to a long-term resident and expats are generally more open to the idea of living in an apartment than Bermudians are. I don't believe we can compel them though.

I counted no more than 50 people in the audience at the height of the evening and only around 5 of them were white. While politicians George Scott and Wayne Furbert put in an appearance, Mr. DeVent was conspicuous by his absence.

Another politician missing from the audience was PLP MP Derrick Burgess. Perhaps that was because he already knows what the cause of the housing problem is. Apparently it’s those nasty real estate companies who are driving up the cost of property – in particular, local realtor Coldwell Banker. Not surprisingly, his comments drew angry responses from both Coldwell Banker and the Chamber of Commerce. I can’t prove or disprove Mr. Burgess’ allegations, but the absence of evidence presented by the MP and his reputation for making unsubstantiated claims suggests that whatever axe he’s grinding, it must be pretty sharp by now.

On Thursday the results of a housing survey were announced, adding a little more context to the debate. Over 30% of Bermudians spend at least half their monthly income on housing, a figure which rises to 50% of those earning less than $50,000 per year. 63% of residents own their own homes, while 32% rent; 36% of homeowners rent property to others.

Enabling every Bermudian to get the housing that they need is going to be a long-term project. Let’s hope that Ashfield DeVent will be spending his summer drafting a Green or White Paper to spell out the Government’s strategy for achieving this.

Comments

[Sammy on 25.07.04 at 19:49]

This isn't a troll...promise!

I've only been to Bermuda twice, but I didn't see any high-rise flats. Is there a reason high-density residential areas haven't been built? Perhaps something to do with hurricanes? Or did I just not explore that bit of the island?

P

[Tiger Bay on 26.07.04 at 13:40]

Derrick Burgess' strange outburst against Coldwell Banker last week shows the PLP's lack of understanding of the housing issues facing Bermuda.

In particular, I am amazed that it is allowable for him to call a UBP MP "her master's maidservant" in the House, without reprimand.

Given the BIU's doormat status within the PLP, Mr. Burgess would do well to keep his ignorant, race baiting mouth shut.

[loki on 26.07.04 at 16:03]

I don't say this merely to be insulting, though I appreciate that it is, in fact, insulting, but I've increasingly come to believe that Derrick Burgess is, well, a bit thick. The sheer number of really, really stupid, ill-founded and 'entirely-missing-the-point' statements (his statements regarding the Stonington deal, anyone?) that he has made of late can only mean that he's not the sharpest tool in the box or, alternatively, that he's a serious wind-up merchant. I suspect the former.