Raul Wants to Cash-In on Housing "Market"

at 10:26 AM Thursday, August 4, 2011

POR: CAPITOL HILL CUBANS

Yesterday, the New York Times ran a story based on speculation that the Castro brothers will allow Cubans (some time next year) to sell the homes they reside in.

It was obviously pre-written in anticipation that Castro's National Assembly might take up the issue during this week's biannual meeting.

However, the topic wasn't raised -- at all.

Moreover, no one has actually seen the much-heralded legislation -- it has only been the subject of teasers by Castro's media.

But why stop a good headline.

Ironically, the underlying premise of the NYT story seems to be:

It's "exiting" for Cuban-Americans to travel and send money to Cuba (and even to break U.S. law on commercial transactions) in order to "invest" in property -- so long as the Castro brothers are in power.

Otherwise, as in the past, it would have been portrayed as greedy Cuban exiles preying on poor and helpless Cubans on the island.

It's almost as if they prefer the illusion of a "benevolent dictator" to the "rule of law."

Meanwhile, Cuba "experts" hail media reports of Raul's supposed home sale "reform" as transformational.

Is it really?

In essence, the Castro regime is simply looking for a way to absorb, control and capitalize from a long-time practice in the black market.

But caveat emptor: confiscation remains inviable -- for the Castro regime ultimately owns everything on the island.

Thus, the Castro brothers can profit in the short-term with no long-term risk to what's ultimately "their" property.

As this 2002 paper from Harvard University's Joint Center for Housing Studies explores:

[Cuba's] 1984 Housing Law introduced important changes, permitting free market prices for sales and legalizing most other previously illegal transactions. The state retained its right of first refusal primarily as a form of land use control, but largely was unsuccessful. A year of rampant speculation prompted the government to require that most sales be directly to the state, except for property transfers to close relatives. These transactional limitations in turn motivated many Cuban families to exchange rather than sell their houses. Since home loans are personal loans, not mortgages, residents normally carried their debts with them.

Because of limitations on buying and selling in the housing market, real estate agents did not legally exist in Cuba. This private sector function, however, did develop illegally. Rather than legally swap properties without exchanging money, many Cubans either gather at an informal open-air market bearing slips of paper with their offers and demands or hire illegal real-estate agents known as permuteros to arrange land deals. A government-managed market now exists to exchange units. Buying or selling of units is allowed, but only at state-fixed prices, with the government retaining the first option to purchase. Typically, those wishing to exchange units initiate a one for one swap, although a swap of one unit for two lesser-priced units is also permitted. Land or the right to build on roofs may be purchased at free-market prices from private individuals, and permanent surface rights to state-owned land can be bought at lower "legal prices." Because of state price-fixing, a substantial black market for real estate transactions has developed with units being exchanged for two to three times the legal value. This market has grown in recent years with the legalization of the dollar. Cubans receiving part of their salary in dollars or contributions from overseas family members have additional purchasing power for homes, but are limited in their ability to purchase via the legal market. Transactions in which homes are illegally exchanged for cash are known as "permutas."

Recognizing this trend, government confiscation of private property and punishment for illegal housing sales has increased in recent years. Cuban officials justify their actions by contending that residents have become too greedy. Juan Contino leads the movement of Cuba's state-affiliated neighborhood groups, the Committees for the Defense of the Revolution. He warns, "The day money is the factor behind distribution of the nation's properties is the day we will be divided into social classes. We will not allow that."

Decree 211, issued in 2000, empowers housing authorities with the right to confiscate properties and authorize constructions and remodelings. According to Granma, the Communist Party's official newspaper, in 2000 there were 1,400 house confiscations, 548 expulsions of illegal occupants, and more than $1.5 million in fines for property crimes.