Friday, November 25, 2011

Ownership and Sale of Homes

Cuba's Real Estate Law Shows a Changing Island
Published November 04, 2011
| Associated Press

The lot in teeming Central Havana used to be the neighborhood eyesore: The shattered ruins of an abandoned building was a breeding ground for mosquitoes and rats before it was cleared in favor of a dreary parking lot and government-run food stand.

Today, all of that is gone. Independent sellers hawk brightly colored clothing, wristbands and earrings as salsa music booms and a line of bicycle taxi drivers forms at the gate to wait for fares among the customers.

Newly empowered entrepreneurs, long held back by the socialist government, speak excitedly of changes that will allow them to buy and sell their homes and cars, and say the emerging new Cuba is here to stay.

This week's announcement establishing a real estate market for the first time in 50 years comes just a month after a similar opening for vehicles, and it is convincing even the island's many cynics that President Raul Castro's economic reforms, after decades of false starts and false hopes, are here to stay.

"I've been an independent worker two times, once before in the 1990s," said Andres Lambreto Diaz, a 38-year-old clothing seller at the Central Havana bazaar who has seen earlier free-market openings abruptly slammed shut when Fidel Castro reversed course. "I think this time it's for real."

Many of the reforms merely acknowledge what had long been black-market realities, and they still fall short of the fundamental free-market transformations seen in other communist countries such as Vietnam and China. But collectively, the changes have loosened the government's iron grip over all aspects of the economy and touched the lives of millions of islanders.

"The recent announcement that Cubans will be able to sell and buy houses and their used cars underscores how important the changes are," said Arturo Lopez-Levy, a Cuban-born economist who teaches at the University of Denver. "This is one of the most visible economic reforms, with a direct impact on Cuban lives.

A little over a year has passed since the government declared that many more people would be allowed to go into business for themselves and even hire employees. Some of the announced changes have been delayed, must notably a plan to eliminate 500,000 government jobs, extend bank credits and allow for mid-sized cooperative companies, but the housing and automobile laws have come in on schedule.

Officials have also shown some sensitivity to popular feedback, modifying the tax code to make things easier for new entrepreneurs and repeatedly changing laws to help new private restaurants be more profitable.

That kind of flexibility has been rare during Cuba's half-century-long embrace of Marxist theory.

Agricultural reform in the 1960s redistributed land from massive farms to medium-size ones and it enjoyed moderate success before being abandoned by the government, said economist Rafael Romeu.

In the 1980s a six-year experiment with private farmers' markets was scrapped, as Fidel Castro complained that unscrupulous middlemen were buying up the food and reselling at higher prices.
Castro grudgingly allowed independent workers to begin doing business for themselves after the collapse of the Soviet Union brought Cuba to the brink of economic ruin, then taxed and regulated them nearly into extinction in the late 1990s when the worst of the crisis was over.
But Fidel is no longer in charge. His brother Raul Castro has repeatedly said that while he has no intention of scrapping Cuba's socialist model, there's no turning back from his reforms.
Analysts say the changes so far do not do enough on a macroeconomic level. For example the housing law's immediate aim is to help redistribute existing stock among the population, allowing big families crammed into tiny apartments to move into larger homes currently occupied by just a few people. But without significant improvements in investment, supplies of construction materials and incentive to make money, it's not clear that there will be much new construction to solve the underlying problem: a housing deficit estimated at between 500,000 to 1.6 million units on an island of 11 million people.

"So far there hasn't been an all-embracing change in philosophy by the government in Cuba. What they're doing is really tinkering with sectors," said Paul Hare, a lecturer in international relations at Boston University and British ambassador to Cuba from 2001-2004. "Certainly the real estate and the car laws are major changes but there will be a lot of people wondering how they follow up. There is no philosophy of 'To get rich is good,' which is the philosophy in China and Vietnam."

Other reforms that were floated are still no more than ideas, such as proposals to relax travel restrictions and create a system of credit for the private businesses. Likewise there has been little visible progress on a wholesale market to supply the entrepreneurs, though officials said from the beginning that that would take years.

"The current reforms will deliver relief and are positive, but ... these are 'low hanging mangoes,'" said Romeu, head of the Washington-based Association for the Study of the Cuban Economy. "The real challenge is to deliver long-term sustainable growth."

Economists say it's not easy to right an economy that's been listing for decades. the 80-year-old Castro is walking a tightrope, eager to reform the country before it is too late, but cautious to not move so fast that the state loses control over the process, as happened in the Soviet Union and other Eastern Bloc nations.

He has said repeatedly that the country would change "without pause, but without haste."
Nonetheless, several Cuba observers said that once started, reforms tend to snowball and could spill beyond the realm of pure economics.

"The liberalization of these markets will ignite new demands for reforms," Lopez-Levy said. "In the long run, the question will be: How long can the economic genie be out of the bottle without people asking for more substantive political reform?"

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Thursday, Nov. 03, 2011
Cuba to Allow Sale of Real Estate

(HAVANA) — Cuba announced Thursday it will allow real estate to be bought and sold for the first time since the early days of the revolution, the most important reform yet in a series of free-market changes under President Raul Castro.

The law, which takes effect Nov. 10, applies to citizens living in Cuba and permanent residents only, according to a red-letter headline on the front page of Thursday's Communist Party daily Granma and details published in the government's Official Gazette. (See TIME's video: "Eyeing a Cuba Travel-Policy Shift.")

The law limits Cubans to owning one home in the city and another in the country, an effort to prevent the accumulation of large real estate holdings. It requires that all real estate transactions be made through Cuban bank accounts so that they can be better regulated, and says the transactions will be subject to bank commissions.

Sales will also be subject to an 8 percent tax on the assessed value of the property, paid equally by buyer and seller. In the case where Cubans exchange homes of equal value in a barter agreement, each side will pay 4 percent of the value of their home. "This is a very big step forward. With this action the state is granting property rights that didn't exist before," said Philip J. Peters, a Cuba analyst at the Lexington Institute in Arlington, Virginia. "If you think about it from the point of view of a Cuban family, it converts their house from a place to live into a source of wealth or a source of collateral. It's an asset that can now be made liquid."

While the Gazette was available online, few Cubans have access to the Internet and most were waiting for the booklet to go on sale at kiosks around the country. A handwritten sign posted at Havana's main distribution center Thursday advised that the law booklet was not yet on sale.

On the streets of Havana, residents said they were thrilled by the news but anxious to see the fine print. "This is going to help me because I have some money and now I will be able to buy a better house," said Oscar Palacios Delgado, a 68-year-old office maintenance worker, adding he hoped the government would enact other changes to make it easier for Cubans to find building materials for home repairs. "This law will benefit many Cubans."

Cuban exiles will not be allowed to purchase property on the island since they are not residents. Still, they will be able to send money to help relatives buy new homes, and there was speculation some might try to buy homes themselves through frontmen, something the government would likely try to prevent.

The change follows October's legalization of buying and selling cars, though with restrictions that still make it hard for ordinary Cubans to buy new vehicles.

Castro has also allowed citizens to go into business for themselves in a number of approved jobs — everything from party clowns to food vendors to accountants — and has pledged to streamline the state-dominated economy by eliminating half a million government workers.

Cuba's government employs more than 80 percent of the workers in the island's command economy, paying wages of just $20 a month in return for free education and health care, and nearly free housing, transportation and basic foods. Castro has said repeatedly that the system is not working since taking over from his brother Fidel in 2008, but he has vowed that Cuba will remain a socialist state. (See TIME's Cuba covers.)

Cubans have long bemoaned the ban on property sales, which took effect in stages over the first years after Fidel Castro came to power in 1959. In an effort to fight absentee ownership by wealthy landlords, Fidel enacted a reform that gave title to whoever lived in a home. Most who left the island forfeited their properties to the state.

Since no property market was allowed, the rules have meant that for decades Cubans could only exchange property through complicated barter arrangements, or through even murkier black-market deals where thousands of dollars change hands under the table, with no legal recourse if transactions go bad.

Some Cubans entered into sham marriages to make deed transfers easier. Others made deals to move into homes ostensibly to care for an elderly person living there, only to inherit the property when the person died.

The island's crumbling housing stock has meant that many are forced to live in overcrowded apartments with multiple generations crammed into a few rooms. Even divorce hasn't necessarily meant separation in Cuba, where estranged couples have often been forced to live together for years while they worked out alternative housing.

According to the Gazette, the new law will eliminate the need for approval from a state housing agency, meaning that from now on sales and exchanges will only need the seal of a notary.

Cubans will also now be allowed to inherit property from relatives without having to live in it first, and they will be able to take title of property of relatives or others who emigrate. Previously, such properties could be seized by the state.

Associated Press writers Andrea Rodriguez and Peter Orsi contributed to this report.,8599,2098614,00.html

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