New Property Law in Cuba

Cuba announced that, as of November 10th, a new property law will go into effect that allows citizens and permanent residents to buy and sell real estate. In the past Cuba has operated under a socialist housing system, so this will mark a very historic change in housing transactions. It has been a long time since the buyers and sellers of Cuba were free to set the price of their home and move whenever they wanted to. Some are even hopeful that this will lead to more changes towards capitalism in Cuba; however, some are not as optimistic.

Cuban officials have voiced concerns that some of the provisions in the new law will still keep these transactions under the government’s control.  Two major areas of concern are that the owner may only obtain two homes and the financing must go through Cuba’s Central Bank. In addition, the bank will charge fees, and the buyer and seller will be responsible for an 8% tax. People are concerned that “the law will probably open a Pandora’s box of benefits and risks.”

Another concern about the new law deals with class conflicts. With this new property law the wealthy will be able to move to better areas, therefore creating a “huge rearrangement” of cities class structure. In addition, homelessness may rise due the titleholder’s ability under the new law to freely sell even if a tenant does not want to move. Many Cubans fear that they may end up on the street.

It is not clear yet how the law will affect foreign purchasers of property, but there are reasons to believe that vacation and summer destinations may have fewer restrictions than other areas of Cuba. There has also been speculation as to how Cuban-Americans will get involved in these types of transactions. Many believe that Cuban-Americans will be eager to provide financing to their Cuban relatives in order to purchase a home under the new law. Now all Cuba can do is wait and see how the new law impacts their country.

How do you think this new law will affect Cuba’s economy? Do you think many Cuban-Americans will help their Cuban relatives purchase properties? Do you think the government will still ultimately have control of the housing market?

Source: The New York Times

5 comments

  1. “Yet on the other hand, there are also significant social concerns. Mario Coyula, Havana’s director of urbanism and architecture in the 1970s and ’80s, said that wide-scale buying and selling would lead to a “huge rearrangement” in Havana and other cities as the wealthy move to better areas. He and others said it would inevitably exacerbate class conflict.”

    Essentially, Coyula is arguing that those who can afford to will abandon the countryside and move to a more affluent home. That’s a reasonable proposition, is it not? The implication is that the lower income population- those who cannot afford to move- will be effectively barred from living in these communities of affluence. By fostering such a “huge rearrangement,” this law will effectively segregate Cuban society according to socio-economic status.

    I’ll be very interested to see how this plays out- particularly because my Note will deal with the problem of social exclusivity in land use and development law, similar to that above.

  2. I think this is definitely a step in the right direction for Cuba. Raul Castro seems committed to trying to help his country “catch up” to modern society. A lot of his brother’s regulations have kept Cubans on a very tight leash, but this move towards empowering the private sector could begin to change all that. In fact, just a few days after this law took effect, the government also began allowing the buying and selling of used cars. Previously, you could only buy a car that was made before the 1959 revolution, or you risked having to do an illegal back-room trade where you wouldn’t even legally own the car. All of this may seem like no big deal to use here in America, but I think sometimes we forget what an amazing right it is to be able to make these kind of choices.

  3. There is not doubt that this new law will have rippling effects throughout many parts of society and the economy. One thing that it seems likely to improve is available “spare” housing which there is a shortage of. There will be an incentive to buy new buildings because they can be sold to new home owners. However, it is not clear who would have money to buy homes as wages are generally low, so low that they have prevented people from fixing up their own homes never mind having money now to buy a new home. Perhaps the price scale for homes will actually reflect the Cuban’s ability to pay, not the astronomical prices that we American’s pay for homes. I did find it interesting that in the above mentioned article they state that part of the new rule is that people cant own more than two homes. While to some this may seem like socialist control, it seems practical and even generous considering the housing shortage there is.

  4. My hope is that this law will lead the way for the liberalization of Cuba’s economy. The Times article commented that earlier laws aimed at economic liberalization (making room for small businesses and private agriculture) were limited in terms of the opening up of the economy due to a lack of internal demand. However, there should not be a similar lack of internal demand with respect to this property law. As Ted Henken, a professor at Baruch College in New York, says in the article, “With a housing market, suddenly people have some wealth and that’s a stake in the economy that generates activity.” As well, the restrictions attached to the law seem slight in comparison to the associated increase in economic freedom. For these reasons, I am optimistic that the new property law will set a precedent for continued economic liberalization in Cuba.

  5. The concerns about creating separate social environments allowing people to purchase their own real estate raises the question, how the existing housing is determined by the Cuban Government? At the present moment, if I am a more affluent Cuban citizen, am I living next to someone who is less affluent? There must be separations of economic strata now in Cuba? I would think there is. I would think this new law will stimulate the economy. People will be able to buy their own real estate, and use it as we do in the U.S. as a way to make profit.

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