Wednesday, January 30, 2008

With a whisper, Cuba's housing market booms

With a whisper, Cuba's housing market booms
By Marc Lacey
Monday, January 28, 2008

HAVANA: Virtually every square foot of this capital city is owned by the
socialist state, which would seem sure to put a damper on the buying and
selling of property.

But the people of Havana, it turns out, are as obsessed with real estate
as, say, condo-crazy New Yorkers, and have similar dreams of more elbow
room, not to mention the desire for hot water, their own toilets and
roofs that do not let the rain seep indoors.

And although there is no Century 21 here, there is a bustling
underground market in homes and apartments, which has given rise to
agents (illegal ones), speculators (they are illegal, too) and scams
(which range from praising a dive as a dream house to backing out of a
deal at the closing and pocketing the cash).

The whole enterprise is quintessentially Cuban, socialist on its face
but really a black market involving equal parts drama and dinero,
sometimes as much as $50,000 or more.

These days, insiders say, prices are on the rise as people try to get
their hands on historic homes in anticipation of a time when private
property may return to Cuba. Exiles in Miami are also getting into the
act, Cubans say, sending money to relatives on the island to help them
upgrade their homes.

Officially, buying or selling property is forbidden. But the island has
a dire housing shortage, despite government-sponsored new construction.
And that has led many Cubans to subdivide their often decaying dwellings
or to upgrade their surroundings through a decades-old bartering scheme
known in Cuban slang as permuta.

Some of those housing transactions are simple swaps. Those the
government permits, tracking each one to keep an up-to-date record of
the location of every last Cuban. Many moves, however, are illegal and
involve trading up or down, with one party compensating, with money,
another party giving up better property.

A 1983 film, "Se Permuta," portrays how complex the system can get: A
mother scheming to get her daughter away from a boyfriend she dislikes
organizes a multipronged property swap. Of course, the deal, which would
have involved about a dozen people and taken mother and daughter from a
tiny apartment into a spacious colonial-era house, ends up in a mess, as
does the mother's meddling in her daughter's love life.

"It's very Cuban," Juan Carlos Tabío, who wrote and directed the film,
said of his country's real estate bartering process. "There aren't
enough houses, and families can't buy them. So they trade."

Tabío has no personal experience with changing homes, having lived in
the same spacious third-floor apartment in the well-heeled Vedado
neighborhood since 1957. Many Cubans live in the same dwellings their
families owned before the revolution; others have been assigned units by
the state.

But almost every Cuban is either plotting to upgrade residences or knows
someone in the midst of the labyrinthine process.

Here is how it works. Imagine a married Cuban couple with two children
and a baby on the way who find their two-bedroom apartment in the
historic Old Havana neighborhood too cramped. What are they to do?

Well, with the help of an agent known as a runner they might start by
locating a bachelor from the countryside looking to come to the capital.
They could arrange for the newcomer to move into a tiny apartment in
Chinatown and move its residents — who also have a house in Miramar
where their elderly grandmother lives — to a first-floor unit they
sought in Central Havana. The Central Havana flat is available because
the residents have divorced; so the former wife would go to the
bachelor's country house, near where her parents live, while her former
husband would go to Old Havana. The Old Havana family that started the
whole process would then head to their dream house in spacious and quiet

Sound complicated? It is. And the government adds even more hurdles by
trying to regulate the swaps with a variety of forms and fees as well as
inspections of the properties involved to ensure that they are of
roughly equal value.

All trades have to be endorsed by the government, but Cubans say
slipping money to bureaucrats increases the chances that deals of
unequal properties — as in those that involve money and carry the taint
of capitalist yearning — will be approved.

"Under the table, there are all sorts of things going on," Tabío said.

The Cuban authorities occasionally make busts, but find the trades
difficult to control.

"It's something people shouldn't do, but they do and we know it goes
on," said José Luis Toledo Santander, a professor of law and a member of
the National Assembly. "It's like saying you have to stop at the red
light and you can't go until it's green. You ought to do it, but not
everybody does."

The trading occurs in plain sight. Under the watchful eye of a police
officer, hundreds of people gather every Saturday under the ficus trees
on El Prado, one of Havana's grand avenues. Some carry cardboard signs
describing their units: the neighborhoods, number of bedrooms and
whether there are patios, garages, hot water, private bathrooms and gas
supplies. Less desirable dwellings use tanks of gas for cooking and
require residents to share toilets with others down the hall.

Ricardo Aguiar, 65, who lives in a two-bedroom apartment in the humble
Marianao neighborhood with his wife, daughter, son-in-law and
granddaughter, is looking for a more spacious place in Vedado, a popular
area closer to the center of Havana. "It's going to be difficult," he
said, scouring the signs on El Prado recently and checking in with the
agents who sit on the stone benches trying to make deals.

"I've just started looking, but there are people who look for years and
then something goes wrong and they never move," he said.

Nearby, a woman was working the crowd in search of a first-floor
apartment near her current third-floor unit in Central Havana so she
would not have to climb so many stairs.

"You have your system and we have ours," she said, identifying herself
only by her first name, Alejandra. "I prefer our system. We don't have
mortgages and so we're not facing foreclosure like so many of you are."

Alejandra knows about the foreclosure crisis in the United States
because her son lives in Florida and is struggling to make his house
payments. "I worry about him," she said. "If he loses his job, he'll
lose his home."

Property is sometimes seized in Cuba as well, but by the government, not
the bank. Property is taken from those who hop on boats to Florida,
although most switch their houses to relatives' names well before
leaving. Those fleeing the island also frequently downgrade their
accommodations before going into exile, trading big places for small
ones and using the money exchanged on the side to pay for their
voyages — the Cuban equivalent of a home equity loan.

Although it is not clear how many thousands of swaps take place
annually, some of them involve the same people again and again, as in
the case of a woman in her 60s who said she had moved 42 times over the
last two decades. "I love to move," she said. "I can't live in the same
place for a year."

But her movement is about more than seeking new surroundings. She fixes
up each place, then turns it over for a profit, she said in a low voice,
declining to be identified out of fear that the authorities might catch
up with her.

Moving through the crowd with her is a learning experience. She knows
the regulars and can spot the deals. When money is discussed, she and
the person she is negotiating with fall into whispers.

"There are so many liars here," she said, surveying the crowd. "They say
they have the best place in Havana, and you get there and you don't even
want to go in. I just stop at the door and say, 'No, thanks.' "

She said she used money sent from relatives who fled to Miami years ago
to keep her business going.

"It's a good time to invest," she said. "If you have family outside,
$20,000 is nothing, and you can get a good place here. If change comes,
and we all expect it, then you're set."

That is the philosophy of another mogul in the making, who also declined
to be identified by name.

Standing in the living room of a two-bedroom apartment in Central Havana
that he is renovating, the man estimated its current worth at $20,000, a
mint in a country where monthly government salaries can be one
one-thousandth of that. If private property ever comes to Cuba, he
estimates the price will most likely multiply by five.

Through a complicated transaction, the man recently managed to obtain a
historic home in Old Havana that he is also renovating. He said he
researched the ownership history of the dwelling because he did not want
to find one day that it had been expropriated from an American, possibly
leading to a court battle in a post-Castro Cuba. As for his apartment,
he rents rooms to tourists, which the government allows.

He is also buying up old chandeliers and other historic furnishings to
decorate his units. With most people so desperate for money, he said, he
pays next to nothing.

"This is the moment to buy," he said, referring to Fidel Castro's
illness, talk of change by his brother Raúl and many Cubans' view that
their system, a half century old, will not remain as it is forever.

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