By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

A senior banker yesterday demanded an end to “the finger pointing” over The Bahamas’ affordable housing shortage as he warned the delinquent properties backlog will not clear unless a “fair market value disconnect” is resolved.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that the Government should not seek “scapegoats” and “identify a single party as the villain” after Keith Bell, minister of housing and urban renewal, accused the commercial banks and other lenders of contributing to the housing shortage by failing to offload distressed properties.

Asserting that this is now “water under the bridge”, and that the focus should be on finding solutions, he argued that if anyone was “the villain” it would be successive administrations that have worsened the housing over-supply by continuing to build homes without working to solve the overhang of distressed mortgaged properties from the 2008-2009 recession.

Mr Bowe, telling this newspaper that the Government should instead focus on developing a house price index to generate “true fair market values” for different communities and zones, said commercial banks have been struggling to sell properties due to “obstacles” in the court system.

He explained that, in instances where lenders have found buyers willing to acquire distressed properties at a much lower price than their appraised value, the court has often been reluctant to approve such transactions and instead more inclined to give the delinquent mortgage borrower the chance to sell the asset themselves.

The Fidelity Bank (Bahamas) chief spoke out after Mr Bell, in the House of Assembly on Wednesday, hit back at his assertion that the 25,000-plus vacant properties identified in the recent Bahamas National Statistical Institute’s (BNSI) housing census showed there was no home shortage if these were made fit for habitation again.

The minister also lashed out at the Bahamian commercial banking industry’s reluctance to extend mortgages to even well-qualified buyers, and accused it of leaving delinquent properties “locked up, idle and unproductive” because it does not want to offload these assets at a loss.

“Some have argued that there is no housing shortage because banks hold distressed or vacant assets,” Mr Bell said, while not naming Mr Bowe. “Yet many of these same institutions have become increasingly reluctant to lend for homes, even to qualified Bahamians.

“The [BNSI] report indicates that the share of owner-occupied homes under mortgage has fallen from 22.8 percent in 2010 to just 16.2 percent in 2022. This is not merely a result of repayment; it reflects a contraction in lending. 

“Many of the same institutions that claim the market is oversupplied continue to hold repossessed or distressed properties for years, refusing to sell them at market value because doing so would require them to recognise losses. These homes remain locked up, idle, and unproductive contributing nothing to the economy or to national housing supply.”

Mr Bell also argued that at least 23,900 of the 25,060 vacant dwellings - roughly 95 percent of such properties identified in the census - are not realistically available to ordinary Bahamian families.

“The detailed data published by the Institute revealed that more than 9,000 of these vacant dwellings were listed for rent, about 900 were listed for sale, more than 2,000 were short-term Airbnb rentals, more than 3,000 were seasonal or winter homes, more than 2,000 were secondary residences, and more than 7,000 were derelict or unclassified,” said Mr Bell.

“It is therefore clear that very few of these dwellings are available to meet the housing needs of Bahamian families.” However, a closer look at the Institute’s report shows it never used the term “derelict” - which was employed by Mr Bell - to describe 7,000-plus vacant properties.

Instead, 4,788 were placed in a category labelled ‘other’, while 2,409 were described as ‘not stated’. And it is unclear whether the 9,067 vacant dwellings listed as “for rent” were available or rented out. All told, it suggests that there is a significant number of homes that could be repurposed to meet much of the 12,000 affordable unit shortage cited by Mr Bell.

The Institute also suggested a more thorough, in-depth analysis of those vacant homes is required. “It is important to note that, in 2022, enumerators were unable to determine the reason for the vacant units that were categorised as ‘other’ and ‘not stated’ during the census period,” it said.

“While this might speak to challenges with the methodology - either the lack of knowledge or low level of cooperation by individuals in providing information to enumerators - it might also be suggestive of at least two other issues. First, some of those private vacant dwellings may be engaged for multiple purposes, for example both as a second home and Airbnb, thereby making it difficult to categorise individually.

“Second, there may be the need for additional categories to reflect other reasons why private dwellings may not be occupied, including repair and maintenance issues, death of homeowner, familial and legal disputes, and the inability or unwillingness of the owner to occupy the premises. Based on this analysis, a more detailed study regarding why there was a 17 percent vacancy of the total dwelling count could be undertaken.”

Mr Bowe, in responding to Mr Bell, said he and other bankers have a “fiduciary duty” to their depositors and shareholders to recover their monies from delinquent borrowers and distressed properties, whereas administrations rarely “suffer the consequences when the chickens come home to roost’.

“It’s easy to say banks are holding properties, which is not the case,” the Fidelity Bank (Bahamas) chief said. “If there was a true analysis, banks have been trying to sell properties and have found obstacles in the court system.” He explained that courts, in cases where appraisal values were higher than buyer offers, tended to accept the former as ‘fair market value’ and often instead allowed the delinquent borrower to seek a higher price.

“What the minister and his colleagues should resolve is the absence of an index pricing mechanism in The Bahamas that allows for observation of bids being made by buyers and offers accepted by sellers in closed transactions so that there is a better appreciation of what true fair market values are,” Mr Bowe told Tribune Business.

“The reason why that’s important is that the court system, through moral suasion, is allowing mortgage borrowers to have the opportunity to sell it themselves… We do not have a sufficient volume of completed sales to generate a barometer, and that’s why we need a house price index that allows us to track sales by community and zone so we understand the price per square foot and transactions taking place.

“As long as we have this disconnect over what fair value is, we will always have this stand-off and tensions that exist.” Noting that any loss on distressed property sales is borne by depositors and shareholders, Mr Bowe said commercial banks and other lenders have an obligation to maximise reclamations and recover outstanding sums from the delinquent borrower. Otherwise, significant “moral hazard” will result if persons believe they can walk away unscathed from their contractual commitments.