By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent banker yesterday asserted the 25,000-plus vacant residential dwellings identified in the latest Housing Census backs his position that The Bahamas “doesn’t have a housing shortage”.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that returning to these properties to “productive” use and occupation will deliver far greater benefits for a Bahamian economy and society as opposed to the Government persisting with the construction of more affordable homes.

Keith Bell, minister of housing and urban renewal, told last year’s Exuma Business Outlook conference that The Bahamas is suffering from a “12,000-plus” shortage of residential units, but Mr Bowe argued that the latest data presented by the Bahamas National Statistical Institute (BNSI) raised questions as to whether this was based on “economic analysis” or “emotion”.

Suggesting that successive administrations have wanted “to be seen giving keys to persons” for newly-constructed homes for political reasons, the Fidelity chief again reiterated his proposal for the Government to instead work with the banks and other commercial lenders to cure the “overhang” of distressed properties that has endured since the 2008-2009 recession.

He added that this has tied-up assets, clogged balance sheets, and dampened the willingness of lenders to extend mortgages even to home buyers who seem qualified. This is likely one factor behind the 4,000-plus drop in the number of residential dwellings owned via a mortgage in 2022, some 19,299, compared to the 23,434 recorded when the last Housing Census was taken in 2010.

Mr Bowe spoke out after the Institute, unveiling the 2022 Census of Population and Housing, revealed that around one in six residential dwellings was vacant and unoccupied. And they had increased in number by 1,429 compared to the total identified some 12 years earlier, growing from 23,631 in 2010 to 25,060 in 2022.

“According to the latest findings, The Bahamas recorded a total of 144,198 dwelling units in 2022,” the Institute said of the Census findings. Of these, 82.6 percent (119,138) were occupied, while 17.4 percent (25,060) were vacant. This represents an overall increase of 17,705 dwellings (14 percent) compared to 2010, along with a 6 percent rise in vacant units over the same period.

“Vacant dwellings were recorded across all islands, with the highest concentrations found on New Providence (34.8 percent), Grand Bahama (17.2 percent) and Eleuthera (10.4 percent). Collectively, these three islands accounted for more than 62 percent of all vacant dwellings nationwide, while the remaining 37.6 percent were distributed among the other Family Islands.”

Describing these 25,000 properties as “unproductive”, Mr Bowe told Tribune Business that the survey did not fully capture what they represented. “The reality is that the lack of productivity means you have structures that are dilapidated,” he explained.

“And we are creating dwellings for all sorts of illegal activity - with squatters, with drug houses, with hiding units - that create a danger for the community, even as it relates to exposed wood and steel. And it doesn’t equally fully capture the opportunity cost economically. “Vacant is an opportunity cost, if you will, because it’s saying they could be used by the Government’s housing rental programme or the private sector rental market. It means there’s a significant number of housing units that are not in the GDP (gross domestic product) calculation, meaning they are not being used productively.”

The number of vacant residential dwellings identified in the Institute’s survey is more than double the 12,000-unit shortage cited last year by Mr Bell. However, Mr Bowe argued that reviving and repurposing existing housing stock and inventory - rather than continuing to build new government subdivisions - is the preferred solution.

“The politically expedient move is to build homes so you can be seen to give keys to persons as opposed to making productive use of all existing land and properties that have been developed,” the Fidelity chief argued. “I strongly maintain that we don’t have a housing shortage, and this supports this in part…..

“It begs the question: When the Ministry of Housing and government ministers make claims that there is a housing shortage, are they basing their statements off empirical analysis or emotions? Are they suggesting that there is not enough housing, or not enough free housing? Those are two different things.

“Free housing comes with a social benefit and cost. Most countries today provide subsidized housing. I think we need to get out of the mindset of gifting people and focus on things to support them - interest subsidies, Customs duty subsidies - how we use the tax structure to lower the ultimate cost,” Mr Bowe added.

“But it must not be seen as a gift. A gift is for a child. The Government should be in the business of teaching a man how to fish, not gifting them fish.”

Mr Bowe conceded that the Institute’s findings need to be “married” with a separate survey that calculates how many units are needed for all Bahamians to “have a place to sleep at night”, but added that the Housing Census also shows the “significant level of overhang and risk” that distressed homes pose for the economy in a recession.

“Most of those properties end up in someone’s balance sheet, whether it’s the bank’s or a private developer’s,” he added. “Someone has a financial burden because those properties are not producing. Just having unoccupied properties is a significant risk, and that’s highlighted in our [IMF] financial sector assessment programme ever since the ‘great recession’ in 2008-2009.

“All those are indicating that the actual level of unoccupied properties and distressed properties are significant risks to the financial stability of the country - not in terms of a panic situation, but when you have unproductive assets on the balance sheets of financial institutions it doesn’t give them the headroom to deploy assets for productive use; it’s just carrying them.”

This is likely a key factor in the decline in the number of residential dwellings owned via a mortgage between 2010 and 2022, with the number of owners paying off their home loans outpacing new borrowers due to a combination of banks’ reluctance to lend and struggles in identifying qualified candidates who meet their tightened criteria.

“The 2022 Census recorded notable growth in home ownership across The Bahamas over the [previous] 12 years. The number of private dwellings owned by home owners increased from 60,543 in 2010 to 71,990 in 2022, representing a 19 percent rise in home ownership nationwide,” the Institute said.

“A closer look at ownership patterns revealed that fully-owned dwelling properties with no outstanding mortgage or claim grew substantially, from 37,109 (36.1 percent) in 2010 to 52,691 (44.2 percent) in 2022. 

“Conversely, dwellings owned with a mortgage declined from 23,434 (22.8 percent) to 19,299 (16.2 percent) during the same period. The second most common form of tenure remained rental occupancy, which also experienced growth from 35,844 households in 2010 to 40,060 in 2022.”

Mr Bowe told Tribune Business that banks and other lenders have become “gun shy” on mortgage lending for a variety of reasons, including the lengthy and cumbersome court processes the industry now has to undergo to enforce its loan security and obtain vacant possession and/or evictions of delinquent borrowers.

“There has not been a replacement of those paying off,” he explained. “The banks since the ‘great recession’ have not actively been in the mortgage space despite their public relations. If you don’t have new mortgages being written and more mortgages being paid off, that’s a natural result.

“The primary factor is all banks have shown a decline in their mortgage portfolio because new mortgages are not being written at the same pace that mortgages are being paid off. I think that what we’re finding is the early ones in the door have been able to amortize and make payments to clear their debt, whereas young persons looking for homes are finding it more of a challenge because there’s not the buoyancy in the mortgage market.”

The Fidelity chief said banks will seek to clear distressed properties off their books before they engage in new mortgage lending. He has previously called for the Government and private sector to collaborate in creating a real estate investment trust (REIT) or similar corporate vehicle.

Once appropriately financed, this would buy distressed properties from Bahamas-based commercial banks at a fraction (cents on the dollar) of what they are valued at on industry balance sheets.

Once acquired, these properties would then be refitted to provide a ready-made affordable, low cost housing solution for hundreds of Bahamian families. Besides selling them at a knock-down price, which would be feasible given the lower purchase price paid by the REIT, this vehicle would also have the freedom to enter more creative housing arrangements such as lease-to-own deals.

Besides easing an ‘affordable’ housing shortage, this would further boost the Bahamian economy by finally removing distressed assets that have clogged bank balance sheets for up to 15 years.

In so doing, funds previously tied-up in non-performing loans would now be freed for lending to productive sectors of the Bahamian economy such as business/commercial ventures as well as qualified borrowers in the housing market.

The International Monetary Fund (IMF) earlier this year disclosed that property prices and rental rates outpaced growth in Bahamian wages seven-fold during the decade to 2022 to deepen the housing affordability crisis. 

It said the “most vulnerable” persons in Bahamian society will have suffered most from real estate-related costs outstripping earnings and incomes. While property and rental prices were said to have increased by 14 percent between 2012 and 2022, in contrast per capita wages in this country rose by just 2 percent.

Housing affordability, and the ability of many Bahamians to realise their dream of home ownership, has been a growing concern for many years given the relatively low annual economic growth pre-COVID together with stagnant incomes and wages. 

Higher construction costs, difficulties in accessing mortgage financing, a reduced supply of land particularly in New Providence, and escalating prices have worsened these fears.

The IMF also pointed out that the supply of new residential housing in The Bahamas has declined ever since the 2008-2009 global recession, shrinking to a low of 607 unit completions in 2023. This, it added, represented a 64.4 percent - or almost two-thirds decline - compared to this nation’s 21st century “peak” of 1,705 home completions in 2006.