$75,000 will get you a lot of house in Havana — if you’re Cuban

$75,000 will get you a lot of house in Havana — if you're Cuban
The Washington Post
Nick Miroff

HAVANA — A few hours and a mojito or two after arriving in this
500-year-old city, with its ocean vistas and dazzling architecture,
American visitors often ask: Can I buy a piece of this?

They cannot. The Cuban government doesn't allow it. The U.S. government
doesn't allow it.

Not yet, at least.

But with the two countries moving to restore diplomatic relations and
end decades of estrangement, it is not difficult to imagine a day when
pent-up global market forces will wash over this city's sagging
buildings and mansions in distress. Cubans are already angling to get
ahead of the flood.

Three years after Raúl Castro cast aside decades of communist housing
dogma and allowed homeowners to buy and sell their properties for the
first time since the 1960s, the island's real estate market is proving
to be a powerful engine of economic and social change.

On seemingly every Havana street, contractors are mixing cement, fixing
cracks and giving makeovers to moldy facades that haven't seen paint
since the ­Brezhnev era. New bathroom fixtures arrive in couriers'
suitcases from the Home Depot aisles of South Florida. Havana's skilled
electricians and plumbers earn more in a day than a doctor makes in a month.

"It isn't only the ability to buy property," said Magda Mora, 39, who
returned to Havana in 2012 after 14 years in Italy and Miami. "It's
buying property that can be used for a business."

Mora bought a 3,300-square-foot duplex in the heart of the city's Vedado
neighborhood, renovated it and now lives upstairs with her family,
converting the lower unit into a mini-hostel. It has five rooms that
rent for $35 a night each, earning good reviews on TripAdvisor.

Anyone who has driven around Havana has seen that a tremendous amount of
wealth was invested in stone, marble and mahogany in the years between
Cuba's founding as a republic in 1902 and Fidel Castro's takeover in
1959. Few cities in the Americas can compare.

Wealthy and middle-class Cuban families who fled for the United States
saw their homes expropriated by the government. Many went to poorer
Cubans or the caretakers that the wealthier families had left behind.
The city's exclusive neighborhoods became racially mixed, and Havana
became a much more "heterogeneous city," according to architect and city
historian Miguel Coyula.

Today, many of those families are selling, finding themselves suddenly
in possession of a valuable asset. But that trend ­appears to be
re-gentrifying the city along racial lines and class divisions,
particularly because lighter-skinned Cubans are more likely to have
relatives abroad with money to invest.

Castro's 1960 housing reform led to a ban on property sales and a decree
that no Cuban could possess more than one urban dwelling, while
converting hundreds of thousands of renters into owners — albeit owners
who couldn't sell.

Although Cubans were allowed to "swap" houses in deals that often
involved under-the-table cash, the lack of a formal market, along with
government restrictions on private home construction, worsened a shortage.

The problem is exacerbated by a supply crunch as the Cuban government
consistently falls short of its housing-construction goals. More than
130,000 city residents are living in shelters or substandard housing,
according to government data. Migrants from poorer eastern Cuba settle
in shantytowns on the city's edge or crowd into crumbling urban
tenements that the real estate boomlet has yet to reach.

Meanwhile, elderly Cubans whose children left the island remained in
large homes they couldn't afford to maintain.

"There were thousands of homes sitting vacant or half-empty," Coyula said.

Ways around the rules

Market forces are now fixing such absurdities, brokers say, ­allowing
older Cubans to easily downsize and get the cash they need to live on,
while new investors are transforming tattered properties into boutique
hotels before an American tourist surge hits.

Significant restrictions remain. Cubans are limited to one property in
the city and one vacation home. Titleholders must be Cuban citizens or
permanent residents, not foreigners. The deals are almost always done in
cash, and the transactions must pass through Cuban banks, though buyers
and sellers often agree to exchange additional sums outside the country
to minimize tax payments.

Communist authorities are in the game, too, building high-end
condominiums for sale to non-Cuban buyers, with plans to erect more
alongside golf courses and yacht marinas in partnership with Chinese
investors.

As usual, Cubans have found ways to skirt their government's attempts to
control the market, as have Cuban Americans (and U.S. residents) blocked
by the U.S. trade embargo. Some buyers acquire additional properties in
the names of their children, while foreigners find Cubans to put on the
deed, despite the risk that they would have no legal claim to the property.

At a deeper level, Raúl Castro's limited real estate liberalization has
brought a sea change in Cubans' regard for their homes, transforming
them from yet another domain of state control into a tangible asset
whose value needs to be preserved, if not improved.

The reform is even altering the relationship between local government
officials and Cuban property owners, who are no longer passive about
broken sewer pipes, uncollected garbage and perpetually neglected city
parks.

"People see that the value of their homes is related to their
surroundings," said Nery Galindo, who obtained a license as a private
real estate broker as soon as the government legalized the trade in 2013.

Her company, Espacio Cuba, has two offices in Havana and a Web site in
Spanish and English with photo galleries and a database of properties
listed for as much as $650,000.

Similar sites have advertised 1940s- and '50s-era mansions for more than
$1 million. The phrase "capitalist construction," referring to
properties built prior to Fidel Castro's revolution, is used as
shorthand for "quality."

Most of the listings are in Havana's most desirable districts,
especially Vedado and ­Playa. A typical three-bedroom, two-bath
apartment in those neighborhoods sells for about $60,000, while detached
houses there are often listed for $100,000 or more.

That's a fortune in a country where the average government salary is
stuck at $20 a month. But those Cuban workers aren't the target
demographic, unless they're the ones selling. With salaries that low,
many of them are — especially if they live in Havana's more coveted
districts.

Mora, the mini-hostel owner, said the family that sold her their house
used the money to buy a Russian Lada sedan and two smaller apartments in
a less central part of the city. "Their son uses the Lada as a taxi,"
she said. "So it worked out well for everyone."

Overseas money

It's no secret that much of the money flowing into the Cuban market
comes from outside, ­especially Europe and the United States.

Galindo said inquiries through her site have doubled since President
Obama and Raúl Castro announced plans in December to restore relations.
The biggest spike is from Cubans in the United States who have relatives
on the island able to occupy the properties or manage them as rental units.

A surge in tourism this year has left the city with an acute shortage of
hotel rooms, and millions of American visitors are expected in the next
several years if Congress approves legislation to lift travel
restrictions. Apartments in the city's most desirable neighborhoods are
quickly being converted into rentals, spurred by the recent arrival of
companies such as Airbnb that allow Americans to book rooms online.

Brokers say many of the new buyers are Cubans who, like Mora, left the
island and want to regain a foothold or secure a cheap place to retire.
This appears to have the indirect political consequence of making them
stakeholders who prefer a gradual evolution in Cuba rather than an
upheaval that would hurt their investment.

"The number of serious buyers has increased significantly on hopes for
change after the [Dec. 17] speeches by Obama and Castro," said Milly
Diaz, owner of Cuba Homes Direct, another start-up real estate agency.
She returned to the island after working for several years as a broker
in England. She said prices were all over the map when the market first
opened up in 2011.

"The market is still immature, but there's a bit more experience now,
and sellers are more and more willing to negotiate," she said.

Source: $75,000 will get you a lot of house in Havana — if you're Cuban
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