The Real Estate Market in Cuba

By Victor Normand
Published: July 2014

It would literally take an act of Congress before Americans could legally buy property in Cuba, but Cubans are now able to buy and sell their homes on the open market, for market value. For more than 50 years that was not allowed, but now, it’s legal and happening every day. If you think it is a challenge to sell your home or buy a new one here, the process is that much more complicated for the average Cuban.

Jackie and I visited Cuba recently (yes there are proper ways to get a visa to the largest of the Caribbean islands and the only fully communist country in the western hemisphere) and among the many things we experienced, we could not help being curious about Cuban real estate.

You might be surprised to know that between 80% and 90% of Cubans own their own homes. That wasn’t always true, in fact only a small percentage of Cubans owned their own homes before the revolution in 1959, but within days of the communist takeover, all private ownership of housing was abolished, rents were cut in half and evictions outlawed. From that time on, rents were paid to the government and the tenants were given title to their homes in exchange for rent payments that never lasted longer than ten years. Still, until 2011, there was only one place where Cubans could actually buy a piece of real estate, in cemeteries:

cuba 1Colon Cemetery, Havana, Cuba

Among the many social problems that exposed the former Cuban government to overthrow, the cost of housing was right up there along with organized crime and government corruption. The change brought about by the revolution was successful in making almost all Cubans “owners” of where they lived. However, government policy dictated that homes were for “living in” not “living off of”. The problem was that while Cubans owned their homes, they could not sell them. Passing the home to your heirs was allowed and swapping or permutas was tolerated until 2003 when even permutas was outlawed.

If you travel to Cuba, as we did in April, you will be struck by the deplorable condition of most residential properties. It seems that while the government gave apartments to their occupants, no one owned or was responsible for the buildings within which those apartments were located. Every day in Havana, where one in five Cubans live, whole buildings or parts thereof collapse into the streets.

cuba 2Residential Neighborhood, Havana, Cuba

In addition to what happens with 50 years of neglect, no private mechanism exists to deal with a severe housing shortage. Recognizing the seriousness of the problem, the Cuban Government under Raul Castro instituted reform in 2011 which allowed homeowners to sell their property at market prices. The real estate brokers, called corredores, or runners, who had previously arranged the permutas, were back in business.

Because there is no organized system for marketing real estate in Cuba with little help from the tightly controlled, censored, and expensive internet, the buying and selling of homes mostly happens at places like the Paseo del Prado in downtown Havana on Saturdays. Buyers and sellers stand around the square holding signs with the particulars of property for sale or sought after.

paseo-de-marti-o-paseo-del-prado_515148Paseo del Prado, Havana, Cuba

Since there are no mortgages in Cuba, all real estate transactions are in cash. Cuba has a dual currency system; the Peso, used for local purchases is worth about 4 cents, and the Cuban Convertible Peso (CUC) which can be purchased for one dollar less a 10% tax to the government. Rent and transaction taxes are paid in pesos, the purchase price in CUC’s.

The average monthly wage for a Cuban worker is about $20. So how does the average worker buy an apartment for 40,000 CUC’s in Havana, or a free standing house for 120,000 CUC’s? Two ways: either sell a larger, higher priced home and buy a less costly property, keeping the difference as a nest egg; or use cash earned by exiled Cubans who have repatriated or have provided remittances to relatives on the island . The bad news is both buyer and seller pay a 4% tax on the sale, the good news is, the sale price is determined by an assessed value mostly based on the original, post revolution value determined by the government and paid in pesos not CUC’s.

Cubans are only allowed to own one primary residence and one vacation home. So, while real estate activity has increased every year since the reform on 2011, the lack of private capital has meant that the housing shortage has not been helped by all this new housing market activity. Younger Cubans often live with their parents or other relatives, waiting for a housing opportunity to open up.

Other economic reforms have taken place recently allowing certain businesses to operate privately with government permission. The corredores joined the list of occupations allowed to work on a private basis in September of 2013. Because nearly every Cuban has a stake in real estate, expect more changes to come. There are no licensing laws or continuing education requirements, but you can be sure there will be a Cuban version of Resident Experts (SM) just the same.