Over the past six weeks, the Cayman Compass Issues section has been taking an in-depth look at some of the concerns around housing in the Cayman Islands.
From people living without proper shelter, to young professionals priced out of the property market, we put the issue under the microscope.
Today we summarise some of the recommendations coming from our readers, contributors and columnists to address the concerns we have highlighted.
They range from simple quick fixes to niche problems to ideas for a total policy rethink on property. We are not suggesting government adopts all of these, we are simply putting forward 10 of the most interesting suggestions, as food for thought and a starting point for further discussion.
1. Incentivise affordable housing development
The absence of a transparent system for how development concessions are granted has been a long-running concern. Traditionally, the exemptions that have been granted have gone to larger developers of luxury property.
While there is a financial logic to that – in that government collects the taxes on the back-end when those multi-million-dollar homes are sold – it does little to persuade developers to use their time, finances and energy on affordable projects. Several developers, and even some charities, have been unable to secure concessions for their projects.
Given the absence of homes in the low- to mid-range price category it might be sensible for the new government to consider gearing its concessions policy towards developers that meet that need.
Exemptions on duty for imported materials for complexes with the majority of homes under the $500,000 mark would help developers make this a priority. A smart concessions policy could also target ‘brownfield’ sites to limit the environmental impact of new construction.
2. Consider joint-venture partnerships
Government alone is unlikely to be able to build enough affordable and social housing to meet the needs of the community.
As part of our series, Sam Story, head of corporate finance at KPMG, highlighted the feasibility of joint-venture partnerships.
Put simply, these are temporary alliances between government and developers to build mixed-use housing. Revenue from open-market property sales helps fund subsidised government units for rent.
The vision, popular in London, also includes a shared ownership scheme which allows young people, who may not qualify for a large-enough mortgage, to effectively co-own their home with government.
The idea lowers the entry point to the property ladder for younger people.
Story worked on similar projects in the UK and it would be worth government tapping his expertise and talking to responsible developers about how the concept could be applied here.
3. Expand the stamp-duty waiver
Many politicians discussed this during the run-up to the election and it seems the PACT government will, at some point, raise the threshold for first-time Caymanian buyers to qualify for stamp-duty exemption.
There is currently very little on the market below the current threshold of $400,000 and that mark could be lifted as high as $600,000.
It is also worth considering whether it should apply to a second property purchase. Young Caymanian families looking to move up to a bigger property have often used up their one-time duty exemption on a small condo or piece of land and face a $50,000-plus tax bill to upgrade to a home where they can raise their children.
Chris Saunders, now the deputy premier and finance minister, suggested the waiver should apply to the first three home purchases for Caymanians, regardless of value.
Given the amount that government brings in from stamp duty, that may be unattainable. However, some expansion of the waiver system to make property more affordable for Caymanians should be considered. For many, that 7.5% levy on top of the down payment is the biggest barrier to home ownership.
A simple fix that would not impact government revenues, suggested by Charterland’s Simon Watson, would be to at least allow that payment to be made over a number of years rather than in one lump sum.
4. Consider restricting foreign ownership
It is commonplace in small islands like Jersey and Bermuda to restrict foreign ownership of property; that goes for work-permit holders as well as holiday home investors.
While, as property industry insiders point out, there are benefits to an open market like the one we have in Cayman, some believe competition from overseas buyers is influencing land and property prices.
Much bigger economies, like Canada and New Zealand, are feeling the impact and restricting outside investment in property.
Cayman could consider a number of measures including an outright ban on non-resident buyers, restrictions on property purchase rights for non-Caymanian residents (for example, Jersey requires people to have lived on the island for 10 years before they can buy) or simply removing the incentive to buy from the permanent residency points system.
Any drastic changes to Cayman’s open market would come with downsides, as the experts consulted for our series pointed out – not least the loss of significant stamp-duty revenue for government – and a thorough economic study would likely be required in the first instance.
5. Consider higher taxes for ‘holiday homes’
An alternative to banning foreign ownership might be to tax it at a higher rate. London recently added a stamp duty surcharge for overseas buyers on top of an existing ‘second home’ surcharge.
The city is battling an affordable homes crisis caused, in part, by an influx of foreign capital into the property market.
It is open to government to consider similar policies for non-residents purchasing property in Cayman.
An annual, rather than a one-off property tax, for such buyers is one possible policy.
Critics argue that it would turn away investors and damage Cayman’s low-tax, pro-investment reputation.
Supporters suggest it would have a cooling effect on development and bring extra revenue that could be spent on government housing and social infrastructure.
6. Reform social services
Many of the housing issues we investigated, including the appalling living conditions of a portion of the community, are intertwined with a host of other social issues.
Families squatting in properties condemned by the housing trust, living in mobile classrooms without electricity or surviving day-to-day in storm-damaged homes are not just struggling with shelter.
Many suffer a slew of related issues from mental health and unemployment to addiction or just plain poverty.
Some are not getting the help they need.
In 2015, Auditor General Alastair Swarbrick released a report that looked into Cayman’s social-assistance programmes. The audit found no overall strategy, no objectives, no priorities, no coordination and, ultimately, no accountability for how $50 million was spent that year.
In a follow-up report last month, his replacement in the role, Sue Winspear, said nothing had been done to correct that.
“There is still no co-ordinated social assistance strategy and so it is not clear if the most vulnerable in our society are being adequately supported, and it is likely that there continue to be inconsistencies in the eligibility criteria for accessing support, and gaps and overlaps in provision.”
The new Social Development Minister André Ebanks has indicated wholesale changes are in the works that will seek to address these concerns.
7. Open a re-use centre
Cayman’s landfill takes in 26,000 tons of commercial waste and a further 7,000 tons of construction and demolition waste each year.
That reportedly includes good-as-new countertops, cupboards and construction materials.
It also includes a significant amount of appliances – dishwashers, washing machines and microwaves – that could be fixed or ‘upcycled’ and donated to a good home.
There is plenty of goodwill across the Cayman community. What is missing is a middle-man. Charities like ARK have, in the past, been forced to turn down donations of building materials because they had nowhere to store them.
While the ReGen plan for reforming Cayman’s waste management system does include several recycling facilities, there is an opportunity for a charity or business to turn trash into treasure.
ReStore in Canada, operated by Habitat for Humanity, is a perfect example.
The facility provides a drop-off location, a warehouse and a retail outlet for reusable hardware and appliances.
Volunteers, and in some cases paid staff, sort and fix up the material and it either gets used by the charity on its projects or sold at a cut rate to consumers to help fund Habitat’s work. Mark Nicoll, who runs the Community Shed in Cayman, is pushing to implement a similar concept here.
8. Support and scale up ARK’s Cayman CASA programme
Charity Acts of Random Kindness is making unsafe properties across Cayman habitable for the families that own them.
The organisation seeks out the most vulnerable and the most deserving people on the island, prioritising projects involving hazardous housing, where there are children, elderly or disabled people in the home.
ARK has become adept at harnessing the goodwill of the community and mobilising swiftly to transform homes and lives through its Cayman CASA project.
We have seen it in action and can attest that it works. The R3 Foundation is matching funding for any donations to the charity and we encourage everyone to consider donating.
On a broader scale, it is open to government to note the success of ARK’s projects and seek to mirror it on a larger scale or simply fund the charity to tackle this problem for them.
9. Reform laws on renters’ rights
According to the 2010 Census, the last official survey of home ownership in Cayman, more than half of the population lives in rented accommodation.
Yet the law that governs the relationship between landlords and tenants is out-of-date and in need of reform.
While anyone renting their property on Airbnb must meet a variety of criteria, there are no similar requirements for long-term rentals.
There is no minimum standard for rented property, limited rights for tenants and no clarity over flashpoint issues like eviction notices and return of deposits at the end of the lease.
A new Residential Tenancies Law was passed in 2009 but never enacted. It is not clear that his legislation necessarily holds all the answers – it doesn’t include any consideration of price controls, for example – but it would be a good starting point to establish some basic rights on both sides of the equation.
10. Examine impact of property speculation
During the course of this series, several industry insiders highlighted perceptions of a problem with property speculation – investors buying properties and marketing them for a quick resale at an inflated price.
Concerns were highlighted around investors, including some realtors, buying multiple units in new developments at pre-construction price for a small stakes deposit and then immediately flipping them for a quick profit.
The impact of that practice, it is suggested, is to immediately inflate the entry price point on new developments.
The extent of this is not clear and it could be argued that this is a symptom rather than the cause of a hot property market. Speculators couldn’t take the risk without being confident they could quickly resell those homes at a mark-up.
The ability of investors to purchase pre-construction and then transfer the ‘assignment’ for the condo before the development is completed (and before stamp duty is paid) does appear to make this type of trading more viable and is something that warrants further investigation.