Caracas, Venezuela, March 29, 2006—The mayor of Greater Caracas, Juan Barreto, announced Monday that the city will confiscate some 400 buildings and sell them to the people currently renting apartments within them.
“All good rented buildings which were constructed between 10 and 30 years ago, or longer and of which the sum of the rental contributions has been, when totaled up, more than 5 times the value of the building, become expropriated by the Greater Caracas city government,” Barreto told Union Radio.
The Caracas mayor argued that five times the price of a building is a reasonable profit for an investor to receive. “The business of renting is legitimate, but it can’t be indefinite because eventually it becomes predatory. The buildings which have been paid for 5 times over should be put on the market for their inhabitants who find themselves perpetually renting,” he said.
Venezuela, and Caracas in particular, is facing a severe housing crisis in the wake of population-displacing natural disasters, the deterioration of substandard housing built by past governments, and population growth. While numbers released from the Central Bank of Venezuela show that Caracas rental prices have risen at less than half the rate of overall inflation since 2005, due in part to rent control, Metropolitan Real Estate Chamber of Commerce President said last month that real estate prices in the city rose 35 percent in 2005, according to Bloomberg. And last year, Alvaro Sucre, the president of the Venezuelan Chamber of Construction, estimated that there was a housing deficit of about 1,6 million homes, of which about 940,000 thousand families live in overcrowded conditions and 640,000 live in shacks without adequate basic services, according to El Universal.
Details of the program, such as whether interest payments made on the building or inflation, which, over time, can add up to several times a building value, have not yet been announced, nor has any policy toward people living in rent controlled units, who may be paying less now than they would making mortgage payments.
Barreto also announced the development of mega housing construction projects in Caracas, including one in which PdVSA and the Mayor’s office will participate.
Barreto’s speech came in the wake of Sunday’s Aló Presidente, President Chavez’s weekly television program, where Chavez announced a program to ramp up construction of new buildings, with the goal of reaching 150,000 new homes by year’s end, according to ABN. Previously the most homes built by the government were just over 66,000, but Chávez criticized these for being substandard. According to Green Left Weekly, the value of each home will be about $25,000, based on the actual cost, of which two fifths will be totally subsidized by the Ministry of Housing. Homeowners will pay back the difference over 20 years at 4 per cent interest.
The Venezuelan President also said that he is considering limiting speculation on houses by forcing some people to sell their houses at government determined rates. “I have no problem signing a decree to regulate housing prices… If someone in Caracas has five homes and refuses to sell at the regulated price, we'll implement an expropriation decree for the public good and pay the owner what the apartment is really worth,” he said.
However, these moves by the government are meeting with resistance. According to El Universal, the Association of Property Owners of Urban Buildings called a meeting today with neighborhood associations in Caracas in order to form a common front against building invasions and expropriations.
The nation’s real estate association and other business groups have also raised objections, saying that expropriations and regulation will only make matters worse. “This constant threat of interventions, control, and lack of respect of private property, not only damages people who need a home, but also causes an unfavorable image of the country among investors…In this insecure climate it’s very difficult to begin a massive housing construction program” Luis Emilio Vegas, president of the real estate agent, told Venezuelan daily El Tiempo.