Trying another tool in the effort to close the island’s huge housing gap, the Cuban government announced it will directly subsidize cash-strapped homeowners who want to build, expand or renovate their home, instead of offering building materials at artificially low prices.

According to several decrees published in the Gaceta Oficial Jan. 4, municipal governments will pay subsidies to low-income homeowners for the purchase of construction material and hiring of private contractors. As of Jan. 15, homeowners with “lack of economic solvency” can apply with the local office of the Instituto Nacional de Vivienda for a one-time cash subsidy of up to CUP 80,000 (US$3,300) for new construction. Subsidies for minor repairs have a limit of CUP 5,000 ($208), and major renovation projects may receive up to CUP 10,000 ($416).

The municipalities take the decision which applicants will receive a subsidy. Applicants that have been victims of natural disasters such as hurricanes and “critical social cases” will get priority treatment. Successful applicants sign a contract in which they commit to a deadline. The municipality then issues cashiers’ checks for the purchase of supplies in a state outlet, and for paying a private contractor selected by the homeowner.

The program, which had been announced as early as summer last year, will be funded with 48.5 percent of tax collections from the sales of construction material. There was no information as to the total amount of funding.

Cuba’s 11 million inhabitants are facing a housing gap of half a million units. According to official figures, half of the housing stock is in “bad” condition, and 8.5 out of every 10 homes need repair. Lack of housing and substandard housing are among Cubans’ top complaints.

In 2009, the government failed to build a promised 100,000 new units after devastating hurricanes wreaked havoc on Cuba’s already crumbling housing stock. Although the government had shifted from its state-only approach to promoting “self-effort” home construction and renovation, homeowners did not pick up the slack left by state construction companies, due to red tape, lack of construction supplies and high prices.

In 2010, the Instituto Nacional de Vivienda announced a 10-year plan to close 90 percent of the housing gap by 2020. The new plan foresees the addition of 60,000 new units every year beginning in 2011, and 500,000 renovations completed by 2015.

As part of the plan, the government expanded supplies of construction material in state outlets and offered some at subsidized prices. However, the emerging black market for subsidized building materials produced shortages.

Then, last fall, the government allowed the purchase and sale of homes and ordered state banks to provide mortgages and loans for construction and renovation.

An article in Communist Party daily Granma explained that the direct subsidies are the result of a plan passed by the Party Congress last April and part of a policy to “eliminate undue gratuities and excessive subsidies, under the principle of compensating needy persons, instead of generally subsidizing products.”

 

This entry was posted on Wednesday, January 4th, 2012 at 10:37 pm and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.