In Venezuela, Sell Your House or Lose It [View all]

[MADem]

...Consider a new law that forces homeowners to sell their rental units to tenants. As of Monday, anyone who owns three or more properties and has rented a unit for more than 20 years, must sell it at a “fair price” to be determined by the state. Landlords who fail to do so face fines and could lose their homes.

The government blames a “monopoly on housing” for Venezuela’s housing shortage. But forcing landlords to sell to tenants can’t possibly solve homelessness. Plus, renters who can’t buy their home may be pushed out by those who can. In the best of all outcomes, this new policy promoted by the government of President Nicolas Maduro would leave the housing problem unchanged. It's much more likely that it will aggravate the housing shortage it is designed to ease.

Venezuela’s housing shortage has doubled to 3 million homes during the past 15 years since now-deceased President Hugo Chavez came to power and adopted policies that mandated wealth redistribution. The housing deficit is growing by 130,000 units every year, which shows that existing policies, including price controls, that limit investor returns have been a drag on residential construction.

It’s easy to imagine things getting worse. Residential buildings older than 20 years, and any others approaching that age, will immediately lose value because real estate investors will get stuck with losses or won't be able to make an adequate return. And why would anyone invest in building new homes in a country where the state already sets rental rates and decrees when and at what prices they must be sold? .... Maduro’s administration says it now aims to build 3 million new homes by 2019. But plenty of red tape, corruption and the absence of adequate construction incentives will make it another failed promise. His attack on real estate investors may be meant to hurt those he deems “savage capitalists.” But it will only squeeze the remaining members of Venezuela’s middle class who haven’t already fled the country and will create a bigger housing shortage. ....

http://www.bloombergview.com/articles/2014-04-02/in-venezuela-sell-your-house-or-lose-it