The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas suffered an annual 900-unit shortfall between new home completions and buyer demand for an entire decade up to and through COVID-19, with government rent controls and regulations further restricting affordable housing supply.

The Inter-American Development Bank (IDB), in a just-released report unveiling a $50m proposal to develop sustainable housing opportunities in The Bahamas, asserted that access to affordable, adequate homes for low-to-middle income Bahamians is further “deteriorating” due to multiple deficiencies besides “insufficient supply”.

It cited the Bahamas Mortgage Corporation’s “inefficiencies and under-capitalisation” as a particular impediment to improving home ownership access for families since its mandate is to provide mortgage financing for the very income groups struggling to purchase housing. The study said it is only capable or originating $2m-$3m in new mortgages per month - between one-sixth to one-third of the $12m required by already-qualified borrowers.

And the IDB, pointing out that the Government has developed no new public rental housing for three decades, with the existing stock limited to 148 units and many suffering from deferred maintenance, added that the existing regulatory regime acts as a disincentive for private landlords to enter the market and increase the supply of affordable properties.

Citing land use planning and zoning requirements that discourage development of multi-residence properties, the IDB report singled out “rent control regulation and tenant protections” as “adversely” affecting the long-term rental market targeted primarily at Bahamians. It added that this has resulted in 20,000 dwellings being left vacant and an 80 percent growth in short-term vacation rentals as property owners eye greater returns from this segment.

The report’s findings have emerged just as the Davis administration plans to increase, not lessen, regulation on the private long-term rental market. Its 2026 election manifesto, ‘Blueprint for Progress’, pledged to create a Residential Tenancy Authority with inspection, enforcement and sanctioning powers, plus mandate that all private landlords register their properties and ensure they meet “enforceable minimum habitability standards”.

Keith Bell, minister of housing and land reform, has confirmed that the Government is working on yet-to-be released legislative reforms for the long-term rental market and relationship between landlords and tenants. To crack down on so-called rogue landlords, the Davis administration is aiming to establish “a national rental property register and a regulator with real enforcement power so that every Bahamian renter is protected”.

The Rent Control Act already prohibits landlords from earning annual rental income that exceeds a property’s assessed or declared value. The additional reforms, which include plans to “publish a public registry of landlords found in violation” and thus ‘name and shame’ property owners, could have the unintended consequence of driving more out of the market - as has happened in cities such as London - and further slash affordable rental home supply.

The IDB report reaffirmed that housing supply has been badly lagging demand for at least 16 years, with average annual production of 1,475 residential completions between 2010 and 2022 leaving a 900-unit “deficit”, or shortfall, compared to the demand for homes. Over a 12-year period that is equal to a 10,800 new homes deficit, and output has subsequently declined further to a low of 607 new units in 2023.

The drop-off in new builds, the study adds, has resulted in The Bahamas’ housing stock becoming increasingly aged, with more and more properties not being maintained and falling into “disrepair” to exacerbate the affordable homes shortage. This, the IDB added, also leaves properties more vulnerable to severe hurricane damage and destruction plus other climate change effects.

To address this, and enable more Bahamian families to achieve their home ownership dreams and obtain secure housing, the $50m IDB project is proposing a multi-faceted solution that includes increasing the number of units available for sale and rent. This will involve a mix of government housing developments and partnerships with private investors, developers and contractors via public-private partnerships (PPPs).

Documents seen by Tribune Business show the proposed loan is targeting projects in New Providence, Grand Bahama and Abaco. The focus in the capital is Clifford Darling Estates, and the Pinecrest One and Two subdivisions on the southern shore. A combined $3.937m would be spent on infrastructure for 30 serviced lots and two “high density” condo buildings featuring 24 units.

The biggest outlay, some $13.388m, is allocated for the rehabilitation of “underused or abandoned housing units” in Freeport’s Garden Village area, potentially involving 35 buildings and 420 units. In Abaco, the Central Pines subdivision would receive $5.2m for the development of serviced lots for 30 single family units.

However, the IDB report also candidly admitted that its $50m project will “not address banks’ aversion to lending for low-cost housing”. This means access to mortgage financing for low and middle income Bahamians via commercial banks and other private lenders will not be tackled, with reliance seemingly being placed almost entirely on Bahamas Mortgage Corporation reforms.

Thus a significant piece of the solution to The Bahamas’ affordable housing crisis will be left untouched, even though the IDB report said commercial banks are reducing the amount of mortgage financing they are willing to release compared to the subject property’s value.

“Between 2015 and 2025, residential mortgage commitments declined by 30 percent for new construction and 20 percent for existing dwellings,” it said. “Larger average loan amounts and declining loan-to-value ratios, from 81 percent in 2015 to 71 percent in 2024, suggest these loans are not serving low-income households.”

Tribune Business has previously reported research asserting that New Providence hotel workers are earning incomes more than 60 percent below what is required to qualify for mortgage financing to buy a median priced home (around $600,000) in the Bahamian capital.

That assumes they have no consumer debt and, while the increase in New Providence real estate prices over the past decade has been in line with global trends, wage stagnation and inflation has worsened affordability woes. New Providence’s house price to income ratio is now among the world’s highest at 141:1, although this may be skewed somewhat by high-end communities such as Lyford Cay, Old Fort Bay and Paradise Island/Ocean Club.

The IDB report, reviewed by this newspaper, said housing challenges have been exacerbated by relatively low levels of government investment compared to other Caribbean nations and the region’s highest level of income inequality. “The Bahamas’ population increased from approximately 255,000 inhabitants in 1990 to about 400,000 in 2022,” the study asserted.

“New Providence's share of the overall population expanded to nearly 74 percent (297,000 residents) by 2022, driven in part by disaster-related internal migration. At the same time, the urban footprint has been expanding. Addressing housing needs in the context of this population growth and declining land-use intensity is particularly challenging.

“Despite its high-income status, income inequality is the highest in the Caribbean and central government spending on housing and community amenities in The Bahamas is low (0.02 percent of GDP) compared to Caribbean peers (1.3 percent),” the IDB added. “Low-to-middle-income households in The Bahamas have limited access to adequate housing. This manifests as low affordability.

“In New Providence, even though price growth of 32 percent in the last decade was in line with international norms, affordability has suffered because of stagnant incomes and inflation. Home prices grew even more sharply in some of the Family Islands, with median prices rising 94 percent, 71 percent and 128 percent in Grand Bahama, Abaco and Exuma respectively, well above the international average.

“The effect is more severe among vulnerable populations, with an earlier assessment finding that 58 percent of poor households lived in privately-rented housing where rents were subject to typical annual increases of 34 percent…. Moreover, in 2022, almost 30 percent of households nationally annually earned less than $20,000 - higher in Grand Bahama and Abaco compared to New Providence – and a further 30,000 households earned less than $40,000.”

As a result, the IDB study warned: “Access to adequate housing is deteriorating due to institutional framework misalignment, insufficient housing supply, stock attrition and banks’ aversion to lending for low-cost housing.

“The institutional framework is characterised by inefficiencies and under-capitalisation of the public mortgage company, lack of dedicated agencies for public housing production and management, and by regulations that inadequately incentivise private production.”

Focusing on the Bahamas Mortgage Corporation, which had $110m worth of bonds coming due for repayment to investors in the four years to 2026, the IDB said it is “characterised by legacy balance sheet issues - mortgage default rates in excess of 25 percent, a high cost-to-income ratio above 70 percent, and severe under-capitalisation with monthly origination capacity of approximately $2–3m compared with a qualified pipeline of nearly $12m”.

“Yet it remains the primary source of mortgages for lower income households who qualify for long-term finance, providing mortgages for 70 percent of housing solutions that were completed by the Ministry of Housing and Land Reform in the last five years,” the IDB report said.

“Public housing stock is currently produced and managed by the Ministry of Housing and Land Reform, a ministry rather than a dedicated special purpose vehicle (SPV). Production is limited and has been focused on single family detached dwellings for sale with only 159 completed between 2021 and 2026, and a further 127 under construction.

“The public rental stock is limited to 148 units, with many suffering from deferred maintenance and very low rental rates. No new rentals have been built in the last three decades. A programme of contractor-led repairs to private homes has been pursued through a grant programme administered by the Urban Renewal Authority with no recovery of financing.”

As for housing’s regulatory regime, the study added: “Land use planning and zoning has inadequately incentiviised efficient use of land and infrastructure, and discouraged multi-residence properties. This is reflected in the Greater Nassau area, whose density of 19 inhabitants per hectare ranked 35th in an IDB 70-city sample in 2010-2020.

“Rent control regulation and associated tenant protections have adversely affected incentives to rent second homes, reflected in vacancy levels - over 20,000 units in the 2022 census - and an 80 percent growth in short-term vacation rentals between 2018 and 2024. High regulatory avoidance in housing construction is partially a response to an inefficient construction permitting process which was ranked 77th out of 190 nations” by the World Bank in 2020.

With housing stock growth in the decade to 2020 some “1.5 times’ slower than in the previous ten years, the IDB study added: “Access to adequate housing is exacerbated by deterioration and attrition as buildings fall into a state of disrepair. Without sustained maintenance and repair, older units are more susceptible.

“Forty percent of the stock as of 2022 was built before 1990. Lower quality initial construction also contributes to faster deterioration. Approximately 17 percent of dwellings (20,672 homes) had outer walls made of less durable materials than concrete blocks in 2022.

“Additionally, homes that were constructed without full regulatory oversight are more likely to have qualitative defects and account for 60 percent (10,497 solutions) of the inter-censal increase. This manifests as a resilience vulnerability during natural disasters with Hurricane Dorian alone destroying an estimated 27.6 percent of dwellings in Abaco and 8 percent in Grand Bahama.”