Bermuda’s housing glut

In September 2013, as I write this, 35 modular housing units are being put up at Dockyard; 77 units of the Grand Atlantic housing development remain empty and unsold; hundreds of residential properties up for sale; an uncounted number of residential properties have been foreclosed on by mortgage holders; and there are thousands of empty and unrented studios, apartments, condos, houses, and mansions.

On top of that, since 2008, Bermuda’s residential population has fallen which means that there is less real demand for housing. Because, in the next two to three years, Bermuda’s resident population is unlikely to grow as it did in the years between 2000 and 2008; there is also no latent demand for housing.

That’s a factual start point.

Between December 1998 and December 2000, I was involved with the Bermuda Housing Corporation as Chairman-designate of the Board, and then Chairman of the Board.

Housing 1998 – 2000

In 2000, my departing analysis to then Minister for Housing Nelson Bascome, was that Bermuda did not have a ‘housing crisis’ caused by a shortage of residential accommodation. Building on research carried out by the preceding administration, I had confirmed that in 2000, Bermuda had an over-supply of residential accommodation; that the BHC had a ‘client list’ of less than 200 households; and that there was this national supply or inventory of about 1,900 empty privately owned residential units — a sort of national inventory of housing. Notionally, there were about nine residential housing units available for each BHC client and client-base household.

What Bermuda did have was a national housing imbalance. That is, there was a disparity between what was specifically needed and what was actually available. My report to Minister Bascome suggested that there were then about 500 empty housing units that could be put back into service and that would be in the price/rent range for typical BHC clients.

I recommended no new builds. I recommended that BHC should concentrate on refurbishing, renovating, and re-introducing currently empty privately owned housing units back onto the market. My analysis suggested that the average cost per re-introduced unit might run consistently under $75,000 or about $60 a square foot; whereas new builds were likely to run consistently over $200,000 or about $150 a square foot. [These are year 2000 prices.]

I envisaged and forecast that such a programme would keep a steady supply of genuinely ‘low cost’ housing coming on to the open market; and that a primary and intended consequence would be a general trend for there to be better price competition on all low to middle rents.  

I also recommended amending the Land Tax laws so that all property owners were specifically discouraged from keeping any residential property empty.

In this way, at least cost, the BHC would best carry out its full mandate.

None of that happened.

Housing from 2000 – 2012

Starting in 2001, BHC commenced a national new-build policy that did not end until the Grand Atlantic housing complex on South Shore Road in Warwick was completed and put up for sale in the spring of 2012.

During this time Bermuda’s standard national inventory of empty and unused residential housing units remained around the 2,000 mark. From 2000 to 2012, both the private sector and BHC were on a building spree and added 2,799 new housing units. More were added in 2011 and 2012, but this number is not yet reported. When reported, the total new builds between 2000 and 2012 is likely to exceed 2,700.

In 2008, Bermuda’s residential population peaked. In 2009, Bermuda’s residential population began falling. By 2012, Bermuda had lost about 8,000 residents. Not all were Bermudian, but all had required housing. This meant that housing units that had been rented to Guest Workers started emptying and accumulating in the national inventory.

By 2012, the national inventory of empty studios, apartments, condos, houses, and mansions was probably sitting around 4,000 – or more.

The BHC shift from providing low-cost rental units at lowest possible market rates to providing housing that was built for sale to middle income households also meant that lowest income and ‘difficult’ households got short shrift.

The BHC answer was to group their lowest income and difficult households and isolate them in lowest cost institutional-style accommodation. This turned out to be the ‘Gulfstream’ apartments in Southside. Here, the poorest and most difficult Bermudian households were warehoused — even though, by late 2012, there were 4,000 empty residential units dotted all round Bermuda — from St David’s Head to Ireland Island.   

Housing in Bermuda, general view

There is no neutral national overview, and amongst building contractors, there is a strong commercial copycat syndrome. So houses can be built on commercial assumptions that may not always be well-supported.

Because Bermudians generally “invest” in a house rather than “buy a home”; houses in Bermuda tend to be seen more as ‘stores of value’ than as shelters for families. This means that any house owner tends to think more about the re-sale value rather than the intrinsic value of a four walled roofed shelter for his family.

There is a clear national tendency, evident throughout Bermuda, to aggrandize every house. What was once a cute cottage tends to evolve into a multi-apartment unit. This happens as properties are ‘passed on’ in wills. This results in an overall elimination of small ‘starter homes’.

Between 1992 and 2008, there was a large influx of relatively deep-pocketed business residents who seemed willing to pay anything for housing. Commencing in 2009, this portion of the overall housing market down-sized.

By the late 1990s, this total national process was pushing the cost of start-out housing beyond the means of average Bermudians who were forming new households. Part of BHC’s post-2004 initiative was to try to deal with this; but this generic and deep national problem required far more than the piece-meal approach actually taken by the BHC.

Housing today

In September 2013, Bermuda has a national housing glut. Too many studios, apartments, condos, houses, and mansions. Too few people — Bermudian and non-Bermudian — to live in them. But there is still a price imbalance.

Between 1994 and 2012, Bermuda has undergone radical national change. Bermuda needs a deep and wide strategic re-think about all aspects of residential housing. 

So far, there’s no sign of that happening.