The cause of the rapid rise in housing costs in Bermuda — especially rents — has been difficult to pinpoint. On the face of it, it makes little sense.

To that extent, the Chamber of Commerce’s recent presentation on housing is helpful in kicking off the debate and should help to find solutions to the problem as well.

One mystery surrounds the conundrum that rental prices have increased even as the population has appeared to decline. Given that the housing stock has not fallen in any material way, it would be logical, using simple supply and demand, to assume that prices should have fallen since demand should have declined while supply remained steady.

One cause is that there is a gap between units with assessment numbers attached to them (about 31,697) and the estimated number of households (about 28,192). Where have those 3,500 units/houses gone?

One problem is that reliable statistics are difficult to obtain. According to the consumer prices index, rents increased by 4.34 per cent between 2022 and 2024, having declined in the previous two years. This does not appear to square with the experience of people looking for rental properties right now.

The second problem is that it is difficult to determine how much the population has declined in recent years. The 2016 Census said that the population was 63,799. Since then, based simply on adding the number of births and subtracting the number of deaths, the Government estimated that the population had decreased to 63,356.

However, this does not take into account immigration and emigration. According to the chamber, the population is likely to be between 54,651 and 56,667, based on “projected economic persons” and “estimated airport movement” — the latter measure presumably taking the number of residents who left the island in a given period and subtracting the number who returned.

That is likely to be an inexact estimate, but it can be said with some certainty that the population is now lower than the official government estimate.

Given that, it still begs the question of why prices have risen instead of fallen.

The chamber has offered a number of plausible reasons for this. A decline in household sizes as the population ages and people have smaller families is likely to be one cause. This is supported by average household sizes having decreased between 2005 and 2016 from 2.26 people to 2.08, according to census data, and that trend was likely to have continued.

If, as the chamber suggests, a decline of 0.02 people in household size equates to a need for 270 more homes, then that would have meant a need for more than 4,000 more homes in the period. Even if that figure was only half-correct — and it may not take into account overall population decline — it suggests more than 2,000 new homes would have been needed, which clearly did not happen and has not happened in the past ten years.

In fact, only 773 new homes were completed in the period, a number that is woefully short of the total needed, according to the chamber’s figures.

Two other causes are given for the rise in rents. One is the number of disused and uninhabited homes on the island. The chamber is right to say that, while these buildings tend to be noticeable because they are usually in a dilapidated state, the number is not that high – somewhere about 300.

The other reason given is the number of holiday rentals, but the number available, according to website AirDNA, has fallen from 737 in June 2017 to 527 last month. That is a significant number, but it does not appear to be the sole, or major, cause of the spike in rents.

The chamber appeared to address landlords withdrawing their properties from the long-term rental market in noting that roughly three quarters of apartments are supposed to be covered by rent control, which suggests some property owners have simply chosen not to rent their properties — presumably judging that the return they can get legally on the property is not worth the trouble. In 2021, landlords told the Department of Consumer Affairs that they were moving to the short-term rental market because of problems with unpaid rents and evicting tenants.

It is an axiom of price controls that they will lead to empty shelves and shortages because producers who cannot get a reasonable return on their products will simply stop producing them. The same argument can be made for landlords who do not see the incentive of renting their properties when the price they can rent them for is capped. In a free-market economy, they cannot be told what to do with them.

It is also a disincentive to building new homes — developers are not going to build rental homes, especially given Bermuda’s high land and construction costs, if they cannot get a return. And banks are not going to lend to them, either.

That is not to say that there should not be some support for those at the bottom of the housing market. But policies that actively disincentivise landlords and developers do more harm than good.

While it seems counterintuitive that rent controls actually drive up rents, it does mean that it limits the incentive for landlords to build new homes, thus limiting supply and price competition.

So, what is the answer?

In the 1980s, when Bermuda faced a similar housing crisis, Sir John Swan, the Premier, commissioned a report on housing that led to substantial investment in the market by the public and private sectors alike.

A similar report is required now. It need not take long, and could be done either in tandem with the Census, which should be started as soon as possible, or if that is not possible, through a housing survey.

Armed with the correct facts, the report’s authors can look at why there is a shortage, the best means of solving the problem and a commitment from the Government to put the changes in place.

What cannot happen is continued delay, and continued theorising based on anecdotal evidence and half-baked economic theories.

Bermuda’s high costs and lack of opportunities are driving people out of the island at a time when they are needed most. Solving the housing crisis is not the only problem they are facing, but it is one of the most pressing.