Bermuda has seen a dramatic increase in economic inequality in a very short period of time. According to the Tax Justice Network, the average household income in 1993 was $65,676, while median income was $52,295 — a difference of 26 per cent. By 2016, average income soared to $131,074, with the median income at $93,713, increasing the gap to 40 per cent. This widening gap suggests that higher-income households have seen more substantial income growth compared with low to middle-income households. This country, as a result, has some of the highest income inequality in the world — and this has had, and continues to have, a profound impact, particularly on the housing market, and on all individuals in Bermuda, including high, middle and low-income earners.

To be clear, this is not a trait unique to Bermuda, as the World Inequality Database acknowledges that the share of income held by the top 1 per cent and top 10 per cent can be contrasted with that of the bottom 50 per cent and bottom 90 per cent, highlighting global disparities in income distribution. Bermuda and the world are plagued with a resurgence of economic inequality that has not been seen in modern times.

In Bermuda, economic inequality has been caused largely by the globalisation and financialisation of our international business sector, where the island’s role as a financial centre has attracted high-income companies and professionals. This has dramatically skewed income distribution, where Bermuda has some of the richest companies in the world domiciled on the island, paying some of the highest-salaried positions in the world. Together, Bermuda’s average working wages for other industries outside of international business have either become stagnant or dried up altogether. Further compounding this reality is Bermuda’s lack of progressive tax reform, or any meaningful social welfare programmes that would address this problem of increased economic inequality.

This worsening economic inequality is the main driver of an ever-present housing crisis that is being discussed by both high and low-income earners, as it now unfortunately affects both groups, but in drastically different ways.

First, along with the financialisation of Bermuda’s international business sector, housing has also become financialised for the sole motive of profit and investment return. High-income developers as a result follow the money. They invest in properties and developments that have the highest return on investment. This is a fundamental flaw within Bermuda’s housing market, as when coupled with the rise of economic inequality, developers will tend to build luxury property for wealthy businesses and individuals, ie, Morgan’s Point and Bermudiana Beach Resort. Bermuda is no stranger to this kind of market speculation, where there is a glut of high-end units but a shortage of affordable or middle-income housing. Affordable housing has never been prioritised in Bermuda, and the existing housing crisis is a modern reflection of this lack of care or planning for affordable housing for all, allowing housing to be guided and determined by market forces that do not care about human need — only profit.

Second, high-income earners who are on island do not live in a vacuum. They often live right beside you and are competing for the same affordable housing. This creates upward pressure and drives up prices of not only those housing prices in Tucker’s Town and Fairylands, but in all areas of Bermuda, as high-income earners compete with each other for housing. Poor people, the homeless community and those threatened by homelessness live in this context, where they are not just competing with other low-income earners but with high-income earners as well. Consequently, rents soar, middle-class earners face increased pressure to find stable housing, and even wealthy individuals are seen to be overpaying for housing that is in — or would have been previously considered — a less suitable, poor condition because the price of housing has dramatically increased for everyone. To meet their employees’ housing demands on island, many businesses are purchasing residential properties to house them, further increasing market demand and driving up the price of housing for all.

Third, the increase of economic inequality is caused by the average worker’s wage stagnating while high-income earner wages increase dramatically. High-income earners often use their increased earnings to purchase housing, as they view housing as a stable investment, which causes further market speculation and price increases. Many people view housing as a type of stock or cryptocurrency. They buy a house “to flip”, hoping that it will increase in value and then rent or sell it for profit. When housing is treated as a speculative asset, homes are bought and sold for profit, rather than to live in. Thus, when home values rise much faster than incomes, homeownership becomes out of reach for most because housing is treated as an investment, not a need. Worse, renters begin to spend more of their income on housing and rent, reducing their ability to save or invest. Like in the game of Monopoly, high-income earners continue to invest, buy houses and receive rent, while low-income earners — those who own less property in the game of Monopoly, for example, or none at all — are trapped in an endless cycle of poverty.

Finally, this situation does not benefit high-income earners, either. The housing squeeze on low and middle-income earners creates a situation where prospective wealthy investors have diminishing returns, and where investing in building housing is not seen as profitable because there are simply fewer people who are able to afford buying homes. When housing is seen as a speculative asset, there is no incentive for developers to build housing if there is no profit.

Problematically, this does not result in the reduced price of residential housing. Instead, it results in housing being left vacant because those with high income or multiple homes can afford to let their properties sit dormant — waiting for prices to pick up again so that they can get a return on their investment.

Bermuda’s reality is that we live in a broken housing market system fundamentally fuelled by material economic inequality and the ideological mindset of financial market speculation. The solution, therefore, is that we must address directly Bermuda’s economic inequality by introducing immediate progressive tax reform that targets high-income earners directly and which impacts low-income earners as little as possible — such as through increased payroll tax for the highest income bracket, as well as the introduction of a capital gains/wealth tax on profits from selling investments such as real estate, stocks, businesses and net worth. Such gains in tax revenue must be invested into large-scale, social housing developments. As a society, we need to further question the place that market speculation has in our housing market. A person’s ability to live in a home should not be determined by market forces or profit maximisation.

Housing must be regarded as a human right. This means that Bermuda must prioritise its people over profit. This means building and expanding social housing to all of its citizens – housing that is not left to market speculation, but that is built because we all need a place to call home. If we do not make a change and address the root cause of economic inequality in Bermuda, locals will continue to be priced out of their own country, facing extreme levels of poverty or expatriation, foreign interest will purchase all of our housing stock, and Bermuda will become the sole paradise of the ultra-wealthy and elite.

Citations:

https://taxjustice.net/2018/06/21/bermuda-inequality-and-poverty-in-uk-overseas-territory/

https://www.royalgazette.com/other/article/20180515/rising-spread-of-income-inequality/

https://wid.world/country/bermuda/

Thesis:

Worsening economic inequality in Bermuda, fuelled by globalisation, financialisation and the absence of progressive taxation or social housing, has created a housing crisis that now affects everyone — rich and poor alike — in a dysfunctional system where housing is treated as a speculative asset rather than a human right.

• Aaron Crichlow is a lawyer and community advocate dedicated to social and economic justice, environmental sustainability and human rights. He is the founder of Bermuda Is Love, a grassroots charitable organisation committed to ensuring that everyone in Bermuda has access to essential needs such as food, housing, clothing, healthcare, education, justice and a healthy environment