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Flawed then, flawed now

In 2007, this newspaper warned that the requirement that Bermudians married to non-Bermudians would have to get a licence to own real estate would backfire.

An editorial warned that while the goal of preventing “fronting” was justified, the method was wrong and discriminatory, because the dead hand of bureaucracy would lead to long waits for couples to get licences, which would give the advantage to other buyers.

Now National Security Minister Wayne Perinchief has announced that the licences will no longer be required for first time homeowners, as government tries to reinvigorate the real estate market.

Five years has been far too long to wait for this policy, that was clearly flawed from the outset, to be reversed. However, the more discriminatory and blatantly unfair part of the policy, which prevents these same couples from owning a second property, is still in place, and apparently is still under review.

While the licence requirement for a first home was cumbersome and discriminatory in practice, at least the possibility existed to own a property. Not so the second part, which was designed to prevent too much Bermuda land falling into foreign hands. In barring Bermudians married to non-Bermudians from owning more than one property, it blatantly discriminated against those Bermudians who happened to fall in love with and marry non-Bermudians.

We said then: “That makes no sense, and may well drive Bermudians out of their own country as a result.”

To some degree that has happened, exacerbating the ravages of the recession on the real estate market. Also stifling the market, at least at the top end, is the restriction on Bermudians selling property to non-Bermudians.

This newspaper disliked the policy from its start in 2005, not out of sympathy for millionaire homeowners, but because it too was the wrong approach to ending the practice of “fronting” in which Bermudians were the titular owners of houses actually owned by non-Bermudians.

Instead it had the effect of instantly devaluing properties owned by Bermudians while increasing the value of homes owned by non-Bermudians. The knock-on effect of that has been to subdue the market, restricting the number of properties available.

Behind concerns about fronting, the Government wanted to prevent non-Bermudians from owning more than 2,300 acres of land being owned by non-Bermudians. This is now said to be 37 percent of the land available for residential development.

There are several concerns with this. One is that no one can really be certain how much land is held by non-Bermudians. In any event, if that is a concern, the answer is to gradually raise the annual rental value limit at which non-Bermudians can buy property.

There is an opposite argument which is that more property and rights should be made available to wealthy non-Bermudians, but there is not room here to debate that question.

These policies have caused misery for many, and have damaged Bermuda economically. This was obvious from the start and any credit Government gets now for reversing these policies must be tempered by the fact that it has taken far too long to get rid of them.

To restore at least some of his Government’s credibility, Mr Perinchief now needs to reverse the policy on second property ownership by Bermudians married to non-Bermudians as quickly as possible.

Peter Woolcock?s cartoon from April 30, 2010 on the land licence controversy

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Published February 22, 2012 at 1:00 am (Updated February 22, 2012 at 7:38 am)

Flawed then, flawed now

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