Two speeches covered in The Royal Gazette on Monday exposed a dilemma facing the island’s policymakers and economic thinkers. How the problem is resolved may well determine the island’s future.

Ever since the 2008 financial crisis, Bermuda has struggled to maintain sustained economic growth. That struggle was exacerbated by the Covid-19 pandemic, which marked a severe reverse for the economy and the wellbeing of many residents.

However, the problem of getting solid and sustainable growth — which leads to more and better jobs and rising incomes — has also been hampered by the pervasive problem of the island’s ageing population. The number of retirees is ballooning as the last members of the Baby Boom begin to reach retirement age.

In terms of jobs, more Bermudians are leaving the workforce than are entering it. That means that simply filling the number of jobs in place will require more immigration, or a sudden and unlikely reverse of the emigration of Bermudians that has accelerated in recent years.

But standing still is not good enough. The economy needs to add jobs and people in order to maintain Bermuda’s success, which means more immigration is needed.

Bermuda’s healthcare system and public pension systems — both the standard government pension everyone pays for and the various public service pension funds — require money to be paid in by healthy, younger people in order to keep paying out pensions and to ensure that health insurance premiums don’t go through the roof.

Thus, Bermuda’s population needs to grow. There are ways of doing this, many of which have been well aired.

However, as Christian Dunleavy, the chairman of the Association of Bermuda International Companies, and economist Nathan Kowalski both pointed out at Abic’s annual meeting last Friday, Bermuda has another problem — affordability, especially in housing.

This is becoming a barrier to immigration and to growing the economy. Bermuda isn’t just expensive for Bermudians, but for non-Bermudians as well. And given that Bermuda needs to import labour just to keep the economy standing still, it is a roadblock to growth, especially for international companies which can pick and choose where they put staff. Local businesses can and do employ remoter workers in lower-cost jurisdictions.

“We will never solve the population challenges and the housing challenge at the same time,” Mr Kowalski said. “The two are difficult to reconcile simultaneously in an effective fashion.”

That’s because adding population now will make the housing problem worse as more people try to rent or buy a finite number of homes. It is elementary economics: if demand rises faster than supply, prices will rise, which will then deter population and economic growth in a vicious spiral.

The answer, therefore, is to increase the housing supply, but this is easier said than done. As Mr Kowalski has pointed out, there are various causes for the housing crisis, including reduced inventory, influenced by:

• The “Airbnb effect”

• Hesitancy on tackling rent control issues

• Slow increases in supply

• Escalating building costs

Add to that the often tortuous process of getting planning permission, and limited credit from the banks for mortgages and to build new homes.

The problem of high building costs is one of the most difficult to solve because Bermuda can do little if the cost of cement or steel jumps.

Building new homes that are also affordable is difficult without government subsidies.

While the container homes being pushed by Zane DeSilva, the housing minister, have yet to be seen and there may be reservations over them, alternative building approaches which still meet the island’s building code and can resist hurricanes are worth looking at. All the same, some form of subsidised housing for those who cannot afford market rents will be necessary as well.

This newspaper has long had reservations about rent control, on the basis that putting a ceiling on rental prices deters landlords from either building or improving homes, thus limiting supply. This has the effect of reducing construction and driving up prices in the rest of the market.

A reform of rent control, combined with direct subsidies for those who cannot afford market prices, would appear to be a better approach.

Little can be done to reduce labour costs, although it has not escaped notice that large developments have been able to import labour on a temporary basis. That option is not available to the small contractor.

The recent draft Landlord and Tenant Act is an example of how legislation can be used to increase supply. Many landlords have either taken homes out of the market entirely, or moved to Airbnbs because of problems with tenants and a courts system that makes it difficult to collect rent in arrears or to evict problem tenants.

The Act attempts to solve some of these problems, but may entrench others. Ensuring that landlords can enforce their rights will increase withheld supply and encourage more construction. While there is a risk of landlords abusing these privileges, that can be policed and is a price worth paying if Bermuda starts building the homes it desperately needs.