Concern at $120,000 increase in Government housing unit’s resale price
First-time homeowners are being “left out in the cold” as a condo on a Government housing development is on the market for $120,000 more than it was bought for three years ago. “There are always going to be people who need a step up but this process is moving on and bypassing the very people we are meant to be helping.
The two-bedroom condo at Loughlands, on South Road, Paget, is being sold for $570,000 even though it was snapped up for $450,000 in 2008.
At the time Government was full of praise for the 96-home development saying it was allowing young Bermudians to take their first steps on the housing ladder.
The Ministry of Public Works, which is responsible for housing, is now facing renewed calls to introduce further safeguards to prevent housing market manipulation.
Both the United Bermuda Party and One Bermuda Alliance fear other homeowners at Government housing developments could also quickly resell their units for profit. This is known as flipping and will eventually result in pushing the homes out of reach for first-time buyers, they say.
Kim Swan, who was elected as a UBP MP, said: “The people looking to sell are obviously looking to maximise.
“But if we are using Government funds to build homes that are affordable we have to ensure they remain available to those at the bottom door entry level.
“These homes will soon be beyond the reach of first-time buyers”.
As Loughlands was being developed, the United Bermuda Party repeatedly urged Government to consider restrictive covenants against flipping to ensure future opportunities for entry-level families.
Mr Swan, who was then Housing Shadow Minister in the Senate, called “for the resale value of properties to suit future, first-time homeowners”. Other covenants suggested at the time by the UBP included a no renting policy and a minimum ownership period.
Mr Swan added: “We have to continue in the spirit of these type of homes. We need to keep these as a catalyst for generations to come. This type of sale will leave first-time buyers out in the cold.”
The seven acre Loughlands site was redeveloped into 96 housing units; 28 three bedroom and 68 two bedroom units.
It was the first public-private partnership used to create housing and was said to be for young professionals with collective household incomes of less than $150,000.
The Loughlands site was originally zoned for tourism but reassigned for housing, granted a Special Development Order and housing materials were given duty relief to reduce the cost of the units.
The families were selected on a first come, first served basis from a list of 586 names on the waiting list of the Bermuda Housing Corporation. They were all previously in rented accommodation or staying with friends and family.
Then Housing Minister David Burch said Government “jumped at the opportunity” to work with developer Gilbert Lopes to provide homes for Bermudians “at prices that the average hard-working man and woman can afford”.
Mr Burch said Government was helping those who would have no other way of 'owning a piece of the rock'.
He said: “Making homes available to first time homeowners at prices that are simply unavailable in the ordinary marketplace represents the “hand-up” that honest, hard-working young Bermudians deserve and we are happy to provide.”
One Bermuda Alliance Senator Michael Fahy said the development's “original intention” to allow first-time homeowners to get on the housing ladder should continue.
He said: “It appears that someone given the opportunity to become a homeowner is using that opportunity to their advantage.
“These condos were proposed at a time when the economy was doing well, now the economy has taken a massive downturn.
“I would like to see checks and balances in place to ensure that the condos remain with first time homeowners
“The owners originally met the criteria so it would seem sensible that they are sold on to other first time buyers”.
Mr Fahy also questioned whether further large Government housing developments were the way forward “considering where we are with the housing market”.
The end unit condo at Loughlands is for sale through real estate agents Canopy Services Ltd. An e-mail advert describes it as a “beautiful” property that is “reasonably priced” at $570,000. Maintenance fees are $375 monthly.
It goes on to say that it's “meticulously maintained” and “everything looks and feels brand new”. The company's website also explains that “the first phase of Loughlands was built with incredible detail and workmanship”.
The condo, built in 2008, is described as a freehold property with two bedrooms, one-and-a-half bathrooms, open dining room and a living room off the kitchen. It also comes with carpeted bedrooms, all major appliances, a water purification system, PVC windows, wall unit air conditioning and additional outside storage.
Mr Burch called Loughlands a “test for Government” as it was the first of its housing projects.
Since then families have moved into developments at Harbour View in Southside, St David's and Perimeter Lane, Pembroke, and the first phase of 24 units at the Grand Atlantic development in Warwick will soon be completed.
A spokesman for the Ministry of Public Works said Government purchased the units from the developer and sold them at cost to qualified Bermuda Housing Corporation (BHC) clients who could not afford the market rates dictated in 2008.
He said: “The BHC has in place a clause in the conveyance documents which prevents purchasers from profiteering from sales of the Loughlands units. The clause provides BHC with the first option to repurchase the unit at a prescribed purchase price.
“The Corporation then looks at all factors and compares it to the current market value. If the market value exceeds the repurchase price leading to profiteering, the Corporation repurchases the unit. If not, the owner is free to offer on the open market.
“There are additional costs to the original owner including legal costs, stamp duty, conveyance cost, interest on the mortgage to the bank, monthly maintenance fees as well as other miscellaneous costs. The BHC has assessed the unit in question and when factoring in the additional costs, it has been determined that the unit has not made a profit in the current real estate market.”
Canopy Services did not respond to our request for comment.