Investors Concerned Over New Housing Law
MANAGUA – Investor concerns that a new housing law would be used as a tool for government expropriation of private property are based more on past fears than current realities, according to sources close to the bill.
The National Assembly is currently studying the “Law of Dignified Housing,” a legislative initiative that President Daniel Ortega wants to fast track to help provide low income housing to thousands of Nicaraguan families in need.
Ortega is so eager about the bill that he met with legislative leaders Oct. 7 to urge them to pass it before the end of the year.
Yet in doing so, the president mentioned the possibility of “expropriating” unused land for low-income housing projects, raising new concerns about private property rights under a Sandinista government with a history of property confiscations in the 1980s.
Ortega said that limited government land available for low-income housing “will oblige us to expropriate, because there’s no other way.”
The president stressed that there’s a difference between confiscation, in which the governmenttakes the land without any compensation to the owner, and expropriation, in which the government would negotiate with landowners based on the property’s cadastral value – or its listed value in the government registry. Yet considering that cadastral values can be 50 times less than real estate market prices, investors argue that “expropriation” would be little less than highway robbery (like being forced to sell a quarter-milliondollar property for $6,000, because that’s its book value according to the municipality’s moldy property registry).
Ortega’s address to lawmakers last week has sparked intense criticism and questioning. The opposition daily La Prensa on Oct. 8 splashed the front page headline “Ortega Insists on Expropriation,” while on-line expat communities buzzed in speculation about “the scary land law” and the National Tourism Chamber requested a meeting with legislators to learn more about the bill.
Insiders consulted by The Nica Times this week insisted that the housing law is being designed to protect investors and stimulate the economy. They said concerns about expropriation are mostly unwarranted.
Eliseo Núñez, president of the Commission on Infrastructure and Public Services, said investors “absolutely do not” have anything to worry about regarding the new law.
“Expropriation would be only in extreme cases,” he told The Nica Times, adding that such cases would have to be approved by the National Assembly.
Núñez noted that expropriation has been on the books since 1972 as a legal mechanism by which the government can force private landowners to sell their land in instances of “national interest.” But just because it’s on the books doesn’t mean it’s common, he said.
The lawmaker stressed that the bill is still a work in progress but insisted that the spirit of the law will be one that “protects private property and investment.”
Núñez also said that an article in the original draft of the bill that called for an annual 20 percent tax increase on unused land and vacated homes will be removed from the final law.
Marlon Toledo, general manager of the Chamber of Urban Developers of Nicaragua (CADUR), which has been working closely with lawmakers to draft the housing bill, said “investors don’t have anything to be afraid of.”
Toledo says the idea of the law is to provide accessible and dignified housing to the majority of poor Nicaraguans, while also helping to stimulate the economy by reactivating the construction sector.
“The idea is to build 40,000 homes in the next three years,” Toledo told The Nica Times. He said that the construction boom would create some 50,000 jobs and employ all 18 urban development companies registered in the national business chamber.
Toledo said that most of the homes will be built in Managua because that’s where most of the population lives, but that the law is decentralized with the goal of building homes in the departments, too, specifically Matagalpa, Estelí and Chinandega.
Letter of the Law
Lawmaker Núñez said the National Assembly is in the process of combining four drafts into one final bill.
But the spirit of the future law – to provide dignified and affordable housing with proper hygienic conditions – has not changed. The new law, as it states in its own wording, is an attempt to comply with Article 64 of the Constitution, which states: “Nicaraguans have the right to a dignified house, comfortable and secure, which guarantees family privacy. The State will promote the realization of this right.”
In Nicaragua, where half the population earns less than $346 a year and the housing deficit is 440,000 homes and growing by 22,000 a year, providing affordable and dignified housing is no small task.
The bill itself identifies the “limited income capacity of population” as the No. 1 challenge to implementing the law, followed by “a lack of access to financing and land.”
To address the challenges, the bill proposes that each municipal government create a “land bank” of government properties.
Expropriation of land, presumably, would be limited to instances where the local government doesn’t have any suitable land for building homes.
However, nowhere in the bill is expropriation mentioned.
The money for the housing projects would come from a variety of different sources: the central budget, fines, loans, foreign aid, and a percentage of funds from debt forgiveness, among other sources.
President Ortega has also said that he “is certain” that Venezuela will help provide funding for the homes.
Under the oversight of the Institute of Urban and Rural Housing (INVUR), the urban developers will then negotiate with the municipalities to purchase the land and build the low-income housing units with the help of the local communities.
The homes, which will be priced between $10,000 and $25,000, will carry payment terms of 30 years with 6 percent interest rates, and will be available only to people who qualify as “very low income” (equal or less than one minimum salary), “low income” (one to two minimum salaries) or “moderate income” (up to five minimum salaries).
The subsidy level will vary depending on income level, with the very poorest percentage of the population receiving a 100 percent subsidy, according to the bill.
Núñez said he thinks the final bill will be ready for vote after the Nov. 9 municipal elections.