Damien Cave
New York Times News Service

MEXICO CITY – Cuba announced a new property law recently that promises to allow citizens and permanent residents to buy and sell real estate – the most significant market-oriented change yet approved by the government of Raul Castro, and one that will probably reshape Cuba’s cities and conceptions of class.

For the first time since the early days of the revolution, buyers and sellers will be allowed to set home prices and move when they want. Transactions of various kinds, including sales, trades and gifts to relatives by Cubans who are emigrating, will no longer be subject to government approval, the new law says.

“To say that it’s huge is an understatement,” said Pedro Freyre, an expert in Cuban-American legal relations who teaches at Columbia Law School. “This is the foundation, this is how you build capitalism, by allowing the free trade of property.”

Cuban officials would disagree; they argue that they are carefully protecting socialism as they move toward economic reform, and the new law includes some provisions that seem aimed at controlling both speculation and the concentration of wealth. Owners will be limited to two homes (a residence and a vacation property) and financing must go through Cuba’s central bank, which will charge fees, which have not been determined. And a tax of 8 percent will be split by the buyer and seller.

Nonetheless, experts and Cuban residents say the law’s implications are likely to be far-reaching. In a country defined by limited change and pent-up demand for freedom of all kinds, they argue, the law will probably open a Pandora’s box of benefits and risks.

On one hand, billions of dollars in property assets that have that have been essentially unvalued or undervalued and locked in place for decades would be available for sale.

Economists on the island favouring economic liberalization have said the country’s other changes – making room for small businesses, and private agriculture – have been limited by lack of internal demand. Some experts say home sales could free up the capital needed to jump-start the island’s seized economy. At the very least, they argue, it will probably lead to a boom in renovation.

“With a housing market, suddenly people have some wealth and that’s a stake in the economy that generates activity,” said Ted Henken, a professor at Baruch College in New York.

Yet there are also significant social concerns. Mario Coyula, Havana’s director of urbanism and architecture in the 1970s and ‘80s, said that wide-scale buying and selling would lead to a “huge rearrangement” in Havana and other cities as the wealthy move to better areas. He and others said it would inevitably exacerbate class conflict.

And because the island has a shortage of housing – with many families and even divorced couples continuing to live together for lack of a better option – critics say that any displacement could raise the prospect of homelessness. For example, if two families are sharing a home and one holds what currently amounts to Cuban title with limited rights, the new law says that the titleholder can sell and the tenant family would eventually have to move.

Many Cubans say they are afraid that the market system will leave them in the lurch.

“What happens if I sell my home and then I can’t find another one to buy? Where do I sleep?” said Felix Mendez, a 47-year-old hospital technician looking at signs for property swaps tacked to trees on a Havana boulevard. He said he would prefer to stick with the complex bartering system currently in use. (Under the new law, that too will be subject to a tax – 4 percent of the value of the transaction.)

One unanswered question involves the role of foreigners and Cuban exiles.

The law generally requires residency, but Freyre said the section of the law applying to areas of “descanso” or “veraneo” – vacation or summer destinations – leaves open the possibility of exceptions in selected places, perhaps coastal areas, Old Havana and the golf communities that are currently under development with foreign investment.

In exile communities like Miami, there are already efforts under way to funnel money to relatives so that they can buy new homes or old family homes that were nationalized.

Most experts, and Cubans on the island, expect these efforts to accelerate.

“I don’t know if they will control the market,” Philip Peters, an expert at the Lexington Institute in Washington, said of Cuban-Americans. “But it is certainly going to be the case that the market is going to settle in a way that’s heavily influenced by demand from outside Cuba coming from relatives.”

Of course, even if the market is open, it may not be transparent. The culture of hiding wealth, from the government, from neighbours, is deeply ingrained in Cuba, and though the new law includes the threat of prison for people caught lying about home prices, Cubans who work in real estate today expect buyers and sellers to disguise the true value of transactions.

“Nobody who has been working, honestly, in a job in Cuba in the past 50 years could possibly afford to buy a second home,” said Gerardo, a property broker in Havana who asked that is full name not be used because his job is still illegal. “That money has to come from relatives overseas.”