State controls are whittled back as Raúl Castro abolishes the ban on buying and selling houses
Raúl Castro's decision to let people enter the property market means that 'Cuban socialism is going to look quite different'. Photograph: Tony Hopewell/Getty Images
"I almost feel rich!" says Yeni, 26, speaking from her dilapidated two-bedroom apartment in Havana's Vedado district. Her surroundings are not those of a wealthy woman. The home she shares with an infant cousin and two aunts was built in the 1940s. It has no hot water and has not been renovated in 70 years – but it is hers. And from Thursday she will be able to sell it.
Shortly after the Cuban revolution brought Fidel Castro to power in 1959, all homes effectively became the property of the state. Cubans who remained on the island were given the right to live in the homes they occupied and pass them on to friends or relatives. They were also permitted to swap houses. However, selling or buying was prohibited.All that changed last week, when the Cuban government announced – with significant understatement – an "amendment" to the existing property law. What it amounts to is the creation of a legal property market and the most significant loosening of the state's dominance of Cubans' lives since the revolution.
It is part of a process that has been slowly unfolding since 2006, when Castro was forced by illness to hand over the presidency to his brother, Raúl, after 47 years in power. The younger Castro, who turned 80 last June, has emerged as far less dogmatic than Fidel. He vowed, on taking office, to make "structural changes" to the way Cuba was run. At first those changes appeared minuscule; Cubans were permitted to have their own mobile phone contracts and stay in previously off-limits tourist hotels.
But in the past 18 months the scale of the reforms has increased. Last month, in a bid to increase productivity, it was announced that private farmers would be allowed to lease up to 67 hectares (165 acres) of land and cultivate it themselves. Raúl Castro has also vowed to reduce the number of people on the state payroll by 20% and boost self-employment. In two years, more than 300,000 people have moved into private enterprise. Street stalls selling everything from pirate DVDs to kitchen implements have appeared all over Havana.
"I'm not sure I like Raúl Castro," said Yusi, a street hawker selling salsa CDs to tourists on Havana's Malecón. "But maybe I like what he is doing."
Castro is adamant that all his reforms are designed to preserve Cuba's socialist system – in which free, albeit limited, healthcare and education are provided for the entire population – rather than to dismantle it.
Philip Peters, a Cuba analyst from the Lexington Institute in Arlington, Virginia, says the move on property sales is likely to have deep ramifications: "Overnight, this represents a creation of wealth for thousands of Cuban families."
It is likely to bring in a flow of capital to the economy and a tax windfall for the government. Until now Cubans who want to move have used Cuba's permuta system. It involves finding someone with a property of approximately equal size and agreeing to swap. Supposedly, no money is involved, but the deals invariably include under-the-table payments and no benefit for the government.
The new, legal market will not be unrestricted. Foreigners, apart from those who have permanently emigrated to Cuba, will not be allowed to buy property. (The Cuban government is still considering a separate scheme that would allow foreigners to buy new-build houses around proposed golf courses on the island.)
Cubans will be limited to owning a maximum of two homes each, with one being designated a "holiday home". A stamp duty of 4% will be charged to both the buyer and the seller. The buyer will have to prove that the source of any funds is through legitimate means. Given that the average state income is around $20 a month, some may struggle to explain where the money to purchase property worth several thousands of dollars comes from.
The reality is that most of the money will come from abroad, largely from Cuban relatives in the US. Once branded gusanos, or "worms", by Fidel Castro's government, Cuban-Americans are increasingly providing a vital source of hard currency for the island. Annually they send an estimated $1bn in the form of remittances.
The flow of money and people from the US to Cuba has soared since 2009, when Barack Obama lifted almost all of the restrictions on Cuban-Americans who wish to send cash to Cuba or visit the island. Havana airport's terminal 2 receives up to six flights a day from Miami alone, and new routes from other US cities are being opened up. Some Cuban-Americans are even returning to the island to retire.
The property changes might also encourage a flow of people in the reverse direction. Until now, in one of the most despised provisions of Cuban emigration law, anyone leaving permanently forfeited the right to their property, which was seized by the state. The law led to families being split, with one member staying behind to look after the house while his or her relatives emigrated. Now those leaving will be able to sell their home and keep the proceeds.
Generally, these latest reforms have been welcomed as long overdue by Cubans, although some complain that they still fail to solve the country's chronic housing shortage and will provide little benefit to those millions who do not have any property in their own name, or the money to move home.
And it remains to be seen how far the government will permit an open housing market to develop. Currently no provision in Cuban law allows for the role of estate agent as a legal occupation. Advertising is largely prohibited.
Nevertheless it does seem that Raúl Castro, once dismissed as little more than an understudy to his brother, is making his mark. "Raúl has shown he is far more comfortable than his brother ever was, with a smaller state and more market activity," says Peters. "Cuban socialism is going to look quite different."
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