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The Caribbean is a playground of the rich and famous. It is also seen as business-friendly. Perhaps surprising, then, that some Caribbean countries have strongly restrictive almost socialist-style housing market systems, with strict rent controls, and strong security for tenants.
In a study, the Global Property Guide examines the landlord and tenant systems of 19 Caribbean countries and territories in terms of rent control, security deposits and tenant eviction. With contributions from local law firms, each economy is rated as strongly pro-tenant, pro-tenant, neutral, pro-landlord or strongly pro-landlord.
The study notes that, against popular notions, a “pro-tenant” rental market is actually harmful to tenants in the long run. It discourages landlords from investing in new rental units, leading to less supply. As demand for rental units increases with population growth, shortages develop. Landlords lose the incentive to maintain and upgrade their rental units. The quality of the existing rental housing stock deteriorates.
The most restrictive rent control law in the Caribbean is enforced in the US Virgin Islands. For housing accommodations, the maximum rent ceiling is the rent in force and in effect on July 1, 1947. For buildings created and/or rented after July 1, 1947, the maximum rent allowed is the first rent charged for the unit.
In Jamaica, the Rent Assessment Board sets the rental for all commercial and residential premises. The annual rent ceiling is 7.5% of the assessed value of the premises.
In the Dominican Republic, there is universal rent control with the maximum monthly rent fixed at 1% of the value of the rental property, in effect, 12% annual rental returns.
Evicting tenants is a serious problem in some parts of the Caribbean. In the Dominican Republic, tenants get more or less perpetual security, notes law firm Guzman Ariza. Rental agreements normally last for three to six months. However, even if the contract has already expired, the tenant can continue living in the unit as long as rent is paid. If the landlord refuses to accept the rent, the tenant can simply deposit the amount Banco Agricola. The bank will hold the amount for the landlord and the tenant can stay in perpetuity.
The law in St. Vincent and the Grenadines also generously protects the tenant. Prior to eviction, the tenant is given at least six months to look for an alternative dwelling, according to law firm Knights Chambers.
The Global Property Guide’s view is that free rental markets, with adequate incentives for landlords, tend best to encourage the supply of rental housing. In the Caribbean, most housing projects focus on the direct provision of housing units with limited and, at times, dismal results. The misplaced focus on direct housing provision, long ago abandoned in Europe, is still in force in several countries.
By removing restrictions, most notably in the Dominican Republic and the US Virgin Islands, the rental market for local tenants could be developed, improving living standards.
About The Global Property Guide
The Global Property Guide is a research publication and website (globalpropertyguide.com) for the high net worth investor in residential property – providing information about the process and benefits of buying property in any country in the entire world.
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Prince Christian Cruz, Senior Economist
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Matthew Montagu-Pollock
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