CUBA: Taxes on Rents to Tackle Housing Shortage

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, May 17 1997 (IPS) - Within a few months, people renting property in Cuba will be swelling the list of tax contributors, and their payments will be used to build new housing and to help alleviate the deficit.

The taxable basis and the types of tax will be established by the Ministry of Finances and Prices, and those charging the rent will be obliged to pay taxes on their personal incomes at the end of each year.

“The income generated by this tax will be destined towards the maintenance, repair and construction of housing to benefit the population,” said the Council of State.

The decree-law 171 “on the renting of houses, rooms or spaces” was signed Thursday by President Fidel Castro and published Friday in Granma, the official Communist Party daily.

Owners of houses or apartments will have the right to rent out part or all of their property, but will have to keep a book of accounts listing their guests, and if these are not Cubans, they will have to inform the Immigration and Foreigners Department.

The decree-law will broaden the right of proprieters, by modifying the General Housing Law, in operation since December 1988, which authorised the renting of a maximum of two rooms.

It also established that renting cannot be carried out by a legally entity “in order to be used in activities which correspond to the ends for which the said legal entity was created.”

This basically means the owners of houses will not be able to accept tenants from accredited foreign organisations, firms, entities or countries for housing or any other ends.

Similarly, subletting will still be banned, as will ceding the use of houses, rooms or spaces, or renting when the person intervening is not the proprietor of the place in question or is renting or inhabiting State housing.

“Because of the current housing situation, it is advisable to offer rental to Cubans permanently resident in the national territory,” to contribute to the solution of “housing problems” explained the decree-law.

The housing question is one of the unresolved social problems in Cuba. Not enough units are built, and the problem is compounded by the deterioration of the housing fund and the lack of resources for its maintenance.

Room rental appeared at the end of the eighties as a desired alternative by people working alone and young marrieds wanting to leave their – often overcrowded – parental home, or who had emigrated to the city.

A study of 300 houses in four urban areas of the capital showed that almost all the units registered incorrect use of space.

Those responsible for the study proved that 78.3 percent of the nuclei investigated overused or underused some rooms of the building, according to a source from the Science Academy Centre of Psychological and Sociological Studies.

In 1995, Conrado Martinez, head of government in the capital, told Cuban weekly “Trabajadores” that for this date, Havana, with something more that two million inhabitants, had a stock of 556,000 homes, 49 percent of which are in average or poor state.

Legal renting, authorised to benefit the population became a highly lucrative business in the nineties, due to the high number of tourists visiting the island and the interest of a significant number of them to find lodging cheaper than in the hotels.

For a Cuban living in the capital, renting a one room apartment can cost around 100 dollars in the city centre, although other zones are cheaper and even have rents in Cuban pesos.

Meanwhile, tourists pay between 20 and 30 dollars per day for a room in central Havana as well as paying the proprietor of the house for services like transport and food.

The official exchange rate has the peso on a par with the dollar, but the government bureaux de change sell the dollar at 24 pesos and it bought at 22.

The new decree-law 171 said rental cannot be used as a commercial, industrial or service activity, and the owner and other tenants are banned from carrying out other forms of self employment.

In the cases of renting to foreigners permanently resident on national territory, this must be arranged at the informal rate of the exchange, and not the official rate, something which will be taken into account when taxes have to be paid.

The regulation, which will come into operation 60 days after it is published in the Official Newspaper, will punish the non- fulfilment of its dipsositions with fines of up to 1,800 pesos or 2,000 dollars, according to the type of infraction.