PM’s 83-acre residential plan isn’t enough, says developer
While calling it a good thing that the government is seeking to assist homeowners, Arawak Homes President Franon Wilson said Prime Minister Dr. Hubert Minnis’ plan to sell property in western New Providence for $50,000 per lot does not help enough people.
The prime minister tabled a resolution in the House of Assembly on Wednesday night for the government to develop 83 acres of land, located north of John F. Kennedy Drive, between Prospect Ridge and the Ministry of Public Works, geared toward young professionals.
The development would benefit about 150 applicants, with parcels measuring approximately 95×100 feet.
Wilson said the biggest challenge people have is coming up with the down payment and closing costs of purchasing a property and if the government wanted to help more people, it would have addressed that issue.
“Part of that closing cost is the government tax. Once you cross a line, the government is telling you that your path to home ownership is significantly harder,” he said in an interview with Guardian Business yesterday.
“Anytime someone is assisting in homeownership, to me that’s a good thing. With that said, I think there are different ways to go about doing it. I think that what I would have preferred to see was an avenue that everyone in The Bahamas was able to benefit from. For example, you have the first-time homeowner’s exemption and as a result of that, a slew of people have been able to own their own homes as a result of that policy, because as a first-time homeowner you don’t have to pay that stamp duty (government tax).”
The government has made several amendments to the Stamp Act since 2018.
As it stands, conveyances, mortgages, long-term leases and other real property transactions attract value-added tax of 2.5 percent for properties valued under $100,000 and 10 percent for properties over $100,000.
First-time homeowners are exempt from paying taxes on real estate transactions valued below $250,000.
Wilson suggested it may be more beneficial to cap the exemption for first-time homebuyers, so that they can continue to benefit beyond that threshold.
For instance, Wilson suggested government cap the exemption at ten percent up to $250,000 and only require first-time buyers to pay on the amount that exceeds the cap.
“If you buy a home for $249,000, you don’t pay anything, but if you buy a home for $251,000 you pay $25,000 in taxes. Today, if you get a home that’s $251,000, the government could say they would cap that exemption. So the government is telling you, look we’ll give you $25,000 and if you go higher than that we charge you ten percent based on how high you go. So if you say you want a home that’s $300,000 the government would give you your first $25,000,” he said.
“So, if your home is $300,000 the tax on that is $30,000, but the government could give you the first $25,000 on that 30 and you give me the extra. So, the further you go the more you pay. At the end of the day, the goal is to try to get people in homes. “
Wilson said when the tax exemption came into effect more than a decade ago, $250,000 could get you a well-appointed 100×100 lot in a desirable neighborhood like Twynam Heights.
“But today, if you look at it, people call around and they ask what they can get for $250,000 and it’s definitely not Twynam Heights on a 100×100 lot,” Wilson said.
He noted that once you cross that line, homeownership becomes significantly more challenging, adding that under his scenario everyone who is looking to get a home can afford it, “whether it’s in a government subdivision, or a home in Twynam or out west or out east”.
“Everyone could benefit. That’s just one example of how everyone can benefit instead of saying whoever goes in this particular area is straight.”
Minnis said on Wednesday that the government purchasers would not have to pay government taxes on the properties for two years and would have to build their homes within those two years.
He said the government intends to put all infrastructure in place for the development and lots would be worth $150,000.
However, the government would have the first right of refusal on any property resales and anyone who wants to sell would have to sell back to the government for a “slightly higher price” than what was paid.
“I can understand the place the government wants to do this from, but to me, I always thought that the goal of government was to help those the private sector couldn’t and then wherever possible, to help the private sector to make homeownership easier for people. Those were what I thought were the two roles. I wasn’t aware of the fact that the government’s role was to facilitate things that the private sector could readily assist with,” Wilson said.