From Social Good to Commodity, Reproducing Economic Inequalities
Frank is a 19-year-old student who lives with his mother, a civil engineer, and grandmother, a retired nurse, in Vedado, a neighborhood considered the social and cultural heart of modern Havana. While there are more luxurious neighborhoods on the outskirts of the city, problems with public transportation make centrally located Vedado the city’s most desirable neighborhood. The family now lives a comfortable middle-class lifestyle, but not because of their work as professionals in the state sector. Frank’s mother gave up a successful career as an engineer to take care of her aging mother. Now the family lives above the mean on the income they receive from renting a recently inherited property to a family of foreigners. With this new source of income, they have moved up economically and socially to a position that is more in keeping with their image of themselves, and their family’s past, than the lifestyle their professional salaries have allowed since the economic crisis of the 1990s. This summer, they were able to spend a week at an all-inclusive beach resort in nearby Varadero.
As Frank explains, “My mom has the house we live in because she inherited it from my great- grandpa (a wealthy landowner who owned a sugar plantation). I have my house because I inherited from my grandpa (an important figure in Cuban public health ministry, renowned surgeon, and decorated internationalist) and so on. All the Cubans who live here, it’s like that. I have the car because I inherited it from my grandpa (who was given the car for his service in the Angolan war). Because if it were based on our merits, on our own efforts, it’s hopeless for the majority of Cubans” (Peréz 2013).
Writing before the real estate market was legalized in November 2011, Cuban urbanist Mario Coyula explained that, “Those who had the luck to live in a good neighborhood and have a good house have ended up with quality properties, although they don’t have exchange value; but those who have not had this opportunity are tied to this reality, with very few chances to improve (their situation)” (2009:24). Today these properties do have exchange values—very high ones—and for families like Frank’s, they are an important source of economic and social mobility in Cuba’s new economy.
Housing has long been a problem in Cuba. Before the Revolution, 75% of families in Havana were tenants, vulnerable to rent hikes and eviction. When the Revolution came to power, evictions were immediately halted. In the first year of the Revolution rents were reduced 30 to 50%, mortgage taxes were eliminated, and all rental properties were nationalized (Trefftz 2011:2). Large numbers of elites left the country and their homes were quickly occupied by squatters or turned into government offices, schools, and health clinics. Residents of Havana’s most notorious slums were resettled in newly-built apartments and newly-abandoned homes.
The Revolution offered new opportunities for education and training from the 1960s–1980s, which allowed widespread upward mobility for the children of Cuba’s rural and urban working classes. Housing construction did not keep pace with the demand of Cuba’s post–1959 baby boom, and opportunities for self-construction were limited. As a result, today most Havana families continue to live in the same homes that their parents and grandparents inhabited generations before. It is not uncommon to meet a surgeon or a university professor who, despite her professional status, continues to live in substandard housing inherited from parents or grandparents, who were working-class laborers. The little housing mobility which did occur took place through a complicated administrative procedure regulated by the state housing offices known as a Permuta in which people could trade dwellings. Uneven trades were prohibited and increasingly complicated oversight procedures were put in place to keep people from profiting off of real estate transactions, in keeping with the state’s position that housing was a social good, not a commodity.
In November 2011, just a little more than 50 years after Cuba’s Urban Land Reform was enacted, a housing market was reestablished in Cuba, transforming housing from a social good to a commodity on the free market and transforming some Cuban homes into sources of wealth and capital. With few exceptions, the post–1959 constructions which benefitted the Pre-Revolutionary working class, known as microbrigades, are considered by Havana residents today to be of poor quality. Their locations in bedroom communities far from city centers, with limited public transportation, necessary services, and sources of employment make them undesirable in the new housing market. While they once “solved” their occupants’ need for housing, their exchange value in the new market is extremely limited. In Havana, 2 bedroom microbrigade apartments from the 1970s go for about $7,000 CUC (1 Cuban Convertible Peso is equal to 24 Cuban Pesos, or $.87 of one USD; and the average salary in Cuba is about $400 Cuban Pesos a month). Pre-Revolutionary constructions of the same size garner $25,000–70,000 CUC, depending on the location.
The inhabitants of newly valuable properties are largely the children and grandchildren of Cuba’s two historical ruling classes: Pre-Revolutionary elites who remained in Cuba after the Revolution, and Revolutionary leaders, many of whom were from Eastern Cuba, who resettled in Havana to take positions in government ministries. Today both groups are using the capital in their re-commodified homes to successfully reestablish themselves at the top of an emerging social-economic hierarchy. By renting out or selling unoccupied or underutilized properties, or downsizing large family homes for more simple quarters, these households are using this economic capital to make investments in new businesses, to increase consumption to socially desired levels unattainable through state sector employment alone, or to fund migratory projects (increasingly of a temporary and cyclical nature).
The re-commodification of housing is contributing to reproducing pre-Revolutionary class structures that were disrupted after the Revolution when widespread access to opportunities for education and technical training, and salaries which were sufficient to meet basic needs, made social mobility possible for Cuba’s working class. The economic crisis of the 1990s put an end to this period of social mobility through education, reconfiguring Cuba’s social structure and laying the ground for a new system of social stratification.
Ideological Shift: New Value, New Capital, Straight to Private Hands
In addition to reproducing class privilege and racial inequalities, the way in which the housing market has been re-established reveals a shift in the Cuban state’s role in regulating the market to guarantee equal outcomes. After decades of complicated regulations and oversight to avoid concentrations of wealth and prevent individuals from profiting from housing transactions, today such concerns no longer determine state policy. Even the modest taxes in place on real estate transactions are rarely paid. The gap between real estate values as assessed by the state and the prices actually being paid in the market is significant, and results in huge losses in tax revenue that could be utilized to improve and maintain health services, education, public transportation, food subsidies and investments in Havana’s crumbling infrastructure (water, sewage, electricity, phone, gas). The assessed values of properties are calculated by the state in Cuban pesos for an economy that has long ceased to exist. For example, a one bedroom apartment that sold for $15,000 CUC in December 2012 was assessed for $6,000 Cuban pesos, or $240 CUC. This may have made sense fifty years ago when the exchange rate between the Cuban peso and the dollar was steady at 1:1, but in today’s Cuba, when a washing machine costs between $200-700 CUC, it’s an open secret that a one-bedroom apartment doesn’t cost $240 CUC. The fictitious property prices as assessed by the state mean that these real estate transactions are barely being taxed. The difference in state income is notable. In the case I mentioned above, instead of paying 4% of the actual sale price of $15,000 CUC, both parties paid 4% on the assessed value of $6,000 Cuban pesos: $480 Cuban pesos or $19.20 CUC. If they had paid taxes on the real sale price the state would have collected $1,200 CUC in taxes.
Rather than taking its traditional position as arbiter of economic equality and redistributing the new wealth being created in real estate transactions to fund social spending, the state seems content to benefit indirectly from the foreign capital being brought to the island through transnational social networks. Redistribution of this new wealth is limited to a trickle-down effect as Cubans who have sold their properties then invest in new businesses on the island or simply use the money to increase their levels of everyday consumption.
Despite 50+ years of Socialist Revolution and social transformations, recent reforms highlight the advantage that the children and grandchildren of pre-Revolutionary and Revolutionary elites maintain in access to economically valuable and socially desirable housing, providing them with opportunities for economic mobility not available to households who acquired their homes through Socialist construction projects which benefited members of Cuba’s Pre-Revolutionary lower and working classes.
Rather than improving the precarious housing conditions in which the majority of families live in Havana, the re-creation of a housing market in Cuba seems designed to attract hard currency to the island through transnational family networks. These injections of hard currency are serving as start-up funds for small businesses and increasing levels of consumption necessary to create a customer base for these new enterprises, but widespread tax evasion means that the money coming into the country stays in private hands, a problem that the state has not yet addressed.
Hope Martinez (American U) is conducting dissertation research on economic and social restructuring in Havana, Cuba. She began preliminary field research in 2011 with a grant from the Tinker Foundation, and her current research is funded by a National Science Foundation Dissertation Improvement Grant.