Creating Value out of Dead Real Estate in Jamaica

This Land is Your Land: Creating Value out of Dead Real Estate
Basil Waine Kong, J.D.

The past fifty years in Jamaica have been characterized by glaring inequality, an active underground economy, high inflation, a weak currency, reduced incomes, high food and energy costs, inordinate influence of Dons and gangs along with flagrant disregard for law and order. Foreign investors are few and our professionals and entrepreneurs are leaving our country with their disposable wealth, knowledge and skills to seek their fortunes elsewhere. We cannot continue to ignore this turmoil.

Every society has people who live in the mainstream, who contribute to and hold a stake in the community; and others who, by choice or circumstance, live on the margins. The "margins" of Jamaica have reached such proportions that they threaten to become the new mainstream. The rivers have swelled their banks and the single most important factor in holding back the tide is rigorous enforcement of the rights to private property.

I asked someone who live in one of our extra legal communities how much his family of seven pays for rent and he said they did not pay rent. I then asked who owned the house they lived in and he said he didn't know but they have been living there for over twelve years. So, how do you get power, water and sewage? "We just work it out."

It may seem like the cruelest of "proposals" to pin our hopes for social progress on private property, when any serious attempt to enforce private property in Jamaica would, in the short term, make outlaws out of nearly half of the population. But we do people who live on the margins no favors in allowing them to occupy land to which they will never have a claim.

The most important vehicle for social mobility is home ownership. For most of us it is the most important asset we will ever own. It is our address, our identity. It is literally the bedrock beneath our feet. We gain equity in it. We borrow against it to educate our children, address critical health issues for our loved ones and to start a business. With any luck, we bequeath it to our children and grand children.

The single most important source of funds for new business start up for various enterprises in developed countries is real estate (one's home). In spite of their obvious poverty, if we adopted a concerted approach to establish good title (legally enforceable property rights) for property occupied by the poor, we may find that we already have the assets to rescue the country and put us on a path to prosperity. At present, real estate taxes are collected on only a small portion of our land.

The energies and aspirations of the poor are waiting to be released. As much as 50% of our people are "coutching" in extralegal situations. While the value of any given plot may not have high value, cumulatively, the value is substantial. The moment is ripe for action. Let us unleash the potential of these dead assets. There is a great deal of value in our land.

The first step is to update our records and to fix ownership to every parcel of land in a formally organized computerized system certifying each owner. By accomplishing this awesome task:
1. Property owners would be vested along with the owner's right to contract for water, telephone, sewage and electrical services as well as enhancing the value of our land holdings by increasing the net of potential numbers of buyers if and when they decide to alienate (give away or sell) their land holdings.
2. Debts could be more easily collected.
3. Law enforcement would be facilitated.
4. Taxes could be collected.
5. A more accurate census could be taken that would enhance voter
registration and extend voting rights to landless or homeless citizens.
6. Delivery of mail, summons and service would be possible.
7. Property owners would be motivated to form Homeowners Associations
to enhance the value of their properties and protect value.
8. Pride of ownership would be extended to more citizens.
9. The need for bribing government officials and Dons would be greatly
reduced.

Albert Einstein taught us that there is enough energy in a brick to make an atomic bomb that could destroy a city if we only had the skills to harness and release its energy. Likewise, there is substantial potential in these shacks and dead assets if we can draw out the value and convert them to real value. Dunns River may be a beautiful river but it also generates electricity that powers manufacturing and production.

Land reform can be the platform on which the entire economy can be based. As a primarily agrarian society, it could be a tremendous boost to the economy if it then leads to increased production as the price of food is increasing rapidly not only in Jamaica but in the world.

Over the past fifty years, there has been a steady increase of citizens moving from country to Kingston and Montego Bay. This was graphically depicted in the movie: "The Harder They Come". When they arrive, legal and social barriers prevent them from acquiring legal housing, acquire training and education, obtain employment or start a business. They are more likely to work as day labourers or in the underground economy where they become easy victims of exploitation.

At tremendous cost to individuals as well as our country, our legal system is not only stacked against the poor, it is hostile. Rather than promoting the ambitions of its citizens, the poor are treated like criminals and our government purposely imposes rules and obstacles that serve to thwart their ability to make a living. We seem bent on finding a problem for every solution.

Establishing a legal business in Jamaica is a formidable business. Obtaining the right forms, filling them out, standing in lines, paying the fees and obtain the necessary certifications to operate is a long frustrating process requiring an investment of six months of red tape even if you are a sophisticated businessman. The cost is at least a year's pay for an average worker. Most people opt out of the system and operate their business illegally. In Jamaica, a citizen cannot open a bank account without a utility bill in the person's name.

As much as our people try to do the right thing, the rigidity and cumbersomeness of our laws breaks our citizens more than they break the law. They do clandestine work and apply creative ingenious survival strategies because, without a support system or a little hand-holding, these recent arrivals to the city are hopelessly reduced to living as outlaws---outside the legal system. Residents in these communities can register an automobile, buy their driver's license, buy groceries, get their automobiles repaired, visit barbershops and beauty salons, use taxis, purchase baked goods, obtain the services of a dentist who may have never graduated from Dental School and pays no taxes. But there is a huge cost to bribe officers of the law and local "big men" for protection and the opportunity to operate their various enterprises. Paying taxes would actually cost less and would certainly be less intimidating. Working in the underground economy, they have tremendous competition with each other but they also have to fight the government. If the system is in conflict with the way our people live, we should not be surprised that frustration, discontent, corruption, disrespect for the law, poverty and violence is the predictable outcome. It takes cunning ginalds to outwit the system just to survive.

Government allocations are never for development, training, housing or education for extralegal communities. Whatever is budgeted by the government always take the form of control---police actions, clamping down and catching criminals.

Properties change hands regularly as people get jobs and move. These transactions are not registered; do not involve lawyers or the tax office. These sales (social contracts) are either cash sales or gifts with no transfer of recorded title. Even expensive properties are bought and sold accompanied by some public gathering where the announcement is made so that "everyone" knows whose property it is. The dogs know who their owners are and the limits of their property.

The downside is that these valuable assets are commercially and financially invisible because the people occupying the property has no indicia of ownership to take to the bank for a loan to start a business or purchase an automobile.

In addition to setting up an efficient court system to establish title, my proposal is to establish macroeconomic reform in Jamaica. Let us marshal the resources at our disposal to:
1. Correct this legal failure and create a unified system that is more conducive to a productive and dynamic market economy.
2. Properly survey, map, record all the land in our country and keep our records current and accurate.
3. Research the "chain of title" to include the rights of adverse possessors (squatters rights).
4. Establish a formal property system that integrates the reality of land ownership with the legal records that give good title to people who are rightful owners.
5. Establish the property rights of extra legals.
6. Assume that if land taxes have not been paid for seven years, the property has been abandoned. (Much of our land has been abandoned by people who migrate and no longer have an interest in the property they left behind or the owners may have died and their children have no ownership interest and have taken no steps to establish ownership or to alienate the property).
7. Since our government has a history of making straight roads crooked, we need to establish a Ministry of Advocacy or a None Government Organization whose responsibility it is to:
a. Review our systems and streamline our bureaucracy to
accommodate the needs of our citizens to become legal taxpaying
entrepreneurs. (It is never enough to pass equitable laws without the will
to implement them efficiently and painlessly in the social reality of our
country. Laws and governments should serve the people).
b. Make a strong effort to communicate the advantages of becoming legal. They could, for example, openly operate and advertise their goods and services to a wider customer base.
c. A place to turn for those who are frustrated that they cannot negotiate the process of becoming legal.
d. Make these valuable assets commercially and financially visible.

Public animosity toward judges, attorney and public officials as agents of the rich could be greatly reduced. When most people obey and support the law, it is easy to enforce it against the few who break the law. But if most people break the law, it is impossible to enforce them and everyone can do what they want to do with impunity. Property ownership is the single most important ingredient for instilling respect for the law. According to Lyndon Johnson, Past President of the United States, "We can only have a law abiding society if everyone has a stake in it." Countries with wide distribution of land ownership are stable, prosperous, discourage unruly behavior, and respect for the rights of others increase.

By integrating current extra legals into our legal system, we will release the aspirations and energies of poor people by giving them a stake in the country that they will want to protect. It is time for custom and social contracts to be integrated and come under the umbrella of the formal law. This is a win, win, win for all concerned. As Jamaicans travel and learn how other societies are organized for prosperity, their frustration and bitterness will grow. On the other hand, this plan will liberate the poor and prepare them to be citizens qualified to participate in the development of the country.