How much is your home worth in Venezuela? The government will tell you.  Photographer: Juan Barreto/AFP/Getty Images

In Venezuela, Sell Your House or Lose It

Raul Gallegos is a Bloomberg View contributor, who covers Latin American politics, business and finance. He was a columnist for Reuters and a correspondent for Dow Jones and the Wall Street Journal. He is a graduate of the University of California at Berkeley and Columbia University. He grew up in El Salvador and is based in Colombia.
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Venezuela's government has some odd ideas about how to stimulate the nation's housing market.

Consider a new law that forces homeowners to sell their rental units to tenants. As of Monday, anyone who owns three or more properties and has rented a unit for more than 20 years, must sell it at a "fair price" to be determined by the state. Landlords who fail to do so face fines and could lose their homes.

The government blames a "monopoly on housing" for Venezuela's housing shortage. But forcing landlords to sell to tenants can't possibly solve homelessness. Plus, renters who can't buy their home may be pushed out by those who can. In the best of all outcomes, this new policy promoted by the government of President Nicolas Maduro would leave the housing problem unchanged. It's much more likely that it will aggravate the housing shortage it is designed to ease.

Venezuela's housing shortage has doubled to 3 million homes during the past 15 years since now-deceased President Hugo Chavez came to power and adopted policies that mandated wealth redistribution. The housing deficit is growing by 130,000 units every year, which shows that existing policies, including price controls, that limit investor returns have been a drag on residential construction.

It's easy to imagine things getting worse. Residential buildings older than 20 years, and any others approaching that age, will immediately lose value because real estate investors will get stuck with losses or won't be able to make an adequate return. And why would anyone invest in building new homes in a country where the state already sets rental rates and decrees when and at what prices they must be sold?

The quality of rental homes will also suffer. No landlord with a brain will spend money to maintain a property that the state says must eventually be sold at below-market prices.

The new law will foster more corruption, too. Landlords desperate to protect their investment will have an incentive to bribe officials who have a final say on how much their property will fetch in a sale. It isn't hard to envision some Venezuelans creating false property sales to friends and family as a way to circumvent the new regulation.

Maduro cannot wish or legislate market forces and human self-interest out of existence. Venezuela's strict rental controls are already so draconian that landlords and tenants often negotiate rental rates under the table that far exceed state-decreed levels.

Maduro's administration says it now aims to build 3 million new homes by 2019. But plenty of red tape, corruption and the absence of adequate construction incentives will make it another failed promise. His attack on real estate investors may be meant to hurt those he deems "savage capitalists." But it will only squeeze the remaining members of Venezuela's middle class who haven't already fled the country and will create a bigger housing shortage.

The saddest part about Maduro's latest effort to achieve by decree what should be resolved by the market is that it teaches citizens they must disobey the law to survive.

o contact the author of this article: Raul Gallegos at

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

(Raul Gallegos is a contributor to Bloomberg View. Follow him on Twitter @raulgallegos.)

To contact the editor on this story:
James Greiff at