Government and banks team up on housing development
An aggregate $50 million government guarantee to jump-start residential development in the island’s economic empowerment zones was announced this morning by David Burt.
A memorandum of understanding with the island’s banks would allow “a reduction in total borrowing rates for large-scale and mixed-use properties that meet the appropriate guidelines”, the Premier said.
Mr Burt appeared with Geoff Scott, the chief executive of the Bermuda Bankers Association, along with executives from HSBC Bermuda, Clarien Bank and Bermuda Commercial Bank, who have committed to offer better interests rates to eligible applications.
The partnership is intended to boost the approved residential scheme for EEZs launched in 2022 by the Bermuda Economic Development Corporation to improve the housing stock in the island’s three EEZs — Hamilton, St George’s and Somerset.
Mr Burt said: “Features of the approved residential scheme widen the scope of potential investment by removing certain ownership restrictions as well as customs duty.”
However, the BEDC identified “the cost of borrowing as a barrier to prospective investors and developers”, which Mr Burt said had hampered buy-in to the scheme.
The sweetener to the programme, known as the approved residential scheme kick-start programme, comes with a total limited commitment by the Government of $50 million.
The Premier added: “If there is any additional exposure, those matters will need to be agreed by the Government”.
He said the government guarantee would remain in place until the expiry of six years after construction.
“The Government does not have any involvement or influence on the banks’ credit underwriting or enforcement decisions.”
Mr Burt said the banks would be left to set their own interest rates according to the varying scope of potential developments.
He added: “There is no agreed set rate.”
Mr Burt said the incentive was aimed at spurring construction and increasing the island’s stock of affordable housing.
He noted further stimulus packages such as the urban strategy for North East Hamilton permitting greater leeway on the height of new buildings.
The island’s lack of affordable housing was singled out by Mr Burt ahead of the 2024-25 Budget as the most pressing issue on the minds of Bermuda voters.
The latest Budget also set aside a $10 million grant increase for the Bermuda Housing Corporation to boost affordable housing, on top of the $15 million already allocated.
At yesterday’s announcement, Mr Scott said the Government’s “unconditional guarantee” would allow lenders to offer lower interest rates for qualifying projects — but was “not intended to enhance or replace underlying creditworthiness”.
He added: “It won’t make an unbankable project bankable.”
He said each bank would evaluate loans on their own merits.
Mr Scott said banks had agreed to a scheme that would promote economic development and growth for the island, and “bring down the cost of borrowing while still maintaining competition between banks”.
Criteria for eligibility are laid out under the existing scheme, either for construction or the renovation and enhancement of existing residences.
Mr Burt said the MOU had been “negotiated and now completed”.
He highlighted the Government’s commitment to bring in 8,000 extra jobs, with the island “on our way with 1,000 jobs added last year”.
• For the Premier’s full announcement, see Related Media.
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