Real estate investment trusts are a bad idea

THE EDITOR, Madam:

An article in the December 29 edition of The Gleaner reported that the Government of Jamaica “is considering a proposal for legislation to facilitate Real Estate Investment Trusts”. This is a very bad idea that will only worsen the housing crisis.

A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, including office and apartment buildings, warehouses, hospitals, shopping centres, hotels and commercial forests. Some REITs engage in financing real estate.

The laws on REITs, in most countries where they exist, entitle a real estate company to pay less in corporation tax and capital gains tax. REITs have enabled speculation on housing, and reduce housing affordability, without increasing finance for building.

The experience in Canada with REITs is mostly negative. Typically, tenants in low-rent buildings are evicted, after which the property-owning REIT makes minor renovations, jacks up the rent and imposes the new, higher rate on another set of tenants who have little choice. The result: less low-cost housing, more people who cannot afford houses, more profit for giant financial corporations and rich speculators.

The solution: decent, rent-geared-to-income, social housing – funded by progressive taxation.

BARRY WEISLEDER

Montego Bay