The nine year recession in Barbados has taken a toll on the economy. The Government’s policy of trying to tax its way out of the recession has failed. As unemployment continues to rise, it appears that industrial development has come to a halt. Foreign reserves are under threat. There is no longer ‘free education’ at The University of the West Indies for students who meet the requirements. The healthcare system is now in shambles and many citizens are struggling to make ends meet.
Unique to today’s situation is the middle class. The large black middle class that exists in Barbados was virtually nonexistent during the 1930’s. Government’s homegrown austerity programme has had a deleterious impact on this segment of the population. Not only the black middle class has suffered, the entire middle class has been affected. Unemployment amongst this sector continues to rise and part and parcel with that unemployment is the inability to pay mortgages due on their homes.
Some will have nowhere to go if their houses are foreclosed on because many of their friends and family are already in the same situation or they have lost the connection to the villages from whence they came and will be unable to find accommodation in the Heights and Terraces. I do not have any figures to estimate the numbers who have been affected but each day brings a new client to Fairness in Action of persons at some stage of loan default.
If a significant portion of the middle class loses their homes, it will be the banks who will become owners of the largest amount of real estate on the island.
The banks in turn will sell their debt to some external entity perhaps the rich Syrians or the Saudis. If this occurs, owing a piece of the rock will become a myth like regional unity. Stockpiles of empty houses will be available as the members of the former middle class will be unable to repurchase.
It is indeed a frightening situation to come to grips with. Nine short years ago, the middle class of Barbados was enjoying the best of what the island had to offer. No one could have ever imagined that so many persons would lose their jobs, their vehicles, insurance coverage or watch all of their cash in their banks accounts dwindle. Along with all this, the prospect for being rehired is dismal.
These luxuries were not available in the 1930’s so they would not have been missed back then. They are the trappings of the middle class that we called progress. Perhaps it would have been wiser to stay in the villages, build a chattel house and as time went by convert it to a bungalow. No mortgages would have been owed to the bank. Unfortunately, we cannot go back so we must deal with the situation at hand.
Someone told me recently that one of the commercial banks is running an advertisement offering to “let us make your dream home”. In fact, they are doing the direct opposite. If the bank repossesses your home especially if you have been paying the mortgage for decades, they are actually killing your dream.
I do believe that the banks in Barbados have a social responsibility to Barbadians. By now, they are fully aware of the effects of the draconian policies of the Government on the mortgagees. In assessing the situation, the banks should have publicized an offer to refinance properties that are in difficulty knowing fully well that there is a cost to each foreclosure process which more likely than not causes the bank loses on its investment.
Apart from financial loses; most banks will suffer from a reputational loss due to the volume and gravity of the current mortgage crisis.
I also believe that more so than the banks that the Government which the people elected should have a social responsibility towards Barbadians.
Throughout this entire period of economic downturn and the harsh home grown austerity programme of retrenchment and high taxation, never once has the Government considered using legislation to put measures in place to prevent homeowners from being disadvantaged to the point where they will lose their home.
It is highly unacceptable for a government not to have understood the gravity of its actions in the first place and secondly not to react.
During the housing bubble that led to the recession in the US, in 2008, the Government stepped in and offered measures that acted as a cushion to prevent many home owners from losing their houses. The share volume of the people in Barbados affected now makes it imperative that the Government must step in and assist them.
The late Errol Walton Barrow reaped the fruits of the seeds that were planted during the 1930 riots when he proclaimed Barbados as an independent nation in 1966. It is indeed shameful that his party has not only destroyed his legacy of education and healthcare but will also be responsible for the death of the thriving middle class of Barbados.
(Heather Cole is a U.S.-based Barbadian who takes a keen interest in domestic developments and contributes frequently to public debate)