Bermuda government and local banks collaborate to tackle housing shortage

In a bid to alleviate the pressing housing scarcity gripping the island nation of Bermuda, the government has forged a groundbreaking partnership with local banks. 

The initiative, heralded as a significant step towards stimulating economic growth, was unveiled during the signing ceremony of a Memorandum of Understanding (MoU) between Premier David Burt and the Bermuda Bankers Association (BBA).

Kickstarting the approved residential scheme

Premier Burt underscored the program’s significance, emphasizing its integration into the broader “Approved Residential Scheme Kickstart Programme,” which was initiated in June 2022. 

The objective of this initiative is twofold: to augment the available housing inventory and invigorate growth within the Island’s economic empowerment zones. 

Moreover, the program seeks to redress economic disparities and empower budding entrepreneurs.

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Government guarantees and bank commitments

Central to the agreement is the provision of a substantial US$50 million government guarantee to support ventures falling under the Approved Residential Scheme within the economic empowerment zones. 

In exchange for mitigated risks, participating banks—such as HSBC Bermuda, Clarien Bank, and Bermuda Commercial Bank—have pledged to extend preferential interest rates to eligible applicants.

Key terms of the agreement

Premier Burt delineated the key terms enshrined within the MoU, including a capped aggregate limit of US$50 million. 

Any additional exposure beyond this threshold necessitates government approval. 

Moreover, the government guarantee will remain in force for six years after the completion of the construction phase. 

Notably, akin to the Mortgage Guarantee Programme, the government will refrain from influencing banks’ credit underwriting or enforcement decisions.

Economic impetus and collaborative efforts

The Premier hailed the collaborative endeavor between the government and participating banks, asserting that the initiative would catalyze economic growth. 

While specific interest rates are contingent upon the scale and nature of individual development projects, each bank has committed to offering discounted rates, thereby substantially lowering development costs.

Bankers’ perspective and Economic Vision

Geoff Scott, CEO of the BBA, lauded the government’s unwavering guarantee, noting its pivotal role in facilitating lower interest rates. 

However, he emphasized that the viability of projects remains contingent upon their inherent merit, underscoring banks’ independent evaluation processes. 

Scott further emphasized the scheme’s dual objective of fostering economic development while preserving healthy competition among banks.

Budgetary allocations and housing initiatives

Premier Burt revealed a substantial US$10 million augmentation to the Bermuda Housing Corporation’s grant allocation during the recent budget presentation. 

This allocation supplements the initial $15 million earmarked for bolstering affordable housing, reaffirming the government’s steadfast commitment to addressing housing challenges head-on.

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