Caribbean Housing Crisis Deepens as Construction Costs Remain Elevated and Affordable Supply Falls Further Behind Demand

Publication Date: 3 August 2023  |  Coverage Period: 3 July – 2 August 2023

Morning Briefing

• Caribbean housing affordability metrics have deteriorated to crisis levels across most territories, with the ratio of median house prices to median household incomes reaching 10:1 or above in several major markets, placing homeownership effectively beyond reach for the majority of working households without subsidised financing.
• Construction costs across the Caribbean remain 25 to 40 percent above 2019 pre-pandemic levels, driven by persistent supply chain residuals, elevated global steel and concrete prices, acute skilled labour shortages and continued logistics cost premiums on island territories.
• Jamaica’s National Housing Trust reported a backlog of over 50,000 approved but unfulfilled housing loan applications in July 2023, reflecting a demand pipeline that the Trust’s current housing supply programmes and partner developer output cannot satisfy at the pace required.
• Barbados’s Estimates of Expenditure for 2023–24 allocate BDS$180 million for social housing and affordable housing programmes, representing the government’s largest housing budget in a decade, yet industry analysts note this remains substantially below the level required to address the island’s estimated 8,000-unit housing deficit.
• The Eastern Caribbean Central Bank’s July 2023 economic bulletin flagged housing affordability as a ‘systemic risk’ for OECS member economies, noting that elevated housing costs are contributing to outmigration of working-age populations from smaller island economies.
• The Dominican Republic’s property market continues to demonstrate bifurcation, with the luxury and tourism-facing segments performing strongly while domestic affordable housing delivery is running well below the 50,000 units annually that government agencies estimate are required to meet current household formation rates.

The Caribbean Housing Crisis: Scale, Causes and Consequences

The Caribbean housing shortage, long a structural feature of the region’s social and economic landscape, has reached a level of severity in mid-2023 that justifies the term crisis without qualification. Across virtually every Caribbean territory — from the largest economies like Jamaica and Trinidad and Tobago to the smallest OECS micro-states — the gap between the housing that households need and the housing that the market and public sector are actually delivering has widened to dimensions that are measurably affecting economic outcomes, social cohesion and demographic trajectories.

The crisis has multiple, mutually reinforcing causes. On the supply side, construction costs that remain 25 to 40 percent above 2019 pre-pandemic levels have fundamentally altered the economics of affordable housing development. When steel rebar that cost US$650 per tonne in 2019 is still trading above US$750 per tonne, when Portland cement prices have not retreated from their 2022 peaks, when the container shipping costs that determine the price of every imported building material remain above pre-pandemic norms despite easing from their 2021 highs, the unit cost of constructing a dwelling has risen in ways that cannot be absorbed without either increasing selling prices or accepting below-market returns — neither of which supports affordable housing delivery at scale.

Skilled labour shortages compound the materials cost problem. Caribbean construction industries are experiencing acute shortages of qualified tradespeople — electricians, plumbers, masons, carpenters and other skilled craftsmen — that reflect decades of outmigration of skilled workers to higher-wage markets in the United Kingdom, Canada, the United States and the wider Caribbean. Jamaica, in particular, has seen a steady emigration of construction trade workers, with many skilled individuals opting for the significantly higher wages available in North America over the local alternatives. This skills drain creates project delays, quality control challenges and wage inflation in the construction sector that further increases building costs.

On the demand side, population growth and urbanisation are driving household formation at rates that outpace supply in most Caribbean capitals and major urban centres. Kingston, Port of Spain, Bridgetown, Georgetown (Guyana) and the principal urban areas of the OECS states are all experiencing household formation rates that reflect both natural population growth and rural-urban migration, creating sustained demand for urban housing that the current supply pipeline cannot satisfy. The additional demand from diaspora returnees and international buyers — who compete directly with domestic households for the same housing stock, typically with significantly greater purchasing power — exacerbates the supply constraint at the price points most accessible to local working households.

Jamaica: NHT Under Pressure and a Backlog That Demands Action

Jamaica’s housing challenge is in many respects the Caribbean’s housing challenge writ large — a microcosm of regional dynamics operating at a scale that makes the problem both more visible and more politically acute. The National Housing Trust, Jamaica’s cornerstone housing finance institution, reported in July 2023 a backlog of over 50,000 approved but unfulfilled housing loan applications. This figure represents not just a bureaucratic bottleneck but a fundamental market failure: households that have qualified for NHT financing, demonstrated their creditworthiness and commitment to homeownership, and are prepared to proceed — but cannot because the housing units they would purchase with NHT loans do not exist at the required price points and in the required locations.

The NHT backlog reflects the convergence of all the supply-side constraints discussed above. Private developers operating in the price range that NHT-financed buyers can access — broadly, units in the J$10 million to J$20 million range — face construction cost structures that make profitable development at these price points nearly impossible without substantial cross-subsidy from higher-margin luxury or commercial development. Government-developed housing through NHT’s own schemes moves slowly, constrained by land acquisition timelines, planning approval processes and contractor capacity. The result is a growing queue of aspirant homeowners with financing access but no suitable supply to purchase.

The Bank of Jamaica’s policy rate of 7.00 percent, maintained at its July 2023 monetary policy committee meeting, compounds the affordability challenge for those who cannot access NHT financing and must rely on commercial bank mortgage products. Commercial bank mortgage rates in the 9 to 12 percent range in Jamaican dollar terms are not merely inconvenient for middle-income Jamaican households — they are effectively prohibitive. A J$15 million mortgage at 10 percent over 25 years generates a monthly payment that exceeds the gross monthly income of the median Jamaican formal sector worker, making owner-occupied homeownership a mathematical impossibility for the majority of the employed population without access to subsidised financing.

Barbados and OECS: Different Scales, Similar Structural Failures

Barbados faces a housing deficit that the government estimates at approximately 8,000 units — a significant number for an island of 280,000 people. The 2023–24 budget allocation of BDS$180 million for social and affordable housing represents genuine political commitment but falls well short of the investment required to close the gap. Industry analysts calculate that delivering 8,000 affordable housing units at current construction costs would require capital investment in the range of BDS$1.5 to BDS$2 billion — roughly the entire annual Barbados government budget — making the deficit resolution a multi-year programme under even the most optimistic resource mobilisation scenarios.

The OECS states face a particularly acute version of the housing crisis that the ECCB has now formally characterised as a ‘systemic risk’. In small island economies where the total housing market might involve only a few thousand transactions annually, the distorting effect of overseas buyer demand — from international second-home buyers, CBI investors and diaspora returnees — on local housing prices is disproportionate. In Grenada, St Kitts, Antigua and St Lucia, overseas buyers with purchasing power derived from earnings in hard currency markets can — and routinely do — outbid domestic buyers for properties that local households consider their primary housing market. The result is price inflation in the middle market that pushes homeownership aspirations for working residents progressively further out of reach.

The ECCB bulletin’s reference to outmigration as a consequence of housing affordability is particularly sobering. When young professionals in Antigua or St Lucia cannot afford to purchase or even rent adequate housing in the communities where they work, the calculus increasingly favours emigration to Canada, the UK or the United States where, paradoxically, housing in smaller cities may be more accessible on a working professional’s salary than it is in the Eastern Caribbean. This outmigration dynamic creates a demographic and human capital challenge that compounds the economic development constraints already facing small island states.

Private Developers and the Luxury Bias: A Market Failure Analysis

The private development sector’s response to the Caribbean housing crisis has been, in market terms, entirely rational: developers have directed their capital and capacity toward the market segments that offer acceptable returns at current cost structures, which in most Caribbean markets means luxury, upper-mid and tourism-facing property rather than affordable housing. This behaviour is not a failure of corporate social responsibility but a predictable outcome of a market where construction costs have risen to levels that make affordable housing development commercially unviable without subsidy or regulatory compulsion.

In Jamaica, the development pipeline for the 2023–24 period is dominated by gated community residential developments targeting the J$25 million-and-above market — where construction costs and a reasonable developer margin can be recovered through sales prices that the income distribution can only support at its upper end. The north coast tourism property pipeline similarly reflects the profitability differential between tourism-facing development (where short-term rental yields justify premium prices) and affordable residential development (where constrained purchaser purchasing power limits sale values).

The Dominican Republic’s market bifurcation is perhaps the clearest illustration of this dynamic at Caribbean scale. The DR’s construction industry — one of the most productive in the region — is simultaneously building luxury resort condominiums in Punta Cana at US$2,000 to US$4,000 per square metre for international investors and struggling to deliver the 50,000 affordable housing units annually that the government’s own housing agency estimates are required for domestic household formation. The units being built are not the units that the majority of the Dominican population needs. This is not unique to the Dominican Republic; it is the structural condition of Caribbean housing markets in 2023.

Caribbean Leaders This Month

Trinidad and Tobago has, through its Housing Development Corporation and energy-revenue-funded social housing programmes, maintained a higher per capita rate of affordable housing delivery than most Caribbean peers. While the HDC’s output still falls short of the demographic demand, the energy sector backstop to public housing investment provides T&T with a resource advantage that most of its Caribbean neighbours lack.

Dominican Republic is taking steps to incentivise affordable housing delivery through its low-cost housing programme (Plan Piloto), though the gap between programme ambition and delivery reality remains significant. The country’s scale and construction sector capacity give it theoretical advantages in ramping affordable supply that smaller Caribbean economies cannot replicate.

Jamaica is advancing public consultations on a revised national housing policy that would include incentives for private developers to deliver affordable units as a condition of approval for larger residential developments, a mechanism analogous to the ‘affordable housing quotas’ used in several UK and North American planning systems. Whether this approach can gain political and developer support remains to be seen.

Barbados deserves recognition for its housing budget allocation, even if the quantum is insufficient to close the deficit. Prime Minister Mottley’s government has demonstrated political will to address the housing crisis through public investment, and the Bridgetown Initiative’s climate finance framework, if successful, could in principle unlock additional concessional capital for housing investment in small island states.

Guyana is facing its own housing crisis in unusual circumstances — a booming economy generating rapid household formation and property price inflation at a pace that is outrunning public housing supply despite significant new government resources derived from oil revenues. Georgetown’s middle-income housing market is becoming progressively less accessible even as the country’s aggregate wealth expands.

St Lucia and other OECS states are wrestling with the international buyer impact on domestic housing affordability, with some jurisdictions beginning to explore regulatory approaches — foreign buyer stamp duty differentials, affordable housing reserve zones — that are used in other markets to protect local housing access.

Antigua and Barbuda has signalled intent to review its approach to housing land allocation, recognising that the current pattern of land development — where prime coastal areas are predominantly developed for tourism and overseas buyer residential use — is exacerbating the displacement of local households to less accessible inland locations.

Belize faces housing pressures compounded by sustained population growth and significant immigration from Central American neighbours, creating a housing demand profile that neither the government nor the private sector has yet designed programmes adequate to address. Overall July regional performer: Trinidad and Tobago, for maintaining the region’s most sustained government-backed affordable housing delivery programme through energy-sector-funded public investment, even as the scale of the challenge continues to grow.

Looking Ahead

August will see Caribbean housing ministers and planning officials continue to wrestle with the affordable housing deficit at both the national and CARICOM regional level. The CARICOM heads of government meeting communiqué from the July 2023 Paramaribo summit flagged housing as a priority issue, and follow-up technical work is expected to produce recommendations on regional approaches to construction cost reduction, skills development and concessional housing finance that could be presented to heads later in the year.

Construction material prices will be watched carefully as the global supply chain situation continues to normalise. Any meaningful easing in steel, cement or imported building material costs would have a direct positive impact on the economics of affordable housing development in the Caribbean, potentially bringing some shelved affordable projects back into viability. The outlook for global construction materials markets through the second half of 2023 is cautiously positive, though the pace of price normalisation has been slower than many Caribbean developers had hoped.

The US Federal Reserve’s July 2023 rate decision — raising its benchmark rate to 5.25–5.50 percent in what many analysts believe is the final hike of the current cycle — will be parsed carefully by Caribbean central banks and mortgage lenders. If the Fed has indeed reached its peak rate and the next move in US monetary policy is a cut rather than a further hike, Caribbean mortgage markets could be approaching the inflection point where borrowing costs begin to ease, potentially providing modest relief to the affordability crisis in the months ahead. But even the most optimistic rate cut timeline suggested by futures markets places meaningful easing in mid-2024 at the earliest, leaving Caribbean first-time buyers to navigate the current hostile environment for some time yet.

The Caribbean Property & Investment Review is published monthly and covers developments during the preceding calendar month. All factual statements reflect information publicly available at the time of publication.