By Francisco Toro
There’s a particular perversity to the story of El Encantado Humboldt – the large, nearly finished housing development in Caracas chavismo decided to expropriate last week. More than 1,500 apartment owners now find themselves in legal limbo and very much at risk of losing their just-purchased homes as the government deliberates on whether other families “need them more”. At a mediation session earlier this week called by the consumer protection agency Indepabis to address the dispute, only pro-expropriations community groups were allowed to participate, with the owners’ association physically barred from the event.
Once again, the government finds itself in the odd position of acting forcefully to protect people of outrages that the alleged victims do not recognize. For instance, pro-government community groups allege that the buildings were not built to code, a pretext the owners would have contested had they been included in the discussion. And chavista officials alleged that the developer acted abusively and coercively in dealing with buyers – another allegation roundly refuted by the vast majority of Encantado Humboldt buyers. In effect, the government’s claim to the mantle of defender of the downtrodden is undermined by nothing so much as the supposedly downtrodden’s actual views. What El Encantado Humboldt’s owners do know is that the measure to expropriate the development has slammed the breaks on all mortgage negotiations surrounding the development, and made it impossible to sign final ownership papers.
The expropriation of El Encantado Humboldt is perverse on a number of levels. For years, as Chávez rhetoric became increasingly radicalized, the government tried to assuage middle class fears saying they were only interested in Big Capital – pointing at the commanding heights of the economy (as though the oil industry hadn’t already been nationalized for a generation when they took over.)
Concerns that a process that starts out targeting big capital can very easily degenerate into a generalized assault on all private property were routinely dismissed as fear-mongering or denounced as “part of an orchestrated campaign to discredit the revolutionary government.” Only reactionary cranks could believe Chávez would want to take your apartment, right?
Turns out in revolutionary times, yesterday’s shrill paranoid fears have a way of turning into tomorrow’s headline with unsettling frequency. While the ownership structure in the housing development is not entirely clear, what this sordid little episode makes clear is that the government does very much intend to extend its reach into the housing sector. Within a year or two, it’s easy to see this kind of thing becoming routine, just the way things are now. And the one-time reassurance about how the government would never ever in a zillion years consider this sort of thing? Bien gracias.
What’s most alarming about this case, though, is the way it showcases, yet again, the government’s tin-ear for the role of incentives in policy-making.
It’s easy enough to see the chilling effect this kind of measure is likely to have on investment in the construction sector: with this precedent in the books, who’s going to want to risk (or lend) a substantial sum for private housing construction? Nobody, obviously.
The government doesn’t seem to grasp that Pottery Barn rules apply: You Break It, You Own It. Having sapped private enterprise of the confidence it takes to invest in the housing sector, the only entity left to step into the breach is the government. But, for the Nth time, the government’s plan seems to be to undermine a private solution to a problem without accepting any responsibility for adopting a public one in its place.

By Francisco Toro