Construction unions argue that the new solid waste taxes increase the burden on the sector, while developers claim that some low-cost housing projects are beginning to lose economic viability
SANTO DOMINGO– The enactment of Law No. 36-26 on Comprehensive Management and Co-processing of Solid Waste has not allayed the concerns of the construction sector. On the contrary, developers and industry associations assert that the law's implementation leaves open questions regarding the cost of building homes, the taxation applied to real estate trusts, and the potential impact of these burdens on access to housing, especially affordable housing.
Although the new legislation modified the scale of contributions established by Law 98-25, representatives of the sector believe that the debate stopped focusing solely on the amounts to focus on the economic consequences that its application would have on an industry that already faces high financial costs, more expensive materials and delays in the project approval processes.
The concern remains
The warnings began even before the law was enacted. In late June, the Dominican Association of Housing Builders and Developers (Acoprovi), the Cibao Association of Housing Developers and Builders (Aprocovici), the Santo Domingo East Builders Association (Acosde), the La Altagracia Association of Builders and Developers (Adecla), and the Dominican Chamber of Construction (Cadocon) stated that the reform could result in new costs for the development of housing projects.
In a joint statement, the organizations pointed out that including real estate trusts within the new tax obligations could generate a double economic burden on projects that already bear these tax responsibilities through their promoters, a situation that, they warned, would end up being reflected in the final price of the homes.
The unions also expressed concern about the potential tension that the measure could generate with the special regime established in Law 189-11 on Mortgage Market Development and Trusts, an instrument that has served as one of the main mechanisms to promote housing construction and facilitate access to financing.
From rising costs to housing prices
For Rafael Durán, an engineer and real estate developer, the impact of the new legislation goes beyond the payment of an additional tax.
In his opinion, any construction company that operates projects of a certain magnitude easily exceeds the income levels contemplated by the law, and therefore must assume contributions that add to a cost structure already pressured by financial and operational factors.
Durán explained that the situation is even more complex in real estate trusts, where, in addition to the payment made by the construction company, these legal vehicles are also subject to the contributions provided for in the legislation.
"Of course it will have an impact because the price has to increase, but low-cost housing really can't withstand any more increases so that it can be acquired by lower-income classes," he stated.
As he explained, developers face a scenario in which it is increasingly difficult to maintain the profitability of projects without passing on some of those costs to the end buyer.
"What we're doing is moving away from low-cost projects. We're shifting to other types of trusts aimed at a middle class that can absorb those increases," he said.
In his view, low-cost housing currently operates with very narrow margins, so any additional increase ends up compromising its economic viability.
ACOSDE insists on the risk to access to housing
The Association of Builders of Santo Domingo East (Acosde) maintains a similar position.
The organization warned that the application of Law 36-26 could increase the development costs of housing projects by incorporating new obligations on autonomous assets or trusts, which, in its opinion, would generate scenarios of double taxation on legal structures that already bear tax burdens.
Its president, Riubell Montes de Oca, argued that this increase in costs would ultimately be reflected in the final price of homes and could worsen the country's housing deficit.
Furthermore, the entity considers that the provision is incompatible with the special regime provided for in Law 189-11, created to promote access to housing and strengthen the mortgage market.
A debate that went beyond construction
Concerns about the reform were not limited to the construction sector.
Prior to the enactment of the law, the National Organization of Commercial Enterprises (ONEC) warned that the successive modifications made to Law 225-20 generated uncertainty for the productive sectors and affected the financial planning of companies.
The group argued that reforms with economic impact must be based on broad consultation processes, technical analysis, and stable rules that guarantee legal certainty for taxpayers.
Along the same lines, business organizations such as the National Council of Private Enterprise (Conep), the American Chamber of Commerce of the Dominican Republic (AmchamDR) and the Association of Hotels and Tourism of the Dominican Republic (Asonahores) also previously stated their position, requesting a broader discussion on the changes introduced to the legislation.
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