A sign indicating a rental property is hung outside a building in the Palermo neighborhood of Buenos Aires.
Photographer: Erica Canepa / Bloomberg
Photographer: Erica Canepa / Bloomberg
From San Francisco to London and Hong Kong, demand has fallen on rental apartments during the pandemic, which has also brought down prices.
But in a global metropolis, rents are rising like never before. Tenants in the city of Buenos Aires see apartment prices soar 67% from a year ago to an average of about 35,000 pesos a month ($ 377). Now, rent increases twice as fast as paychecks and is well ahead of other prices in one of the largest cities in Latin America.
“We never imagined that rents would exceed 60%, no one was planning,” says Leandro Molina, commercial director of ZonaProp, one of the best online real estate platforms in Argentina. “It’s the biggest increase on record.”
Gallop rentals
Rental prices have risen in Argentina after housing reform became law
Sources: ZonaProp; INDEC
Some of the reasons for this are Argentina’s rising inflation, driven in part by the government’s excessive printing of money last year to fund Covid’s social spending.
But it is also the unintended consequence of the rent reform passed last year by the national government that sought to stabilize prices and protect tenants. From July, the Argentine central bank will publish an index indicating how much it can legally increase income. And because homeowners in Buenos Aires don’t know how much they’ll be allowed to raise prices later, they now increase rents for new contracts before the index goes into effect, according to local real estate agents.
The new law also stipulates that leases will be extended to three years, with a price increase limited to once a year. Currently, a common lease lasts for two years and landlords usually increase prices every six months as part of the terms described in the contract. But with so much economic uncertainty in Argentina, landlords and tenants have traditionally negotiated the amount of rent that would increase.
Armando Pepe, head of the Buenos Aires Real Estate Brokers Association, says the changes benefit tenants so much that many landlords simply stopped renting, eliminating supply and driving at even higher prices. Many continue to bust a government-forced income freeze that had just expired in March after twelve months.
Asked to comment on rent control reform, a government spokesman noted Bloomberg CityLab on Thursday in statements by President Alberto Fernandez. Fernández did not talk about the law, but said he would talk to the Minister of Housing, Jorge Ferraresi, about the ban on evictions that expired recently, shortly before the new closure measures began.
Dwindling supply
Like most major cities, Buenos Aires is not immune to the impacts of the pandemic, especially after a three-recession in Argentina. Some wealthy Argentines have abandoned apartments and fled to elegant, gated communities outside the city. Many Argentines are facing rising unemployment and Covid-19 closures that closed schools for an entire year.
Trapped in the disaster are tenants like Laura, a 30-year-old woman in Buenos Aires. Laura and her boyfriend ended up looking for an apartment all year round when they moved from a luxury neighborhood to a middle-class area of the city. They got a third room to use as a home office, but rents doubled to 70,000 pesos and left 24-hour security behind, a key sacrifice amid rising crime and a poverty rate of 42 %. The supply of heavy apartments left tenants like Laura rented.
“I would visit a place but I would already be booked, it was very difficult to just leave a deposit,” says Laura, who asked that her last name not be published. In the new neighborhood, “I’m a little scared at night.”
The debacle of rent reform marks the last chapter of one of the most twisted in the world housing markets. In Argentina, home sales, and increasingly rents, are priced in US dollars, although the vast majority of society weighs in, a currency that has lost 80% of its value. since 2017. Mortgage rates are close to 30% and sales have plummeted. Currently, most homes are purchased with fully cash deals.
Some politicians are trying to dismantle rent legislation. Álvaro González, a lower house legislator, introduced a new bill to reverse the changes. Gonzalez proposes to keep much of the technical details, such as the amount homeowners can demand in deposits, but eliminating key reforms: the length of the contract and the annual rent-controlled increase. He wants to scale it to two years and half-yearly rent increases, negotiated between landlord and tenant.
But Gonzalez, an opposition lawmaker, does not promise victory. The ruling party controls both chambers of Congress and the presidency.
“What you were trying to resolve with the changes to the rental law, which was intended to provide relief to tenants, is really just complicating the situation,” Gonzalez says. “Because the increase in rent can no longer be negotiated, landlords make rents to protect themselves from inflation.”