A sign indicating that a property is for rent is hanging outside a building in the Palermo area of Buenos Aires.
Photographer: Erica Canepa / Bloomberg
Photographer: Erica Canepa / Bloomberg
From San Francisco to London to Hong Kong, the demand for rental apartments increased during the pandemic, which also caused prices to fall.
But in one global metropolis, rents are rising like never before. Tenants in the city of Buenos Aires see that the price of apartments has risen by 67% from a year ago to an average of about 35,000 pesos per month ($ 377). Rents are now rising twice as fast as salary checks, and far ahead of other prices in one of the largest cities in Latin America.
“We never thought rents would rise by more than 60%, and nobody planned for that,” said Leandro Molina, commercial director of ZonaProp, one of the top online real estate platforms in Argentina. “This is the largest increase recorded.”
Galloping rent
Rental prices rose in Argentina after a home 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 money pressure last year to fund Covid’s social spending.
But it is also the unintended consequence of the rent reform carried out last year by the national government, which was intended to stabilize prices and protect tenants. From July, the central bank of Argentina will publish an index indicating how much rents can increase legally. Since landlords in Buenos Aires do not know how much they may increase prices later, according to local brokers, they increase rents on new contracts before the index takes effect.
The new law also stipulates that leases will be extended to three years with price increases limited to once a year. Currently, a joint lease agreement lasts two years and landlords rent rates every six months as part of the terms of the contract. But with so much economic uncertainty in Argentina, landlords and tenants have traditionally negotiated how much rent would rise.
Armando Pepe, head of the Buenos Aires Association, says the changes have benefited tenants so much that many landlords have simply stopped renting, removing the offer and leading to even higher prices. Many are still unhappy with a government-imposed domestic freeze that just expired after 12 months in March.
Asked for comment on the rent control reform, a Bloomberg CityLab government spokesman on Thursday pointed to President Alberto Fernandez’s remarks. Fernandez did not speak on the law, but said he would talk to Housing Minister Jorge Ferraresi about a ban on evictions that had recently expired shortly before new closure measures began.
Deviating offer
Like most major cities, Buenos Aires is not immune to the effects of the pandemic, especially after a three-year recession in Argentina. Some wealthy Argentines smashed apartments and fled to posh, fenced-in communities outside the city. Many Argentines are struggling with rising unemployment and Covid-19 closures that have closed schools for years.
Tenants like Laura, a 30-year-old in Buenos Aires, are trapped in the mess. Laura and her boyfriend ended an annual apartment hunt when they moved from a luxury neighborhood to a middle-class area of the city. They were given a third room to use as a home office, but their rent doubled to 70,000 pesos, leaving them with 24-hour security – a major sacrifice amid rising crime and a 42% poverty rate. Declining apartments have left tenants like Laura scrambling.
‘You would visit a place, but it was already reserved. It was really difficult to make a deposit, ‘says Laura, who requested that her surname not be published. In the new neighborhood: “I’m a little scared at night.”
The debate over rent reform is the latest chapter in one of the world’s most twisted housing markets. In Argentina, home sales – and increasing rents – are priced in US dollars, although the vast majority of society makes pesos, a currency that has lost 80% of its value since 2017. Mortgage rates are almost 30% and sales have collapsed. Most homes these days are bought in cash.
Some politicians are now trying to dismantle the rental legislation. Alvaro Gonzalez, a lawmaker in the lower house, has introduced a new bill to reverse the changes. Gonzalez proposes to retain many of the technical details, such as how many landlords can claim on deposits, but to remove the most important reforms: the length of the contract and the rent-controlled annual increase. He wants to scale it back to two-year and half-yearly rent increases, negotiating between landlord and tenants.
But Gonzalez, an opposition lawmaker, does not promise a victory. The ruling party controls both chambers of Congress and the presidency.
“What you were trying to resolve with the changes to the tenancy law, which was intended to provide relief to tenants, is actually only complicating the situation,” Gonzalez says. “Since you can no longer negotiate the rent increase, homeowners increase the rent to protect themselves from inflation.”