The rental limitation continues its course despite criticism from a large part of the real estate sector, especially from the owners. Among the arguments that the detractors put on the table is the experience in other European cities such as Paris and Berlin, where the failure to intervene in prices has been verified: the number of flats for rent has fallen, the average rent has become more expensive and a black market among landlords and tenants.
Access to housing has become one of the main problems in Spain in recent years and the Government has promised to introduce a price cap to try to reverse the rise in rent in some cities. The measure has generated discrepancies even within the Executive itself, since a part of the Council of Ministers, with the vice president Nadia Calvio at the head, rejects it while another part, led by the vice president Pablo Iglesias, has driven it. Iglesias even threatened President Pedro Sanchez with not supporting the Budgets if he did not include her in the project for 2021. And finally he included her.
Now the company Rent Insurance has analyzed the experience over decades in other countries and has gathered its conclusions in the study How does price intervention affect the residential rental market?.
According to the study, the laws of Paris and Berlin are under the supervision of the Constitutional Court and its intention to stop the rise in rental prices has had the opposite effect as desired. “Markets have become even more tense, the supply of rental properties has decreased considerably while demand continues to grow and many owners are demanding rent payments irregularly,” he says Antonio Carroza, CEO of the firm. For their part, prices in these cities continue to rise, while in others where rent is not intervened, it is observed how the market regulates itself and prices fall.
Berlin under the microscope
In the case of the German capital, the rental rate is 85% of the total. In 2015, the Administration introduced the brake device at the price of
Mietpreisbremse rentals allowing local authorities to limit the maximum amount of new rentals with respect to a reference rent. Already in 2019, after verifying that the rule was not effective and that it was avoided through the numerous exceptions that allowed it, several modifications were introduced, despite which the study found that the supply of rental flats has fallen by 25 % in one year, the average price has risen 36% since 2015; homes for sale has shot up 38.8% and investor interest has been discouraged.
In addition, the homes that are for rent are promoted with two prices (the price by law and the desired price) and the owners claim part of the rent irregularly, which has generated a certain underground economy.
Berlin is currently awaiting a review of the regulations by the Constitutional Court as it violates the right of owners to decide prices and because it is a federal jurisdiction that cannot be regulated by each federated state.
Double try in Paris
In Paris, FranÃois Hollande approved the call Ley Groove, but it was only two years in force because the courts ended up repealing it. This legislation made it impossible to rent an apartment at a price that was 30% cheaper or 20% more expensive, depending on different variables such as the type of home, its location, its size or its furniture.
After the abolition of the Alur Law, rent prices shot up to 25%, which prompted the government to Emmanuel Macron to start the Ley Elan that allows, again, the regulation of the maximum level of rents and that will be in force for five years. As of 2023, its effectiveness and continuity will be evaluated. This new legislation limits rent increases to 20% above an average reference price level in all new rental contracts, both for homes already leased and for first leases.
The Vienna example
Another example that the study collects has as its protagonist the city of One. The capital of Austria is considered by many analysts as an example to follow in terms of rental. Its model, in force since 1920, promotes housing policies with strong public financial support for renting and building social housing. A city where more than 80% of Viennese rent and 66% live in flats with some type of municipal subsidy, and where prices are regulated.
As Antonio Carroza points out, “it is an exemplary model, but difficult to apply in our country as it requires a strong economic investment by the State and years of adaptation”.
In his opinion, Spain could resort to alternatives other than limiting rent to promote access to housing. “Instead of taking restrictive and penalizing measures against leases, we have to bet on developing effective social housing policies,” he says. He also believes that incentives and guarantees are necessary for small homeowners to put their homes on the rental market.
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