A house for rent sign hangs outside a building in the Palermo neighborhood of Buenos Aires.
Photographer: Erica Canepa / Bloomberg
Photographer: Erica Canepa / Bloomberg
From San Francisco to London to Hong Kong, demand for rental apartments fell during the pandemic, causing prices to drop as well.
But in one global metropolis, rents are rising like never before. Renters in the city of Buenos Aires are seeing apartment prices increase 67% from a year ago to an average of about 35,000 pesos per month ($ 377). Rents are now rising twice as fast as paychecks, and far ahead of other prices in one of the largest cities in Latin America.
“We never thought rents would go above 60%, nobody planned this,” said Leandro Molina, Commercial Director at ZonaProp, one of Argentina’s top online real estate platforms. “It’s the biggest increase ever.”
Galloping rents
Rents have risen sharply in Argentina after a housing reform came into effect
Sources: ZonaProp; INDEC
One reason for this is rising inflation in Argentina, driven in part by excessive government pressure last year to fund Covid’s social spending.
But it is also the unintended consequence of the rent reform passed by the national government last year that aimed to stabilize prices and protect tenants. Starting in July, Argentina’s central bank will publish an index showing how much rent can legally increase. And since landlords in Buenos Aires don’t know how much they can raise prices later, local estate agents say they are now raising the rent on new business 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 common lease lasts for two years, and landlords often raise prices every six months as part of the terms set forth in the contract. But with so much economic uncertainty in Argentina, landlords and tenants have traditionally negotiated how much rent would increase.
Armando Pepe, head of the Buenos Aires real estate association, says the changes are so good for tenants that many owners simply stopped renting out, taking away the offer and leading to even higher prices. Many are still reeling from a government-mandated rental freeze that expired just after 12 months in March.
Asked for comment on the rent control reform, a Bloomberg CityLab government spokesman pointed out President Alberto Fernandez’s comments on Thursday. Fernandez didn’t talk about the law, but said he would talk to Housing Secretary Jorge Ferraresi about a ban on evictions that expired recently, shortly before new lockdown measures began.
Diminishing supply
Like most major cities, Buenos Aires is not immune from the effects of the pandemic, especially after a three-time recession in Argentina. Some affluent Argentines have demolished apartments and fled to chic, gated communities outside the city. Many Argentines are struggling with rising unemployment and Covid-19 lockdowns that shut down schools for a year.
Trapped in the mess are tenants like Laura, a 30-year-old in Buenos Aires. Laura and her boyfriend ended years of apartment hunting when they moved from an upscale neighborhood to a middle-class part of town. They were given a third room to use as a home office, but their rent doubled to 70,000 pesos and they left behind 24-hour security – a major sacrifice amid rising crime and a 42% poverty rate. Due to the dwindling apartment supply, tenants like Laura had to clamber.
“You were supposed to visit a place but it would already be booked, it was really hard just to make a down payment,” said Laura, who asked not to publish her last name. In the new neighborhood: “I’m a little scared at night.”
The rent reform debacle marks the final chapter in one of the world’s most twisted housing markets. In Argentina, home sales – and increasingly rents – are priced in US dollars, although the vast majority of society earns pesos, a currency that has lost 80% of its value since 2017. Mortgage interest rates are hovering around 30% and sales have collapsed. Most homes today are bought in cash.
Some politicians are now trying to dismantle rental laws. Alvaro Gonzalez, a lawmaker in the lower house, introduced a new bill to reverse the changes. Gonzalez suggests keeping many of the technicalities, such as how many landlords can charge for deposits, but removing the most important reforms: the length of the contract and the annual rent increase. He wants to reduce it to two-year and six-monthly rent increases, which have been negotiated between landlord and tenants.
But Gonzalez, an opposition lawmaker, is not promising victory. The ruling party controls both houses of Congress and the Presidency.
“What you wanted to solve with the changes to the tenancy law that were designed to relieve tenants, actually only complicates the situation,” Gonzalez says. “Because you can no longer negotiate the rent increase, homeowners are running with rents to protect themselves against inflation.”