A sign indicating a rental property 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, the demand for renting apartments during the pandemic has also fallen, reducing prices.
But in a global metropolis, rents are rising like never before. Residents of the city of Buenos Aires see that apartment prices increase by 67% from a year ago to an average of about 35,000 pesos per month ($ 377). Rents are now growing twice as fast as wages and well ahead of other prices in one of Latin America’s largest cities.
“We never imagined that rents would exceed 60%, no one had planned this,” says Leandro Molina, commercial director at ZonaProp, one of Argentina’s leading online real estate platforms. “It’s the biggest increase ever.”
Galloping rents
Rent prices have risen in Argentina after housing reform became law
Sources: ZonaProp; undecided
One of the reasons for this is the rise in inflation in Argentina, driven in part by the government’s excessive printing of money last year to fund Covid’s social spending.
But also the unintended consequence of the rent reform adopted by the national government last year was meant to stabilize prices and protect tenants. Starting in July, Argentina’s central bank will publish an index that indicates how much rent can be legally increased. And since homeowners in Buenos Aires don’t know how much they will be allowed to raise prices later, they are now raising their rents for new contracts before the index goes into effect, according to local realtors.
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 often raise prices 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 increase.
Armando Pepe, head of the Buenos Aires real estate association, says the changes benefit tenants so much that many landlords have simply stopped renting, eliminating supplies and leading to even higher prices. Many are still spinning because of the freezing of the government-mandated rent that just expired in March after 12 months.
Asked for comments on rent control reform, a government spokesman stressed Bloomberg CityLab on Thursday in statements by President Alberto Fernandez. Fernandez did not talk about the law, but said he would talk to the Minister of Housing, Jorge Ferraresi, about the eviction ban, which expired recently, shortly before the start of the new blockade measures.
Dwindling supply
Like most large cities, Buenos Aires is not immune to the impact of the pandemic, especially after a recession of three in Argentina. Some wealthy Argentines gave up their apartments and fled to elegant and closed communities outside the city. Many Argentines are facing rising unemployment and the Covid-19 blockade that closed schools for a whole year.
Caught in the mess are tenants like Laura, a 30-year-old from Buenos Aires. Laura and her boyfriend ended a year-long apartment hunt when they moved from a luxury neighborhood to a middle-class area of the city. They received a third room to use as a home office, but their rent doubled to 70,000 pesos and left 24-hour security behind – a key sacrifice amid rising crime and a 42% poverty rate. The supply of apartments behind left the tenants to fight Laura.
“You would visit a place, but it would have already been booked, it was very difficult just to make a deposit,” says Laura, who asked that the last name not be published. In the new neighborhood, “I’m a little scared at night.”
The disaster of rent reform marks the last chapter of one of the most twisted in the world real estate markets. In Argentina, home sales – and rising rents – are priced in US dollars, even though the vast majority of society makes pesos, a currency that has lost 80% of its value since 2017. Mortgage rates are close to 30%, and sales plummeted. Most homes these days are purchased in full cash offers.
Some politicians are now trying to dismantle rent legislation. Alvaro Gonzalez, a lower-house parliamentarian, introduced a new bill to reverse the changes. Gonzalez proposes to keep much of the technical details, such as how many landlords can apply for deposits, but eliminating key reforms: the length of the contract and the controlled annual rent increase. He wants to reduce it to two years and to half-yearly rent increases, negotiated between the landlord and the tenants.
But Gonzalez, an opposition lawmaker, does not promise victory. The ruling party controls both congressional chambers and the presidency.
“What you were trying to solve with the changes to the rent law, which was meant to provide help for tenants, actually only complicates the situation,” says Gonzalez. “Because you can no longer negotiate rent increases, property owners purchase rents to protect themselves from inflation.”