November 25, 2020

from the requirements to tenants in Paris to the flight of investors in Berlin


Madrid

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Spain, 1964. The Franco regime promotes a reconstruction in terms of housing that seeks to promote construction and home ownership. To do this, the State approves forced extensions in rental contracts … and limits prices. Due, Spain is full of empty flats, rehabilitation disappears and rent loses weight as opposed to buying and selling.

More than 50 years later, Spain returns to the limitation of rental income as a mechanism to lower prices after the escalation experienced in recent years. A measure that, in principle, will be approved in the state housing law that the Government of Pedro Sánchez wants to approve in February. While, real estateEconomists and even the Bank of Spain warn that whenever these types of limits have been approved, the opposite effect to that desired has been achieved.

Rent Insurance has gone a step further, and in a report published this Thursday has made a historical review of the cities that have approved in recent decades rent limits. In addition to the Spain of the last century, the real estate company includes in its analysis the cases of Great Britain, Berlin, Paris, Vienna and the most recent of all: Catalonia.

As the CEO of Safe Rental, Antonio Carroza, explains, in these cities “the markets have become even more stressed, the supply of rental properties has decreased considerably while the demand continues to grow and many owners demand the rent payments of irregular way. ‘

Prices have skyrocketed in most cities with rent limits

There was only one case of success, according to the real estate. And it was not Great Britain, despite intervening in the market for 65 years. When the market was opened in 1980 after several laws, the supply of houses for rent barely represented 8%, a consequence of measures such as that the rents were indefinite and could be inherited, according to Safe Rental.

More recent was the case of Berlin, which made a first attempt to limit rents andn 2015 and a deeper one in 2018. According to Safe Rental, this measure has caused the supply of rental homes to collapse by 25%, investment has fled and, which is contradictory, prices have grown by 36%.

The case of Vienna

Meanwhile, in Paris the Alur law was approved three years ago, which according to the real estate agency produced a tightening of the conditions for tenants and that 33% of the flats exceeded the allowed limits. In addition, when the income disappeared soared by 25%, which forced the French president, Emmanuel Macron, to promote a new interventionist norm.

There is only one success story for real estate in the case of rent restrictions: Vienna. A triumph that is explained by the commitment made by social housing, which, as the Government recognizes, barely represents 2.5% in Spain. “For decades, municipal entities have allocated budgetary allocations to the construction of a public park of social housing for rent, becoming the largest owner of real estate in the world, but also to the subsidy of private projects that have public rental aid, all of this financed by a housing tax set since the 1900s, ”says Alquiler Seguro.

Catalonia and the occupation

Catalonia has just joined this group with a rule that limits since September rents in Barcelona and 60 other municipalities in the region. “Controversial legislation, with the opposition of lawyers, experts and real estate professionals, in which the market situation, affected by the health crisis, was not taken into consideration, but has promoted insecurity and confusion among the owners, already discouraged by the difficult epidemic situation, defaults and occupancy, ”says Alquiler Seguro, which also warns that black payments and the flight of investors is already taking place.

The organization considers that Spanish cities that follow this same path (the Executive intends to leave the decision of these controls in the hands of the municipalities) will have similar results. «The rule announced by the Spanish Government does not bring anything new to what has already been applied in other countries, indeed, it is a rough copy of what has been done in Paris and Berlin, where it has been more than demonstrated that the Intervened markets have become even more stressed. As in the case of Catalonia, we are faced with populist measures and partisan interests that, as occurs in the rest of the countries analyzed, bordering on the unconstitutional», Highlights the real estate.

In addition, the measure will leave a legacy that Spain will take decades to digest, as happened with the interventionism of the Franco regime. “Almost 50 years later, with a high-quality offer, we will see how it will falter when we stop investing in renovations, accessibility or energy efficiency, we will return to the mistakes of the past”, concludes the organization.

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