Renting a home: the new impossible mission in Argentina

The sharp rise in prices, the growth of tourism, falling wages, and an impotent regulatory law form a lethal cocktail for tenants.

The abrupt decline in supply affects thousands of people all over the country.

The adverse economic situation the southern country is going through has repercussions in different areas of the population’s daily life.

To the accumulation of challenges Argentine society faces in the context of a pressing crisis, we can add one that hits the middle classes hard: the difficulty of accessing rent in the context of skyrocketing prices.

According to a Scalabrini Ortiz Center for Economic and Social Studies study, rents in the City of Buenos Aires have increased more than 120% in the last year.

This is particularly felt in the case of the smallest units: studio apartments increased by an average of 123% compared to February 2022.

The negative outlook is complicated by its flip side: housing supply.

According to the consulting firm Argenprop, 30% fewer properties were offered for rent in the third quarter of 2022 than in the same period of the previous year.

At the same time, temporary rentals grew 19% in the last three months.

According to the group Inquilinos Agrupados, more than 40% of the three million residents of the country’s capital do not own their homes but rent them formally or informally.

THE PROBLEM IN THE FLESH

“I can’t work 10 hours daily to pay rent and not eat. The price of the available apartments represents more than 60% of my salary,” Gaston, a 38-year-old tenant who lives in the City of Buenos Aires, tells Sputnik.

The testimony reflects the reality experienced by a significant portion of the country due to galloping inflation – which reached 100% in 2022 – in the context of the fifth consecutive year of a consecutive salary drop.

“The first year I renewed my current contract, the increase was 52%, and now I am getting an 83% increase. I lost heavily against inflation last year,” he adds.

“Today, an average salary is US$390, while a studio apartment is over US$294: the gap between prices and salaries is enormous,” Gervasio Muñoz, president of the National Federation of Tenants, tells Sputnik.

“Most people can’t make ends meet, and one of the causes is the high rent prices,” Muñoz points out.

There is a reversal of market logic.

“If we look at what happened five years ago, properties that were waiting months for tenants were available. Today, tenants are waiting for properties to be released due to the huge demand”, remarks Alejandro Bennazar, president of the Argentine Real Estate Chamber.

Gastón expresses it without euphemisms: “due to the limited supply, I have to look for an apartment a year before my contract expires because if I start looking only two months in advance, I could be left in the street”.

THE RENTAL LAW, THE CORE OF THE CONTROVERSY

The argument put forward by property owners points centrally to the regulations in force since 2020.

The reform of the Rent Law establishes that price adjustments will be annual – no longer monthly – and that contracts will be for three years.

In addition, the index that establishes the value adjustment no longer depends exclusively on inflation but also contemplates the variation of formal salaries.

According to the real estate companies, the regulations’ ceilings are impracticable given the high level of monthly inflation.

“The rent law changed all the rules of the game. Today a landlord will not accept a three-year contract. In addition, the time for updating the value -which today is annual- makes inflation end up liquefying the profit. We are looking for a maximum of six months”, says Bennazar.

“Today, the owner chooses to put his home for sale or temporary rent, and that makes prices more expensive. That’s why the law hurts landlords and tenants alike,” says the businessman.

For those who rent, the reading is radically the opposite.

“The law is fine; it is fair. But the State is absent from controlling its compliance. Landlords try to evade it; that’s why it doesn’t work”, Gastón replies.

Gervasio Muñoz agrees.

According to the tenants’ representative, the responsibility lies exclusively with the authorities: “what should happen is that the State should control compliance with the law, which facilitates the rental of real estate.

But this is not going to happen because no political class is determined to fight with the real estate market, ” he denounces.

“The rental law raised a dispute scenario as it had never happened before. The real estate market is unwilling to comply with it”, warns Muñoz.

CHARGE IN PESOS, RENT IN DOLLARS

Without an official response, landlords opt for less traditional alternatives: temporary rentals of three to six months, with more frequent increases, or the valuation of prices in dollars, which is aimed at foreign tourists.

Bannazar contextualizes this decision.

“The owner will always look for the highest possible profitability. Unfortunately, temporary rentals are detrimental to real estate companies because families want access to them but cannot because of the prices. The housing supply is almost null”.

The representative of the Chamber relativizes the growth of rents in dollars.

“Dollarization is a phenomenon of temporary rents. We do not see them appearing in traditional rents”, he points out.

The experience of those who rent flatly contradicts the businessman’s version.

“In many neighborhoods, there is not a single apartment to rent in pesos, and those who are closer to the law ask for an extra commission or an increase above inflation”, warns Gastón.

Muñoz complements the tenant’s testimony with a blunt fact.

“Many neighborhoods in Buenos Aires have become so touristy that almost no local residents are left. We are moving towards a short-term rental model, where the tenant must rent for only one or two months. We are starting to go through this situation”.

According to the specialist, the phenomenon is a consequence of the market logic that governs rental dynamics.

“The market is increasingly concentrated to set conditions behind the State’s back. The situation today is the law of the jungle: ‘every man for himself’ rules,” he adds.

“The tenant is completely alone in front of the real estate market: today, it is impossible to face this panorama,” denounces Muñoz.

SUBSTANTIAL RESPONSE

The problem requires long-term solutions that may even affect some parties’ interests.

According to Muñoz, “there is a permanent struggle between this sector and the tenants. As long as the State does not get involved, the winners will always be the landlords”.

In practical terms, the alternative proposed by the tenants’ referent means restricting the landlords’ freedom of action.

“It is not a question of platforms; short-term rentals must be limited, restricting by area or the number of nights per year. We have to prevent all housing from being earmarked for short-term: today, people can’t find a place to live,” he points out.

On the other hand, the Real Estate Chambers propose to increase the facilities for the owners.

“We have to encourage not only the investment but also the return to the traditional housing market, and that can be rearranged with two or three precise measures”, points out Bennazar.

Specifically, the basic solution for the businessman consists of “facilitating access to credit so tenants can become owners.

It is a whole scaffolding that requires a dialogue table to work side by side with the organizations”, he adds.

More than a proposal for tenants, Bennazar’s thesis is a utopia.

“Where can I get a loan? It is impossible to get any loan to buy a small apartment,” says Gastón.

“If today renting is impossible, buying is already unthinkable,” he adds.

With information from Sputnik