One of the first acts of liberal President Javier Milley after winning Argentina’s presidential election last November was to repeal the country’s notoriously clumsy and counterproductive rent control.
The results are in: rents are plummeting in Argentina as housing supply explodes.
Rent control is a policy favored by leftists in the United States and Europe, but it was introduced in Argentina by the socialist government in 2020. In particular, the “Rent Law” Prescribed Properties must be leased for a minimum of three years, rent caps will be set by the central bank, and security deposits cannot exceed one month’s rent.
The rent laws gave tenants almost total powers over breaking leases, making it virtually impossible for landlords to evict tenants, and even allowed tenants to deduct the cost of home repairs they made from their rent.
The socialists touted these rules as a form of “economic security” for the population, but the result was anything but. Argentina’s housing market collapsed, leaving cities filled with empty apartments. Home hunters said it was nearly impossible to find a landlord willing to rent them out under socialist laws.
In the capital, Buenos Aires, home to some of the country’s most desirable real estate, it is estimated that one in seven homes will be vacant in the second half of 2023. The Argentine Real Estate Association announced that the supply of rental properties in Buenos Aires at the end of 2023 was down compared to the previous year. 95 percent It has been three years since the Rental Law was passed.
As always with price controls, the actual price of rental property It soared Even if there is a cap. Desperately searching for a home said French Le Monde When her old lease on her small, two-bedroom apartment expires in September 2023, her landlord has offered her an extension for a 350 percent increase.
“I’m so worried I want to cry. At worst, I won’t be homeless and I might be able to rent a studio or a studio, but what will happen with an 11-year-old?” she sighs.
Milly Flipped He reformed rental laws by executive order in December, one of many sweeping changes he implemented in his program. Explained as “shock therapy” for Argentina’s moribund socialist economy.
Newsweek on tuesday Explained As a result, the “sudden increase in housing supply” directly led to a “fall in rental prices.”
“Since the repeal of Millay’s rent control law came into effect on December 29, the supply of rental housing in Buenos Aires has increased by 195.23%, according to the Real Estate University’s Real Estate Market Statistics Observatory.” Newsweek He said.
Ryan Born, economics chair at the Cato Institute, said Argentina’s experience should serve as a warning for the United States, where the Biden-Harris administration has proposed rent control measures to “protect tenants from corporate landlords.”
“Mi Lai cut rent control and other rental regulations, which supported the economic theory that the supply of rental housing would soar and rents would fall,” Vaughn said.
Rent control is one of the few Biden administration policies on which Vice President Kamala Harris has not backed down since becoming the Democratic nominee, reiterating her support for price controls at her first rally as a presidential candidate.
“Evidence suggests that rent caps can encourage landlords to convert rental properties into apartments, reduce maintenance costs, and be more selective about tenants,” the Cato Institute said of the Biden-Harris proposal. The analysis was written before Millay decisively defeated rent control in Argentina.
Bone pointed out In January Essay Price controls on rents compound the already dire risks faced by landlords, and inflation distorts market prices as well. In Argentina, rental laws forced landlords to accept payments only in the hyperinflated Argentine peso, rather than the more stable US dollar that many had hoped for.
When Argentina’s socialists decided they could make market volatility disappear with the magic wand of price controls, most landlords simply abandoned the old property rental model, preferring instead to sell their properties at rapidly inflated prices or arrange short-term “micro-rentals” through services like Airbnb. Despite the supply of rental properties in Buenos Aires disappearing between 2020 and 2023, the number of Airbnb rentals in the city nearly tripled.
Another predictable consequence of price controls was that landlords found ways around them, causing rents to skyrocket under ostensible “caps.” One simple technique was to inordinately raise rents before the price controls went into effect; another was to abandon maintenance efforts in order to cut costs. Born noted that the average monthly rent for a two-bedroom apartment in Buenos Aires rose from 18,000 pesos in 2019 to 334,000 pesos by the start of 2024.
Even in January, when Born wrote his analysis, Argentine renters were reporting that rental availability had increased by up to 50 percent while rental prices had fallen by 20 to 30 percent — less than a month after Millay revoked socialist rental laws.
“In recent years, there has been a renewed push to offer tenants greater security through rent control in the context of longer-term, more stable leases,” Born concluded. “Argentina’s experience is a textbook warning of how this policy can backfire, and will provide fodder for Milley.”
