The announcement of the Minister of Transport, Mobility and Urban Agenda, José Luis Ábalos, to bring to Congress the limit of rents before summer has created discomfort in the Spanish real estate sector, which rejects the intervention of the market. The bulk of the industry agrees that reaching the rental price will reduce the supply in regulated areas, create a black payment market and raise incomes in neighboring neighborhoods. Instead, the platforms that defend the rights of the tenants against the funds celebrate the step forward. It is the face and cross of a measure that was already contemplated in the agreement signed between Podemos and the PSOE for the Coalition Government.
Socimis, funds, portals and real estate agencies say they have more than enough reasons to state that the Government is wrong to impose control of income. “The law of supply and demand tells us that if we limit the price of a good, supply will decrease and demand will increase. We have already experienced that in the last century, when most of the population was rented, income was controlled and the rental market practically disappeared ”, warns José Luis Suárez, professor at IESE. The teacher's recipe is to "increase the offer with a combination of public-private partnerships and private investment, for which the rental business must be made more attractive and not less."
José García Montalvo, Professor of Economics at Pompeu Fabra University, talks about real estate haste and the absence of magic recipes from today to tomorrow. In addition, he believes that price control is reasonable “if producers have market power and can control prices or if there are information problems. But in Spain it is a sector completely atomized and dominated by private owners. And the problem is that if the diagnosis of the cause of the increase in the rental price is wrong, the remedy will be worse than the disease, ”he says.
García Montalvo speaks of the perverse effects of the regulation: “reduction of the offer (for sale or demolition of houses subject to control), decrease of residential mobility and investment in maintenance, as well as increase of prices in the non-sector regulated". And he warns that the result may be contrary to the desired one: greater inequality, lower supply and increase in rental prices and the creation of a black market for collateral payments.
Agencies and portals
Real estate companies welcome the official rental price index prepared by the Government. It will be published from March to provide transparency to the sector. But not the use that will be made of him. "Using this index to control the rental price is bad news for the cities that apply it," says Fernando Encinar, head of studies at Idealista. From this portal they warn that “in the capitals that apply the regulation the current tenants will continue to pay the same, but the tenants of the future will look for in a market with much less supply, of worse quality and with more difficulties to find something affordable.”
The foreseeable reduction in supply is the most alarming consequence for the sector. The Fotocasa portal warns the Government that “price control cannot be too interventionist or too restrictive for homeowners, since in the long run we can find that fewer homeowners put their homes on a rental basis and gradually reduce the offer in the market ”. Kardoudi believes that the solution is to promote public rental housing and enhance lease incentives. In this case, “the future tenant would have fewer options when choosing,” says Para Gregorio Martín-Montalvo, general director of Solvia.
José Ramón Zurdo, general director of the Rental Negotiating Agency, points to another possible problem and is "the gradual deterioration of rental housing and a possible increase in a demand in advance of black money to compensate for the decline in income." "It is foreseeable that the owners invest less in the maintenance and renovation of the houses which would cause a decrease in the quality of the housing stock for rent in the regulated areas," adds Eduardo Guardiola, director and partner of Catella AM, the manager of Real estate assets of the Swedish fund Catella.
The sector recalls the reform of the Law of Urban Leases (LAU), in force, since last May - it forces to update the income with the IPC and to extend the term of the contracts to five years for individuals and seven for companies -, which an important percentage of the homes for rent of the socimis and of the owners has already been carried forward; they are selling or taking them out of the market, ”says José María Alfaro, general coordinator of the National Federation of Real Estate Agencies (FAI). For Alfaro, the measure is unrealistic and will lead to clashes between municipalities and autonomies. The effective would be "to subsidize the owners with tax incentives and give direct assistance to the tenants."
Funds and socimis
The most affected by the announcement of the Government are large institutional investors and socimi with portfolios of homes for rent. Javier Rodríguez Heredia, partner of Azora, real estate fund with more than 13,000 houses for rent under management, encourages to look at the experiences of other countries. “To encourage the creation of a rental park it is necessary to take as a reference successful models such as Sydney, where a 40% increase in the rental park has been achieved with price drops of up to 50% in some areas. On the contrary, the restrictive and price control measures applied in cities such as Berlin and Paris or countries like Sweden, have proven to be failed and are being withdrawn. ”
In the same line is David Vila, CEO of Renta Corporación, managing company of the socimi Vivenio, with almost 5,000 houses in the portfolio. "The measures to limit rental prices will not favor in the short term an increase in the supply of housing, especially in a market that is 95% in the hands of smallholders. To enhance the supply of real estate in rent, it is preferable to put new homes on the market, activating bags of land in the hands of the administration and making promotions from public-private collaboration. "
Very low is the tone of the platforms that have been defending the rights of the tenants against the funds for years. They applaud the measure, although they believe something is late. “The rents should have been regulated five years ago, when the excessive increases of 30% and 40% have already begun. Rent prices have to be regulated as Austria, Denmark or New York State have been doing for decades and as Germany or France have recently done, "says Jaime Palomera, spokesman for the Barcelona Tenant Union. He is in favor of linking the price of housing at average income, so that people do not allocate more than 30% to housing (including associated expenses such as electricity, water and gas) Although satisfied by the measure announced by the Government, Palomera insists that the problem of the rent goes far beyond the price-related abuses and it is “cheater to reduce the debate to that aspect.” From the consumer organization CecuMadrid consider this measure “fundamental and necessary to recycle the rental market, as is done in others countries. "
Government explanations to the sector
In his first public intervention since his appointment, David Lucas, General Secretary of Urban Agenda and Architecture of the Ministry of Transportation, has emphasized the "supply problem that exists in Spain" and has pointed to public-private collaboration as a of permanent solutions. "But these solutions have a medium and long-term effect. There are currently areas that we can call stressed with exorbitant prices; when the market is corrected, it will no longer be necessary to apply the measure," he said at an event held Thursday with companies from real estate sector, with which he has been in favor of dialogue and with which he has tried to reduce tensions.
