The real estate boom that our country experienced in the last decade was marked by restrictions in the foreign exchange market, high inflation, the consequent distrust in the peso as a store of value and the low sophistication of many national investors, resulting in an insufficient channeling of savings to the financial system.

As inhabitants of Rosario we have observed how part of the surpluses from the boom in soy production in the province have been turned into construction, with the aim of forming an asset that acts as a refuge of value (in a context of inflation and volatility) and /or as a source of additional income via rental.

The report focuses on this sector, specifically the issue of rentals . To understand this market, we must first consider the broader context, where our society faces a housing problem.

The housing deficit refers to both quantitative and qualitative issues. Both dimensions seem to get worse in recent years.

If the 2001 census is taken as a starting point, 2.600.000 households, 25,8% of the total, had unmet housing needs. According to the 2010 census, the number increased to 3.000.000 households, 24,6% of the total. Of those three million, 66% needed to improve or complete their home and the remaining 33% required a new home.

Regarding the qualitative dimension, according to INDEC, at the end of 2020:

• 78,9% of households and 74,5% of people live in homes whose materials are of sufficient quality.
• 7,8% of households (9,6% of people) live in homes whose materials are of insufficient quality.
• 13,3% do so in homes whose materials are of partially insufficient quality. In the case of people, 15,8%.

Regarding public services, only 52,3% of households (46,4% of people) have access to running water, sewage, and natural gas. The rest do not have access to at least one of these services.

The rental market

Regarding the specific characteristics of the market, we find that the supply of rental housing , or housing in general, is relatively inflexible in the short term, given the time involved in its construction; therefore, it tends to respond slowly to changes in demand. It follows that measures that do not include incentives to increase supply will, in practice, result in higher prices (since we would have the same supply and ever-increasing demand).

On the other hand, it's important to highlight that the demand for rental housing is not homogeneous, but rather comprised of segments with varying income levels and purchasing power. The poorest families are in the most critical situation and, at the same time, are excluded from credit markets due to a lack of collateral.

Regarding the evolution of rental prices and housing maintenance costs, the information is quite vague, given the diverse characteristics of housing. The Consumer Price Index (CPI) is composed of twelve baskets, including "Housing, water, electricity, and other fuels." The graph presents the monthly series for the overall CPI and the aforementioned basket.

As can be seen from 2017 to mid-2019, the increase in these expenses was higher than the general average of the economy; this mainly occurred due to the removal of subsidies and tariff updates. As of mid-2019, the update of public service rates was suspended and in relation to rents, their increases were lower than inflation. However, these data correspond to the average of the 31 agglomerations surveyed by the EPH.

Unfortunately, there is no specific data available to analyze the behavior of rental prices in the large cities of the central zone (Rosario, Córdoba, Mendoza, Santa Fe). The only data on disaggregated rentals available are those published by the Government of the City of Buenos Aires that. However, a study carried out by Zonaprop seems to indicate that the price of rentals grew 58% in the last year in the Federal Capital, and 62% in Rosario, when inflation was 46% in the same period.

The following graph characterizes the housing tenure system , according to data published by INDEC based on the EPH for the second half of 2020.

Legal framework

According to Article 14 bis of our National Constitution , all inhabitants of the Nation have the right to access "decent housing." This implies, among other things, legal security of tenure, which can take different forms, including renting.

At the end of 2019, a global pandemic broke out known by the virus name SARS-CoV-2 (COVID-19). In March 2020, to address this epidemiological challenge, the national executive branch established a series of Necessity and Urgency Decrees (DNU). DNU 260/2020 decreed a health emergency throughout the national territory, DNU 297/2020 decreed social and preventive isolation.

Under this unforeseen and fragile context, with a State in default and inflation that exceeded 40% annually, a new DNU was established, 320/2020, which briefly froze the price of rents already agreed upon and prohibited eviction due to lack of pay. Then, successive extensions caused the emergency regulations to be extended until April 2021.

In June 2020, the national congress passed a new rental law (Law 27551) to update the regulatory framework for the sector and attempt to resolve the various legal conflicts it faced. The main differences from the previous system are shown in the following table:

In addition, other measures are incorporated, such as the obligation to declare the rental contract before the AFIP and the registration of the parties' emails for notifications.

The report is completed with a synthesis of the regulatory framework in Chile and Uruguay as a comparative parameter. As can be seen from the regulations in neighboring countries, we see that the housing problem is also present in them.

Conclusions

Broadly speaking, the new regulations impose more risks and restrictions on bidders and encourage them to “launder” their activity. While the mechanisms to expedite evictions due to tenant non-compliance are not yet regulated.

In addition to this, the possibilities of claims or indexation of the value of the rentals were stopped by DNU (decree of necessity and urgency), which emerged in response to the global context of the pandemic generated by COVID 19, which, as we all know, It caused a huge drop in activity and income across the board.

Almost a year after the implementation of the new law, it can be seen that many of the customs of the “previous regime” are still maintained in practice. Furthermore, the price of rentals in this same period increased at a rate that almost doubles the inflation rate published by INDEC, while in previous years rents maintained an average inflation rate of around 28%.

What is observed in practice is that sectoral policies seem not to take into account the long-term incentives they cause in the market. In addition, it is necessary that policies at different levels of government be coordinated so that specific sectoral policies achieve their objectives.

Rental housing policies must be a complement, not a substitute, for home ownership, respond to the context and be adapted to the specific spaces or places in which they are applied. The State must include renting as an additional housing policy option within its general urban planning plans. These plans must take a holistic view and must address issues such as access to public services and transportation.