Analyzing the increases in rental prices in CABA before the law compared to inflation (IPC CABA) during the same period, it is observed that rents have adjusted less. But, since the law entered into force, this effect has been reversed with market prices that are above inflation. Although this effect has several causes, what is clear is that the law has distorted rental prices.
The new law imposes a minimum contract term of 36 months with adjustment once a year based on an index created by the BCRA, calculated based on inflation (IPC INDEC) and salary adjustment (RIPTE).. This indicator seems reasonable and, if we observe its short evolution, we see that it is slightly below the CPI. However, this price freeze for 12 months is contrary to market practice where adjustments in local currency are usually made every 6 months, trying to match inflation. This change results in rents being barefoot: while the prices of other assets rise, they are frozen until the next adjustment. Naturally, the market responded, in this case, by adjusting for price; anticipating a forced freeze, rents increased to offset future losses.
Another factor that has also had an impact is the obligation to declare the lease contracts before the AFIP, thus increasing the tax burden on activities that have little chance of reducing the tax base. In a country where more than a third of the economy is in the black, measures of this type feed that percentage.
Beyond the price situation, nominal jumps and inflation these days, there is a problem that persists, worsens and affects several generations: the housing deficit. The shortage of affordable housing deepens with laws of this type, less supply, higher prices, increasingly impoverishing low-income sectors. This situation creates marginality, overcrowding and terrible living conditions for the inhabitants of the main urban centers.
The new Congress has a double opportunity: to learn from this gross mistake of legislating with its back to society, fantasizing that these types of measures are going to translate into political gain, and to provide solutions to a market that needs tools to increase the supply of real estate and thus contribute to reducing the underlying problem. Society has pronounced on this issue at the polls, the intrusion of the State in relationships between individuals creates imbalances. Regulations that promote investment in rental properties, the creation of a specific regime for commercial contracts and a tax scheme that favors transparency in the sector are welcome.
The author of the note is Business Development Manager of CBRE Argentina.