Sunday, December 5

Inflation Cornered Tenants Awaiting Housing Bill


The housing market has been relegated to the background in the government’s political agenda due to the notable increase in the price of electricity, which will experience the most expensive Sunday in history today. But the reality is that thousands of households – especially young and low-income households – are finding it increasingly difficult to pay their rent. A social problem that, in addition, will be aggravated by the outbreak of inflation.

Most of the contracts are referenced to the Consumer Price Index (CPI), which reached 3.3% year-on-year in August. A percentage which, foreseeably, will grow in the coming months, especially due to the rise in energy prices. The Foundation of the Boxes

Savings (Funcas) estimated in July that inflation would reach 3.8% by the end of the year, a forecast that, according to the agency itself, will be revised upward in the coming weeks.

The rise in prices will have an important reflection on the rental market, both for commercial premises and homes. The reform of the sector that the Government undertook in 2019, when inflation closed the year at 0.8%, linked the increases in leases to the CPI – a reference that was already included in the original text of the Urban Leasing Law ( LAU), approved in 1994 – to avoid “abusive” increases. Of course, the Executive also gave owners and tenants a wide sleeve to negotiate their own conditions.

Sources in the real estate sector assure that, for the moment, this flexibility has allowed the landlords “to be benevolent”, avoiding in most cases the increases due to inflation. But they also warn that “if prices continue to rise over the next few months the increases will be inevitable, because some owners are also experiencing financial difficulties.”

“99.9% of the contracts are linked to inflation, but each owner proposes a different solution to their tenants, because in many cases they do not deserve to raise the rent by a few euros and then have the premises or the house empty for months”, explains to this newspaper the president of the General Council of Associations of Administrative Managers, Fernando Santiago. This in the case of small landlords, because the investment funds that control real estate or premises “are all going to apply the rise,” says Santiago.

The arrival of inflation in rents coincides with a new upturn in demand. As every September, in recent weeks there has been an increase in mobility in jobs and students have launched into the search for flats, which has reactivated the market. “These months usually mark the beginning of the working year. It is true that in 2021 there are still many employees teleworking, but despite this there is an increase in activity», Explains the spokesperson and director of studies at Fotocasa, María Matos.

ABC
ABC

In the real estate sector, they foresee that this (partial) return to normality in jobs and universities will change the trend in prices in recent months.

In 2021 there have been significant year-on-year falls in cities such as Madrid and Barcelona, ​​but in recent months the sales have slowed down. According to the latest statistics from Pisos.com, rent fell 2% per year in Madrid in August and 7.8% in Barcelona. But in a month-on-month rate, prices pick up in both cities: 0.86% in the capital and 2.89% in Barcelona.

“Price declines are becoming more and more moderated, although they are still noticeable in large cities,” explains the director of studies for Fotocasa. Other sources in the real estate sector even open the door to further increases in the last quarter due to the lack of supply. “The economy is picking up and this may cause part of the tourist homes converted to residential last year to revert to vacation homes. This would trigger a drop in supply and cause slight price increases, ”these sources explain.

An entrenched norm

Despite the drop in prices caused by the coronavirus pandemic, rent is not more accessible today than in 2019. According to Fotocasa data, at the end of 2020 Spaniards spent 41% of their salary to pay for housing, which means practically the same percentage as in 2019. And everything indicates that in 2021 the ratio will remain barely unchanged.

To tackle this situation, which especially affects young people and low incomes, the Government intended to approve a state housing law at the beginning of the year. He even included the ambitious project in the Recovery, Transformation and Resilience Plan that he sent to Brussels. But months have passed and the project continues to be muddied by the disputes between United We Can and the PSOE.

The former marked from the beginning as a red line in the negotiations that the future law includes the control of rent prices. A measure that the socialist wing of the Executive mistrusts, especially the economic vice president, Nadia Calviño, if it is not accompanied by fiscal incentives for the owners.

The tug of war has spread over time, to the point that neither of the two initial interlocutors, Pablo Iglesias and José Luis Ábalos, are still in government. On the side of Unidos Podemos, in fact, they see Ábalos’ departure from the Executive as an advance, since the former Minister of Transport was also very reluctant to impose rent caps. Your successor in office, Rachel Sanchez, showed a more lukewarm position when she was mayor of Gavà. Sources familiar with the negotiations explain that the talks, which were suspended during the summer, will be resumed in the coming weeks, “but there is not much hope of reaching an agreement in the short term.”

In this context, all eyes are on Catalonia. The Generalitat approved just a year ago a decree to regulate rents that, according to the real estate sector, has done nothing more than reduce the housing supply and tiptoe through prices. The rule has ended in the Constitutional Court, which will rule on it shortly. The aforementioned sources explain that the PSOE are waiting for this sentence before taking any false step, because if the court knocks down the controls “it will feel legitimized in the face of public opinion to reject the caps.” And it will toughen its stance in housing law negotiations.


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