On 7 July, the second session of the non-permanent committee for the study of rental market regulation of Barcelona City Council was held. In this second session, they spoke about international experiences in regulating rental prices. For this purpose, experts and social stakeholders from various countries were invited to share their experience. Participants included the coordinator of the “Housing Justice For All” campaign in New York, Cea Weaver; the Sinn Féin party spokesperson for housing, Eoin Ó Broin; the Tenants Union spokesperson, Jaime Palomera; the Housing Office manager of Tarragona County Council and legal advisor on Real Estate Law, Elga Molina; the Director of the UNESCO Housing Chair at Rovira i Virgili University, Sergio Nasarre; the Assistant Director of the Housing Agency of Catalonia, Jaume Font; and Ana Puig-Pey; Director of the Master’s in Innovative Real Estate Business Management and assessor of the European Union’s LIFE, SOCRATES and JESICA programmes. The committee was chaired by the councillor of the ERC council group, Eva Baró, and the deputy chair was held by the councillor for Housing and Rehabilitation, Lucía Martín.
The committee was paused after the first session due to the health crisis and a new schedule was approved comprising three sessions. In September, there will be talks on the competence framework and the potential scenarios in rental market regulation, in the October session they will debate the social, economic, and urban development impact, and in November the conclusions will be presented.
After the 2008 financial crisis, housing costs, particularly rent, increased a lot, negatively affecting its affordability. It occurred in Barcelona, but in many other cities too. The Sinn Féin party spokesperson, Eoin Ó Broin, explained how it also occurred in Dublin, where rent has risen to an average of 2,000 euros. Both Ó Broin and the coordinator of the “Housing Justice For All” campaign in New York, Cea Weaver, spoke about how the purchase of buildings by large owners has influenced this increase. Weaver explained that in New York the percentage of large owners that have more than 20 buildings with about 30 dwellings each has increased over the last few years. Ó Broin spoke about the increase in “semi-professional owners” who purchase housing just to rent them out, and how in Ireland this has been discouraged via taxes, which has led to them going to other countries, such as, for example, Spain, Portugal or Greece.
This scenario has led many countries to take some kind of rent control measures, particularly in those where rental stock is more important. In this sense, the councillor for Housing and Rehabilitation, Lucía Martín, explained the need to have this debate, know about international experiences, and take measures in Barcelona, where the rental market is 40% although it is suspected it will increase.
International examples
The second session focused on analysing international experiences of rental market regulation. Rental market regulation is not a new phenomenon. Weaver explained that in New York it has been regulated in some way or another for over 100 years. But more recent experiences were also spoken about, such as France, which has calculated a price index according to the size and year of construction and, in which, the owner cannot put a price that is above 20% nor below 30% of this index. For its part, Denmark, which applies rent controls since 1979, also has a similar index. Through the cost is calculates the improvements made to the housing and a reasonable profit for the owner, which is a percentage that is made public in an ordinance.
The Housing Office manager of Tarragona City Council, Elga Molina, however, highlighted the German regulation system. It is a very sophisticated systems based on some tables that establish the price per square metre according to a set of characteristics. The system originated in the 1960s but it was voluntary until 2015, although it was applied to about 90% of the contracts. According to Molina, this shows that it is a very robust system because it arises from the consensus of owners’ associations, tenants’ associations, and the administration. Despite this, the regulation was made stricter in Berlin in 2019, where a semi price freeze was applied, to pre-existing rents as well, with a limit of 13 euros per square metre, a lower price than that found in Barcelona, where the average is 14 euros.
For Molina, these experiences show that effective regulation that solves the problem of housing affordability through regulating the initial price as well as its revisions, guarantees a reasonable profit for the owner, preventing abuse and favouring predictability and transparency on both sides. The duration of contracts is a key factor. As well as the price, countries such as France and Germany have regulated an obligatory extension that does not permit a tenant to be evicted unless they are breaching the contract or the housing is needed for personal use or for a relative. It is also necessary to find a rent revision system that prevents abusive increases as well as old rent control rentals in which the owner loses the reasonable profit.
Regulation and supply
One of the most frequent debates when talking about rental market regulation is that this will reduce the rental supply. In this sense, the representative of the Tenants Union, Jaime Palomera, said that this dilemma is dishonest, as it does not consider the historic moment in which regulation was done in Spain. The detractors of the regulation say that with the regulations made in 1920 and 1964, the supply dropped, but they do not explain that with the Boyer Decree, which eliminated the obligatory extension, it also dropped. This deregulation occurred in the 1990s with neoliberalism at its peak, which housing began to be treated as a growing financial asset believing that thus the supply would increase and would be more affordable. That did not happen and the supply dropped because housing is not a market of perfect competition. Palomera stated, therefore, that it is the set of housing policies that, in Spain, are aimed at boosting the buying market.
Another aspect on which various speakers agreed is the need to recover tourist flats and make them return to the rental market as primary residences. In this sense, Palomera also spoke of the importance that the 62% increase in the rental property supply over these last few months due to the health crisis should not be volatile and should stabilise.
Rental as a way of life
With all this, we see how rental market regulation is, as all the speakers have said, a necessary tool but not the only one; as Palomera reminded the committee “it will not be a miracle cure, but nor will it be a disaster”. And for it to work, it must be accompanied by other policies that make citizens see rental as a valid and viable way of life in the long term and not just an alternative for those who do not have enough money to buy a house or flat, as stated by the Director of the UNESCO Housing Chair of the Rovira i Virgili University, Sergio Nasarre.
This happens through global regulation, as Nasarre reminded, touching one element, such as prices, affects the rest and legislation must be found that looks at the general context and finds a balance. Beyond regulation, a series of policies are needed that encourage rental through the fiscal policy and, as the Director of the Housing Agency of Catalonia, Jaume Font, reminded, it needs to be done well, because bad regulation of the rental market could work against its objectives.
Another element highlighted by Weaver and Palomera, representatives of tenant movements, is the tenants’ capacity of organisation. Weaver spoke about the long tradition of tenants unions in New York, where her organisation already unites five million people and has achieved the right to an attorney for evicted people. Palomera spoke of the important the rental market regulation goes hand in hand with the expansion of collective rights and that these organisations have the capacity for collective representations and negotiation.
In short, the rental market regulation must serve, as Molina summarised, to have a transparent and objective rental market that works in the long term. All the speakers have agreed that this will not only favour tenants but also people in vulnerable situations. Resources that up to now have been allocated to rent payment aids, could go to those who need them most.