Javier Burón, Barcelona City Council’s Manager for Housing, warned today about the new bubble currently being produced in Barcelona’s property market, where prices continue their upward trend and there are less and less homes to rent at an affordable price.
“In Barcelona homes are not removed from the rented market in order to sell them, just the opposite: they are being bought to rent out, because it is an extraordinarily profitable market… Barcelona cannot be a speculative market; it has to be a stable market with reasonable profits and with tenants who can afford to pay the prices”, he stated in an interview with RAC1.
For this reason, Burón positively valued the announcement by the Government of Catalonia of implementing a reference index on rental prices in order to limit their uncontrolled increase: “It is not a case of doing away with the real estate business or of prohibiting any increase in prices; it is simply that some increases are reasonable and others are not.”
In line with the models applied in other European cities, this index will serve to establish a reference price around which the prices can vary following a series of criteria. Thus the price of a flat will depend on the district where it is located, the characteristics of the property and its condition, for example.
Also, the new regulations establish measures to promote the use of this indicator, as incentives for owners who rent below the reference prices. The proposal by the Government of Catalonia is mirrored in the services of the Housing Rental Market, which offers guarantees and renovation grants for owners who transfer their flat to the social housing market.
A tool for modulating market trends
Despite having no regulatory power, Burón insisted on the importance of producing “a well-constructed indicator” that contains all the information possible on rental prices according to area, dwelling type, size, category, type of furnishings, etc. in order to find a balance.
“It is a case of finding a system that can, on one hand, enable owners to obtain certain profitability and are interested in being in the rental market in the long term, while on the other hand, tenants being able to pay their prices,” he said.
Meanwhile, the lengthening of the minimum period of leases (from the current 3 years, it has been proposed to increase it to 5 years + 3 renewable years) provides the market with “stability”: not only for the tenants, who will be able to keep their home at the same price, but also for owners and real estate professionals, who will be guaranteed regular revenue.
“If someone wishes to buy and rent in the tourist market, with or without an HUT (Houses for Tourist Use) licence, to obtain profitability over two or three years and then sell the dwelling… this is not a professional landlord, this is something else,” Burón criticised.
Another of the incentives to try to halt the uncontrolled rise in prices is that town councils may be able to subsidise the IBI Property Tax on rented properties, so that a system of incentives is created for those owners who rent below the reference price and those who set higher prices are penalised.
European models
Following the experience of other cities like Paris or Berlin, which have their own regulation over rental market prices, the aim is for both landlords and tenants to know what “reasonable prices”are in the area of the city where they want to rent a flat or live in one.
The Housing Chief recognised that the new decree could come into conflict with property law and freedom of enterprise, but he also considered that the public administrations have “total competence” to fix reference prices.
Thus, administrations would ideally have legal coverage to apply restrictions on certain rentals. In the case of Paris, for example, there is a “framework system” according to which if the rental price exceeds the indicator by too much, the increase cannot be applied. Consequently, in the leases signed in recent months in the French capital the price increase has gone down by 30% (not the price itself).
According to the latest studies, Barcelona is the city with the highest rental prices in the whole of Spain and various cities in the metropolitan area are among the ten most expensive cities in the country. Burón acknowledged that “It is a serious problem, it is an emergency situation and in all the administrations we must act as quickly as possible.”
In the next 10 years, the Government of Catalonia and Barcelona City Council will invest over 1.6 billion euros in housing policies, to jointly create a mechanism which can function as a public housing service.
“This is our main obligation, as indicated by the European Court, which defines housing as a basic right of all European citizens,” he concluded.