Spain is not the first European country to apply limits on rental prices. Other surrounding economies, such as United Kingdom, France either Germanyalso tried their luck with a result very similar to what we can see today in Spain.
As stated a few months ago by International Monetary Fund (IMF) in its report on the Spanish economy, in general, we can conclude that limiting the price of rent ends up generating the opposite effects to those desired.
In Europe, in fact, there is only one success story. A capital whose market, with special characteristicsmakes coexistence between owners and tenants satisfactory for both parties.
Paris and Berlin
The most recent use cases at the European level are those of the French and German capitals. In both cities, a series of limitations have been introduced over the past decade in an attempt to halt the rise in urban rents. Spoiler: both enclaves obtained the same result.
Berlin, with a rent rate of 85%, registered increases the rental price by almost 100% since the 2008 crisis, the city has welcomed an average of 40,000 citizens per year and is only capable of building 16,000 rental housing units, which is why the authorities have applied the Mietpreisbremsea system with which local entities could set an upper limit on prices.
Only one year has passed since its entry into force, the supply of apartments fell by 25%the average rental price increased by 36%, the supply of housing for sale subject to the law increased by 38.8%, and the underground economy skyrocketed. The situation was such that houses were promoted at two prices, the Law price and the desired price.
“On the other hand, in German cities where the price of rent has not been limited and where efforts have been made to encourage landlords, the opposite trend to that in Berlin has occurred. In Hamburg, Düsseldorf, Frankfurt, Cologne, Munich and Stuttgart increased the number of rental properties by an average of 33.4%, while sales decreased by 5.9%,” adds Seguro Rental.
In the French capital, photography is similar. In 2015, the government of François Hollande decided to intervene in the rental market with what is called Alur lawa rule that was only in effect for two years.
The rental price has increased by 25%. In fact, 33% of the houses advertised exceeded the limit set by law. In just two years, 15% of the supply of rental housing has disappeared from the market.
The chaos of Sweden
The scale of Sweden’s housing problem, arising from price controls, is unprecedented in any Western country. Waiting lists for access to regulated rentals exceed 20 years. Currently, 255 out of a total of 290 Swedish municipalities They officially have a housing deficit.
The problem originated in the failure of a public housing plan which called for the construction of 100,000 new homes per year. The objective was none other than to achieve a large stock of social housing to guarantee below-market rents.
The problem ? In the 1990s, a bubble burst in the country, plunging construction companies and developers into a major crisis. The result? Only 10,000 homes were built per year. The consequence? Nearly 500,000 people were waiting for social housing in Stockholm over the past decade.
People who access public rental do so for life. The prices of these rentals are negotiated by the unions, so they are effectively lower than those of the market. The problem comes from those who, for whatever reason, have not been able to access one of these accommodations.
Buying a house in Sweden It’s complicated even for the wealthyThus, in many cases, citizens who cannot access the public rental program are forced to pay rents 200% more expensive than a few decades ago.
“In 2017, the European Commission urged Sweden to take measures to reduce household debt and improve the strained housing situation. The European Commission said that “a strictly regulated rental market makes it difficult to use property efficiently existing housing, which aggravates the problem.” ” they add from the Seguro Rental study center.
The secret of Vienna
The Austrian capital is considered by many experts to be the tenant capital of Europe. Nearly 77% of its housing supply is intended for social rental and around 60% of regulated housing is public.
For decades, municipal entities have allocated large budgetary allocations to the construction of a public stock of social rental housing, making the city the largest real estate owner in the world. At the same time, private projects benefiting from public rental assistance were subsidized. Annual investment in housing exceeds 600 million and citizens pay a tax of 0.5% of their salary to improve the park.
How is it applied?
Austrian rent law (Mietrechtsgesetz or MRG) applies in three ways:
Complete: Sets the maximum rental price. It protects the tenant in the event of termination of the contract by the owner. It is applied in particular in houses built before the Second World War and those belonging to municipal authorities.
Partial: The price can be set freely and the parties benefit from the protection of the law. It applies to unsubsidized housing and new construction.
Exempt: No price limitation and no specific protection for the parties to a rental contract. Everything is regulated on the basis of free contract and the Austrian Civil Code. It is applied in the private market.
Ease of access to housing makes 80% of citizens prefer to rent rather than buy. In addition, housing construction is regulated and the price per m2 is fixed from the start of the project, thus avoiding speculation.
“On the other hand, the characteristics of social rental housing, both public and subsidized, meet exceptional quality criteria, often higher than those of free housing, which makes it even more attractive for tenants. This type of housing, unlike the rest of the market in European countries, is not built on the outskirts,” adds Seguro Rent.
Since April 2023, Spain has regulated rental prices through the Housing Law. The application of this rule, which only Catalonia and the Basque Country apply as a whole, has caused rental prices to rise to the maximum in the major markets.
