The Bank of Spain says that to control the price of the rental assistance but has adverse effects

The Bank of Spain considers that the price controls on the rental market attack directly the problem of soaring rents, short-term. Do not assume huge amounts of

The Bank of Spain says that to control the price of the rental assistance but has adverse effects

The Bank of Spain considers that the price controls on the rental market attack directly the problem of soaring rents, short-term. Do not assume huge amounts of resources as to create a public park. And help young families to plan and make decisions knowing that the cost of the housing will not trigger. However, in a report that makes the effort to collect all of the evidence existing at the time of trying to tackle the rising cost of rent, points out that this mechanism has also led to “significant adverse effects”, especially when it has been maintained, prolonged, and partial. The agency notes that it has raised the price in the surrounding areas where it was not applied, creating a division between those who benefit and those who are left out.

In the medium term, it has been reducing the supply so that the underlying problem isn't eradicated. They are left to make investment in housing, which implies a deterioration of the quality and of the district. In addition, the redirected investment to other areas may end up causing processes of gentrification, this is: neighborhoods in deterioration that are rehabilitated and become expensive to deport those who previously resided there. Even, warns the bank, it can cause “segmentation of the population according to their economic conditions.” And that is also conducive ghettos. You can even act as a disincentive to labor mobility not to want to lose a lease to low price.

The Spanish supervisor stresses that the rents are shooting up in places where it tends to concentrate economic activity, creating a problem of accessibility to housing and limiting the consumption of young families and with fewer resources. In the face of this growing problem in all large cities, has become the debate on what action to take. And the bank makes a collection of all the policies developed and the academic work done on these. Does not give recipes. It simply lists the pros and cons that have been found in the literature on three types of measures: price controls; public offering of rental and other initiatives, fiscal, regulatory, and urban planning.


The pact includes a commitment to limit the price of the rentals The Bank of Spain warns that the access to housing of young people is further compounded by the precariousness of labour Councils will be able to limit the price increases for rental

Starting with price controls, these have always existed. With inflation rampant of the seventies, took on new strength by freezing rents. But “their associated problems explain the decline of this policy,” notes the report. Until now. Returning to be on the table. Although it does not consist of frozen prices. Rather it is to temporarily limit the rate of increase of rents. In the united States are looking for general upper limits to the inflation that would allow the landlord to obtain a return.

The agreement between PSOE and United we Can provides that are put a ceiling on the increases of abusive rent in zones under tension. And Germany is now the case nearest. France has a scheme in force and has tried to implement a model is more reinforced, but it struck the justice as discriminatory. “Despite this mechanism is designed to limit the growth of prices, the problems of access to rental housing persist in some of the most dynamic cities of Germany,” says the document of the supervisor. For that reason, Berlin has reinforced the system by resorting even to the freezing of rents for five years and tightening of control and sanctions. “This contrasts with the less effective control of the regulations applied in the whole of Germany, the fulfilment of which rests on the civil law and is not subject to an administrative process of enforcement and sanction as you enter Berlin.”

Or what is the same, as highlighted by the Bank of Spain, this system is facing serious challenges at the time of launching, above all, control. Which implies that you have to develop an administrative apparatus to ensure that it works. In Germany there has been a increase in the number of lawsuits between tenants and landlords. “We need court systems or arbitration effective for the proper functioning of the market”, concludes the institution that directs Pablo Hernández de Cos.

In the case of San Francisco (USA) in the nineties, although “in the short term has reduced the displacement of households in the lowest income”, in the medium and long term it has detected “a reduction of the supply of rent to the homes of lower-income,” and “an increase in the construction of housing targeted to families with greater purchasing power,” says the document. And in Germany there has been a similar dynamic to San Francisco: according to the agency, price controls represented “a reduction of the rental price in the segment regulated, while that caused a substantial increase in rental prices in the segments are not regulated”. That is to say, as it is not addressing the underlying problem of the shortage of supply to an increasing population, creates a dual market in which there is a part that is protected and another that suffers from the overflow of the prices.

In terms of the supply of public rental housing, there are cities such as Vienna that are more than half of the park under this regime, because it was erected to rebuild the city after the war. But Spain has very little and is in property. The cost of lift now a park from scratch would be very high. So a solution suggested by the Bank of Spain would be to leverage the private sector incentivándolo, just like it does in the united States. This requires that the concession be designed efficiently, to prevent benefit to someone in a moment, and then, years later, continue to enjoy the home even though in reality you do not need it. You would also need to minimize the concentration of pockets of social exclusion.

to Improve protection of the owner contributes to the promotion of the rental housing, says the Bank of Spain. Although adds that it must be combined with some protection for the tenant that will give you stability. The casuistry of the united States shows that limit the construction is also noted. And the little evidence that exists on the penalization of the empty dwelling points that would help something to mobilize flats for the rental market. Direct subsidies or deductions to the tenant run the risk of moving to the prices. On the other hand, although with limited information, it appears that the rental home on the cheap would be having some impact on the revenue, if well-bounded to the tourist areas.

Updated Date: 23 January 2020, 19:00

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