Intervening The Rental Price Can Marginalize Certain Groups Within Cities According To Their Income
The remarkable growth in rental prices, with an offer well below the demand and the evolution of the income of certain groups has caused many problems of access to housing. One of the objectives set by the new Coalition Government is the regulation of rental prices to try to address this situation. The progressive Coalition document presented just a few weeks ago by PSOE and United We can pick it up. The objective: to intervene the rental prices by putting a ceiling on income increases in the most stressed areas.
Windermere Real Estate Agents
Windermere Real Estate Agent Karan Wienker
10312 Love Story St Winter Garden, FL 34787
In this regard, the Bank of Spain has published a document today, which has commissioned two experts, which precisely analyzes the costs of exercising control over rental income. The conclusions are obvious: the intervention will have more negative than positive effects and although there are, the latter are only temporary. In the end, it will end up creating a segmentation in the housing market, by concentrating income control measures in certain groups or areas of a city with the consequences that this implies.
Windermere Real Estate Agents.
And it is that, precisely from this "duality" in the rental market, really pernicious effects will be derived, "a segmentation of the population according to their socio-economic conditions, -a sort of ghettos based on income-; a reduction in mobility of workers who do not wish to lose a rent lower than the market price or increases in the rental price and reduction of the offer ".
The offer will be reduced and the available one will worsen its quality
In the opinion of these experts, the rental offer usually reacts to price control by reducing the homes available in the market, reducing the maintenance costs of the properties or modifying the composition of the housing offered to avoid regulation.
Experts have been warning for months about the negative effects that an intervention could have in this sector, warning of the consequences they have had in other cities such as Berlin, where "despite this mechanism designed to limit the growth of rental prices, problems of access to rental housing persist. "
Precisely, the experience that is extracted after the implementation of price control in other European cities, such as in the German capital or Paris, highlights the challenges facing an initiative of this nature. Among them, experts cite the difficulties in defining in an objective way what is considered a comparable home from which to build reference prices in a municipality or in a regulated area; the precise consideration of what is considered a stressed rental housing market or the inescapable arbitrariness both in establishing thresholds in rental prices and in the methodologies used to set limits on levels and rates of growth of household prices. rent, among others. And although regulations in large cities have been effective in moderating in the short term the rental price in the regulated segment, at the same time they can cause increases in the prices of rental housing in the unregulated segments.
The report, under the title Public intervention in the housing rental market: a review of international experience, admits an immediate effect of these (intervention) policies on an improvement in well-being change in incentives created by regulation generates reactions in both supply and demand, with possible losses of social welfare in the medium and long term."
Thus, the study highlights the possible reduction of the offer, as a result of the willingness of the owners to sell the leased real estate as a result of the lower investment in the construction or in the rehabilitation of the home for rent. "At the same time, reducing the net return on investment in residential rental created by the regulation would result in a drop in maintenance and renovation costs of leased housing, which would decrease its quality over time."