In the last few years, a good deal of metropolitan areas in the developed world have experienced a soaring of rent prices for residential housing. These price increases have a rippling effect on household budgets, access to housing and geographical mobility for certain groups in society, for example students and professional expatriates. That is according to the "Public intervention in the rental market" report, published a year ago by the Bank of Spain which examined some of the principal instruments of government intervention in the rental market.
In context, various European governments have implemented different means of intervention with the hope of regulating the renting market. Ultimately, they aim to control rental rates, secure the accessibility of renting public housing at reasonable prices and to offer financial initiatives directed at increasing the number of private houses available on the market.
It's clear that this is no simple task. Each form of intervention has different levels of effectiveness and invariably generates consequences, meaning that they all attract both supporters and critics. Here at Spotahome we want to focus on three European metropolises: Berlin, Paris and Barcelona, where regulation has been carried out.
Germany has the highest rental rate in Europe with close to half of its population living in rented housing. The first measures to put a stop to rising rental rates were introduced to the German capital in 2015, targeting especially critical areas which most needed government intervention. In February 2020 the Mietendeckel law was passed, whereby a maximum rental rate was established per square metre, considering factors like the date of the building and how well maintained it is. It affected more than 1.5 million homes. However, last April the German Constitutional Court deemed the regulation unconstitutional, stating that the local government did not have the authority to make the law. Whilst the regulation was in place, various studies recorded a drop in rental rates as well as prices to buy housing. Although, we must take into account the influence of the pandemic over the figures.
In France, where according to Eurostat, 36% of the population are renters, legislation introduced has also swayed back and forth. The Alur Law proposed in 2014 aimed to stop the continual augmentation of rental rates in Paris (which over the previous decade had risen by 42%). Opposition to the regulation was successful in achieving its repeal in 2017.
Then Macron's government propelled the Elan Law which has been active since July 2019. Among other measures, the regulation ensured a maximum rental rate was imposed on Paris and on other cities (rents could not increase by more than 20% of the reference price) as well as introducing special conditions for rental contracts. In theory, although the plan will be released in 2023, some sources claim that its adoption will only have a very limited effect.
In September 2020 Catalonia approved a pioneering law in Spain which regulated rental rates in 61 municipalities in the region, Barcelona being among them. According to the text, contracts signed by a new tenant are subject to the same terms as agreed by the previous one and, in some cases, the terms will even be reduced if they are above the area's rental rate index and depending on a series of other variables.
Barcelona, with 30% of its population under rental contracts, has recently declared itself as a "tense housing market area". This means that when signing a new rental contract, the reference price must be either lower than the previous contract or 95% of the regional government's rental rate index.
Whilst a national housing law remains paralysed in the Spanish political system, a few days ago the head of the government Pedro Sánchez confirmed the submission of a complaint of unconstitutionality against the rental law enacted by the Generalitat, Catalonia's regional government.
Italy, Denmark, Sweden and Austria are all countries which have kick started policies to keep in check the escalation of rental rates. Others, like Portugal, have chosen to offer financial incentives and regulation to protect people over the age of 65.