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By Jesus Mesa
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Argentina's recent repeal of rent control by libertarian President Javier Milei has led to a surge in housing supply, with the freedom to negotiate contracts, previously restricted, directly causing a drop in rental prices.
Milei, a self-described "anarcho-capitalist" known for his free-market approach, repealed the 2020 Rental Law, enacted by former leftist President Alberto Fernández, which had imposed restrictions on landlords and led to a significant decline in rental availability.
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With Argentina's inflation reaching 211.4%—the highest in 32 years—rent prices were adjusted every 12 months, and leases had to last at least three years. The law, introduced in 2020, ended up distorting the real estate market and hurting both landlords and tenants.
The law aimed to provide tenants with more financial security, but by the end of last year, an estimated one in seven homes in Buenos Aires was sitting empty as landlords chose not to rent them out in Argentine pesos. Deposits were capped, and it was nearly impossible to end tenancies early.
For many locals, finding a new apartment had become "mission impossible." But after the repeal, Buenos Aires saw a doubling of available rental units, and rental prices have stabilized. Under the new rules, landlords and tenants have more freedom to agree on lease terms. If the duration isn't specified, it defaults to two years.
"We've seen a significant increase in rental apartments, and in some cases, we had to lower prices in pesos because of fewer viewings," Soledad Balayan, head of the real-estate agency Maure Inmobiliaria, told Argentine newspaper La Nación.
Since Millei's repeal of rent control laws took effect on December 29, the supply of rental housing in Buenos Aires has jumped by 195.23%, according to the Statistical Observatory of the Real Estate Market of the Real Estate College (CI).
Not everyone in Argentina supports Milei's measure. Critics argue that the repeal disproportionately benefits landlords at the expense of tenants, many of whom are already struggling with the country's economic crisis. Some worry that the increased housing supply could be temporary, leading to a surge in prices once the market stabilizes.
Lessons for US' housing crisis
The debate over rent control is not specific to Argentina. In the U.S., where housing affordability is a major issue, the Argentine example is drawing attention. The libertarian Cato Institute in Washington D.C. pointed out that Argentina's experience shows the inherent problem of price controls, which in the case of housing can both limit supply and worsen affordability problems more broadly.
"Milei cut rent control and other tenancy regulations. The result confirmed economic theory: the supply of rental accommodation is surging, and rents have fallen," said Ryan Bourne, chair for the public understanding of economics at Cato.
President Joe Biden has proposed federal rent control measures, saying they're needed to protect tenants from corporate landlords. He proposed limiting rent hikes to 5% a year for the next two years for landlords with more than 50 units.
Vice President Kamala Harris has also recently indicated support for rent controls, saying at her first major rally since becoming the nominee that she wanted to "take on corporate landlords and cap unfair rent increases." In 2019, after Oregon passed a statewide rent control measure, she praised the bill on Twitter.
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Biden's plan was meant to last two years, which the White House argues is enough time to build more housing that would relieve some of the affordability issues, particularly in cities. However, critics argue that even with exemptions for new construction, rent caps discourage building more homes.
"Evidence shows that rent caps may push landlords to convert rental units into condos, cut back on maintenance, and become more selective about tenants," read a Cato Institute analysis of Biden's proposal.
Housing costs have emerged as a key concern for Americans as the real estate market contends with the double-whammy of high mortgage rates and a dearth of supply, pushing the cost of owning a 26% higher than it was in 2020, according to a recent Redfin analysis. With many would-be buyers on the sidelines, the effect has been a red-hot, competitive rental market that has further pushed up prices.
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