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Why changes to the rental law are not enough to improve the situation of tenants and owners - La Nación Propiedades
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www.lanacion.com.ar
October 14, 2023
The semiannual adjustment and the index that must be used to make the increase are the most significant changes already approved to the rental law; 10 sector leaders consulted by LA NACION give their opinions
By Veronica Ruby
The semiannual adjustment and the index that must be used to make the increase are the most significant changes already approved to the rental law and those in the sector do not see that this will improve the market situation for tenants and owners.
The Chamber of Deputies converted into law, by 128 to 114 votes, the rental reform project with the changes included by the Senate and promoted by the Frente de Todos, with which the contracts between owners and tenants will be maintained for three years and They will be updated semiannually, instead of annually as established by the current standard, with a new index.
With the sanction of this project, the contracts are maintained for three years, which must be stipulated "in a single value in national currency and for monthly periods on which adjustments may be made periodically at intervals of no less than six months."
Also, the Senate modified the mechanism for updating the price of rents and established that “the adjustments must be made using a coefficient made up of the smallest variation that arises from comparing the average of 0.9 of the variation of the salary variation coefficient published by the Indec and the variation of the Reference Stabilization Coefficient (CER), published by the BCRA.” This is the Casa Propia index that is used for housing loans granted by the State and created two years ago by the Ministry of Territorial Development and Habitat of the Nation.
The approved text also incorporated a paragraph in which it determined that “income from the rental of up to two properties will be exempt from paying the monotax .” It also establishes that any “advertising, in any media or platform, that includes the price of “Leasing of properties for residential purposes must be carried out in national currency” and eliminates the possibility of owners charging tenants months in advance. Regarding tax benefits, owners will not pay Personal Property on properties that are rented. Nor will they pay the Check tax in the bank accounts intended to collect those contracts that are “duly registered” with the AFIP. In addition, the “parties may deduct from the Income Tax the sum equivalent to 10% of the annual amount of the lease contract.”
After a marathon day in the Chamber of Deputies, these changes were approved, which must be submitted to the Executive Branch and must be published in the Official Gazette for the new rule to come into force.
These modifications will not significantly impact the current critical situation of the rental market, characterized in recent years by a scarce supply and excessive increases. The Own House coefficient calculates the average of the salary variation and the inflation variation, selecting the lowest value (which is usually the salary, due to the limited increase in income compared to the dizzying rise in prices). As a result, the increase in rents will be linked more to wages than to inflation. In this sense, owners will continue to face imbalances, as inflation exceeds salary increases. And tenants will have to pay semiannual adjustments instead of annually.
Until the law is regulated with the changes, current contracts will remain subject to the law enacted in July 2020, which establishes a term of three years and annual adjustments through the ICL. The law does not have retroactive effect, meaning that a change in legislation will not affect contracts that are already in progress and they must continue in the same way until they expire. New contracts or renewals carried out once the new law is published must be under that standard.
The opinions of experts and leaders in the sector were immediate. LA NACION consulted 10 of them to have their first-hand testimonies.
German Gomez PicassoFOUNDER OF REAL ESTATE REPORT“I was shocked by the news. I did not believe that there was going to be real progress in this change, which for owners is another setback, so there will surely continue to be little supply in the market and values will continue to rise, and tenants will be harmed. Updates every six months may be better than every 12 but it is not enough for the current inflation situation. The new proposed index would appear to run below real inflation. This will surely be reflected in the market with less formal rental offers and in pesos. “A huge waste of time for all sectors of the business, owners and tenants”
Gervasio Muñoz
MEMBER OF GROUPED TENANTS“There are two important things to highlight: on the one hand, the advance of the real estate market could be stopped on the rights already achieved with the 2020 law; On the other hand, from now on the Ministry of Territorial Development and Habitat must enforce the changes to the law, which is why we have already requested a meeting with the minister to demand this control in the application. The annual ICL is not the same as the semiannual Casa Propia. A tenant who paid $100,000 for a whole year will now pay $100,000 for six months and -for example- $150,000 for the other six months. The law is there to be enforced, so contracts should not be made outside the law.”
Marta LiottoOWNER OF LIOTTO PROPIEDADES AND PRESIDENT OF THE UNIQUE COLLEGE OF REAL ESTATE BROKERS“These changes are getting worse and the index is very complicated, as well as unfavorable. The annual ICL today reaches 115.32% and the annual Own Home barely reaches 82%. Today there were a large number of calls from owners to their real estate agencies to let them know that when the contract ends they want to sell and not continue renting. Owners increasingly rent to friends, acquaintances or family members by making private agreements between them or sell the home. We real estate agencies are expelled from the scene and thus illegality increases. A blue rental market has been created with private contracts outside the law. “We are asking the three main candidates that whoever takes office can review this and repeal it.”
Ivan KerrFORMER SECRETARY OF HOUSING OF THE NATION DURING THE PRESIDENCY OF MAURICIO MACRI“The new rental law is terrible. Four years wasted to approve this monstrosity that will once again generate a reduction in supply and further increases in prices. The possibility of access to housing has never been so far away. The law is bad and once again creates an index that is below inflation at a time of very high inflation. Nobody will want to rent their property and there will continue to be less supply and abrupt jumps in prices for tenants. The greatest intervention by the State was of no use and the lesson was not learned. “There is also no development of a social rental policy, credits for social rental or tools that facilitate access to housing.”
Alejandro BennazarOWNER OF BENNAZAR REAL ESTATE AND FORMER PRESIDENT OF THE ARGENTINE REAL ESTATE CHAMBER“I see these changes at the wrong time. We are two months away from a possible change of administration in the country and whoever wins, we are introducing changes to a law that was even contemplated to be repealed. Hopefully these changes will be firm at the beginning of November but on October 22 we will know what direction the country will take with the new president. Will the Own Home coefficient continue? What ministries are going to remain? What are the new government conditions starting in December? How is the new president going to regulate? “All of this generates a lot of uncertainty in the market and produces once again paralysis”
Ivan GinevraCEO OF GNVGROUP AND PRESIDENT OF THE ARGENTINE REAL ESTATE CHAMBER“This new law is not going to have a good impact on the market, both for tenants and owners, because the parties must be allowed to agree freely and not through an index imposed by the Government that dictates how they have to be updated. contracts nor set minimum or maximum deadlines. The consequences are going to be negative. If there is a new Government starting in December it is very likely that it will be repealed quickly. All this generates a more distorted market and uncertainty and we will continue with little supply and more dollarized rents. Tenants and owners continue to be harmed, this is what we said was going to happen with the 2020 law and what will continue to happen. "They are not solving the problem, they are aggravating it."
Soledad BalayanOWNER OF MAURE REAL ESTATE“I do not expect to see major changes, much less positive ones, on the rental market with this approval. For the market to reverse its course, requests for rental appraisals for publication in pesos would have to overflow and that will be impossible to achieve in this context for three-year contracts. The cost of the rental law is even greater than the cost of the exchange rate CEPO. A well-known Nobel Prize winner in Economics said about the implementation of public policies: “If you want someone to do something, make it easy for them.” Argentina is usually the opposite. We already had an annual index to adjust contracts (ICL), why use another one for semiannual adjustments? The implementation of the law is testing the functioning of the market in total informality”
Federico González RoucoECONOMIST SPECIALIZED IN HOUSING“A bullet was spent changing the law so that nothing changes. Or get even worse. No offer, no rentals. Using the Casa Propia index only keeps the problem the same. Kirchnerism sanctioned, in a single mandate, two rental laws, one worse than the other. And it continues with the mistaken idea of putting an index for the entire country, as if CABA, Mendoza and Pinamar, for example, worked in the same way. Casa Propia has a calculation methodology that is almost impossible to replicate and will always run behind as long as we continue in this process of inflationary acceleration. It will always go below inflation. If we agree that today the problem is the lack of available rentals, this does not help one bit”
Mariano EsperLAWYER SPECIALIST IN THE REAL ESTATE SECTOR“These changes are not yet in effect so current contracts remain the same. And it must be clarified that the changes revolve around rental contracts for housing. The premises or offices are not impacted. Something important is that you cannot publish or charge for homes in dollars, something that has been happening and has become natural because the market is dollarized. It is a rush law that is not analyzing the current market well or projecting 10 years into something as fundamental as housing. The rental regime has been modified four times in the last 40 years (and the last two changes three years apart), it is not something very serious for the country nor does it provide stable rules and it is to the detriment of everyone”
Enrique AbattiPRESIDENT OF THE CHAMBER OF OWNERS OF ARGENTINA“This is like throwing more gasoline on the fire and we will surely go to zero rents. The owners have not wanted to renew for a long time but rather make extensions under the same conditions. The Casa Propia index is worse than the current ICL, no one will apply this law and the extensions will continue, which are made for three or six months and have no maximum limit on the initial contract. It is very difficult for someone who starts a rental now to do so with a contract under the new law because the majority are trying to avoid it. The owners expect the new formation of both chambers in Congress with the change of Government because the current ruling party will not have the majority. "What was approved is absolutely negative and will further discourage housing rentals."
www.buysellba.com
Source:
Por qué los cambios a la ley de alquileres no alcanzan para mejorar la situación de los inquilinos y propietarios
El ajuste semestral y el índice que deberá utilizarse para hacer el aumento son los cambios más significativos ya aprobados a la ley de alquileres; 10 referentes del sector consultados por LA NACION dan sus opiniones
www.lanacion.com.ar
October 14, 2023
The semiannual adjustment and the index that must be used to make the increase are the most significant changes already approved to the rental law; 10 sector leaders consulted by LA NACION give their opinions
By Veronica Ruby
The semiannual adjustment and the index that must be used to make the increase are the most significant changes already approved to the rental law and those in the sector do not see that this will improve the market situation for tenants and owners.
The Chamber of Deputies converted into law, by 128 to 114 votes, the rental reform project with the changes included by the Senate and promoted by the Frente de Todos, with which the contracts between owners and tenants will be maintained for three years and They will be updated semiannually, instead of annually as established by the current standard, with a new index.
With the sanction of this project, the contracts are maintained for three years, which must be stipulated "in a single value in national currency and for monthly periods on which adjustments may be made periodically at intervals of no less than six months."
Also, the Senate modified the mechanism for updating the price of rents and established that “the adjustments must be made using a coefficient made up of the smallest variation that arises from comparing the average of 0.9 of the variation of the salary variation coefficient published by the Indec and the variation of the Reference Stabilization Coefficient (CER), published by the BCRA.” This is the Casa Propia index that is used for housing loans granted by the State and created two years ago by the Ministry of Territorial Development and Habitat of the Nation.
The approved text also incorporated a paragraph in which it determined that “income from the rental of up to two properties will be exempt from paying the monotax .” It also establishes that any “advertising, in any media or platform, that includes the price of “Leasing of properties for residential purposes must be carried out in national currency” and eliminates the possibility of owners charging tenants months in advance. Regarding tax benefits, owners will not pay Personal Property on properties that are rented. Nor will they pay the Check tax in the bank accounts intended to collect those contracts that are “duly registered” with the AFIP. In addition, the “parties may deduct from the Income Tax the sum equivalent to 10% of the annual amount of the lease contract.”
After a marathon day in the Chamber of Deputies, these changes were approved, which must be submitted to the Executive Branch and must be published in the Official Gazette for the new rule to come into force.
These modifications will not significantly impact the current critical situation of the rental market, characterized in recent years by a scarce supply and excessive increases. The Own House coefficient calculates the average of the salary variation and the inflation variation, selecting the lowest value (which is usually the salary, due to the limited increase in income compared to the dizzying rise in prices). As a result, the increase in rents will be linked more to wages than to inflation. In this sense, owners will continue to face imbalances, as inflation exceeds salary increases. And tenants will have to pay semiannual adjustments instead of annually.
Until the law is regulated with the changes, current contracts will remain subject to the law enacted in July 2020, which establishes a term of three years and annual adjustments through the ICL. The law does not have retroactive effect, meaning that a change in legislation will not affect contracts that are already in progress and they must continue in the same way until they expire. New contracts or renewals carried out once the new law is published must be under that standard.
The opinions of experts and leaders in the sector were immediate. LA NACION consulted 10 of them to have their first-hand testimonies.
Changes to the Rental Law
The opinions of the sector references
German Gomez PicassoFOUNDER OF REAL ESTATE REPORT“I was shocked by the news. I did not believe that there was going to be real progress in this change, which for owners is another setback, so there will surely continue to be little supply in the market and values will continue to rise, and tenants will be harmed. Updates every six months may be better than every 12 but it is not enough for the current inflation situation. The new proposed index would appear to run below real inflation. This will surely be reflected in the market with less formal rental offers and in pesos. “A huge waste of time for all sectors of the business, owners and tenants”
Gervasio Muñoz
MEMBER OF GROUPED TENANTS“There are two important things to highlight: on the one hand, the advance of the real estate market could be stopped on the rights already achieved with the 2020 law; On the other hand, from now on the Ministry of Territorial Development and Habitat must enforce the changes to the law, which is why we have already requested a meeting with the minister to demand this control in the application. The annual ICL is not the same as the semiannual Casa Propia. A tenant who paid $100,000 for a whole year will now pay $100,000 for six months and -for example- $150,000 for the other six months. The law is there to be enforced, so contracts should not be made outside the law.”
Marta LiottoOWNER OF LIOTTO PROPIEDADES AND PRESIDENT OF THE UNIQUE COLLEGE OF REAL ESTATE BROKERS“These changes are getting worse and the index is very complicated, as well as unfavorable. The annual ICL today reaches 115.32% and the annual Own Home barely reaches 82%. Today there were a large number of calls from owners to their real estate agencies to let them know that when the contract ends they want to sell and not continue renting. Owners increasingly rent to friends, acquaintances or family members by making private agreements between them or sell the home. We real estate agencies are expelled from the scene and thus illegality increases. A blue rental market has been created with private contracts outside the law. “We are asking the three main candidates that whoever takes office can review this and repeal it.”
Ivan KerrFORMER SECRETARY OF HOUSING OF THE NATION DURING THE PRESIDENCY OF MAURICIO MACRI“The new rental law is terrible. Four years wasted to approve this monstrosity that will once again generate a reduction in supply and further increases in prices. The possibility of access to housing has never been so far away. The law is bad and once again creates an index that is below inflation at a time of very high inflation. Nobody will want to rent their property and there will continue to be less supply and abrupt jumps in prices for tenants. The greatest intervention by the State was of no use and the lesson was not learned. “There is also no development of a social rental policy, credits for social rental or tools that facilitate access to housing.”
Alejandro BennazarOWNER OF BENNAZAR REAL ESTATE AND FORMER PRESIDENT OF THE ARGENTINE REAL ESTATE CHAMBER“I see these changes at the wrong time. We are two months away from a possible change of administration in the country and whoever wins, we are introducing changes to a law that was even contemplated to be repealed. Hopefully these changes will be firm at the beginning of November but on October 22 we will know what direction the country will take with the new president. Will the Own Home coefficient continue? What ministries are going to remain? What are the new government conditions starting in December? How is the new president going to regulate? “All of this generates a lot of uncertainty in the market and produces once again paralysis”
Ivan GinevraCEO OF GNVGROUP AND PRESIDENT OF THE ARGENTINE REAL ESTATE CHAMBER“This new law is not going to have a good impact on the market, both for tenants and owners, because the parties must be allowed to agree freely and not through an index imposed by the Government that dictates how they have to be updated. contracts nor set minimum or maximum deadlines. The consequences are going to be negative. If there is a new Government starting in December it is very likely that it will be repealed quickly. All this generates a more distorted market and uncertainty and we will continue with little supply and more dollarized rents. Tenants and owners continue to be harmed, this is what we said was going to happen with the 2020 law and what will continue to happen. "They are not solving the problem, they are aggravating it."
Soledad BalayanOWNER OF MAURE REAL ESTATE“I do not expect to see major changes, much less positive ones, on the rental market with this approval. For the market to reverse its course, requests for rental appraisals for publication in pesos would have to overflow and that will be impossible to achieve in this context for three-year contracts. The cost of the rental law is even greater than the cost of the exchange rate CEPO. A well-known Nobel Prize winner in Economics said about the implementation of public policies: “If you want someone to do something, make it easy for them.” Argentina is usually the opposite. We already had an annual index to adjust contracts (ICL), why use another one for semiannual adjustments? The implementation of the law is testing the functioning of the market in total informality”
Federico González RoucoECONOMIST SPECIALIZED IN HOUSING“A bullet was spent changing the law so that nothing changes. Or get even worse. No offer, no rentals. Using the Casa Propia index only keeps the problem the same. Kirchnerism sanctioned, in a single mandate, two rental laws, one worse than the other. And it continues with the mistaken idea of putting an index for the entire country, as if CABA, Mendoza and Pinamar, for example, worked in the same way. Casa Propia has a calculation methodology that is almost impossible to replicate and will always run behind as long as we continue in this process of inflationary acceleration. It will always go below inflation. If we agree that today the problem is the lack of available rentals, this does not help one bit”
Mariano EsperLAWYER SPECIALIST IN THE REAL ESTATE SECTOR“These changes are not yet in effect so current contracts remain the same. And it must be clarified that the changes revolve around rental contracts for housing. The premises or offices are not impacted. Something important is that you cannot publish or charge for homes in dollars, something that has been happening and has become natural because the market is dollarized. It is a rush law that is not analyzing the current market well or projecting 10 years into something as fundamental as housing. The rental regime has been modified four times in the last 40 years (and the last two changes three years apart), it is not something very serious for the country nor does it provide stable rules and it is to the detriment of everyone”
Enrique AbattiPRESIDENT OF THE CHAMBER OF OWNERS OF ARGENTINA“This is like throwing more gasoline on the fire and we will surely go to zero rents. The owners have not wanted to renew for a long time but rather make extensions under the same conditions. The Casa Propia index is worse than the current ICL, no one will apply this law and the extensions will continue, which are made for three or six months and have no maximum limit on the initial contract. It is very difficult for someone who starts a rental now to do so with a contract under the new law because the majority are trying to avoid it. The owners expect the new formation of both chambers in Congress with the change of Government because the current ruling party will not have the majority. "What was approved is absolutely negative and will further discourage housing rentals."
www.buysellba.com
