Radical change in rental law

[jimdepalermo]

This is only the latest attempt to restore rental controls that were repealed many years ago when the rental market dried up completely. A friend with an inmobiliaria points out that 2 similar proposals were introduced to congress in recent years without going anywhere. Neither of the senate sponsors appears to be very well connected to the government.

It's still worth watching....

For more info see the Clarin "debate" from 20 March http://www.clarin.com/opinion/Insolito-proyecto-ley-alquileres_0_667133342.html.

 

[chris]

A prominent lawyer friend thinks that this could become a law. It falls in line perfectly with the extreme statist Kirchner philosophy. I don't believe, as a couple of people here say, that it would be business as usual. The government has tightened up very radically on its controls.

 

[Bajo_cero2]

Well, lets clarify some points.

A rental cannot cost the same in NYC than in BA. Somebody is pushing the envelope too much.

And as far as Argentina is a small market, greedy peoply can produce inflación and hiperinflacion.

It already happened in 1975 and 1989.

To put limits on the rental prices is a way to stop inflacion.

To avoid to send dollards away too. The problem in the local market is that there are no dollars for paying the imports. And there are no dollars because Argentines anb some foreign companies, equally, had been taking all the dollars abroad. So, the lack of dollars is artificial and it makes no sense to take debts to pay the imports when the government can have dollars.

Think about what might happend if in the US everybody buys pesos instead of saving their money in dollars or US treasury bonds.

This year I was in Korea and there people save their money in Wons, the local currency.

Just my point of view.

Regards

 

[jimdepalermo]

Sorry to disagree, Christian. The government is at fault for maintaining fiscal policies that are causing terrible inflation. And then lying about it through INDEC and trying to cover their missteps through a dependent and collusive central bank.

With the buying power of their savings eroding at 25% per year, Argentines sensibly want to invest their savings in some vehicle that maintains at least a constant value and ideally appreciates a little over time, rather than depreciating daily with accelerating peso inflation.

The only 2 investment vehicles that meet this criterion and are/(were) readily available to Argentines are US dollars and Argentine real estate. The scramble to acquire "ladrillos" has driven prices sky-high. This time it is Argentines, not foreigners, who are bidding up the prices. They believe their real estate investments will hold value, instead of depreciating with inflation, and that they can realize a modest return by renting out these properties.

So now the government restricts the acquisition of dollars and wants to limit returns on apartment rentals. You can argue that the currency controls are an unavoidable short-term measure, given the gross economic mismanagement already inflicted by this government. But rent controls serve no purpose other than to frustrate middle-class Argentines and to employ more corrupt bureaucrats to administer the controls.

The answer to inflation and the flight to foreign currencies is simple: put the fiscal house in order, and the rest will follow.

 

[Mano Negra]

Very reasonable response Jim, though coming from London where young professionals i.e. doctors, nurses, teachers, etc. have very little chance of being able to rent or buy anywhere near where they work normally, let alone those from lower income brackets, I do see the destructive side of both high property values and high rental costs.

The dollar problem would be solved by allowing the currency to float freely, though of course this would initially cause both devaluation and more inflation, and steadying inflation by controlling wage increases. Commodities fluctuate up and down, wages only go one way so if they get built into the cost base the country very quickly becomes uncompetitive. However, if the government tackled labour inflation and put in place a stable regime, a lot of investment money that now finds Brazil expensive would flow to here.

Of course the YPF situation is currently having exactly the opposite effect.

 

[Bajo_cero2]

The answer to inflation and the flight to foreign currencies is simple: put the fiscal house in order, and the rest will follow.

Disagreement is healthy.

The "fiscal house" was never better than now. In fact, the whole issue about buying dollars is because now you have to be in good terms with afip for buying them at 4.30 instead of 4.9. Now you have to pay your taxes.

If what you mean is to spend less, Cavallo (the economy minister that caused the 2001 crisis) applied neoliberal policies for long time and it was a disaster. The economy colapsed and the external debt rise double.

If people and companies send the dollars abroad, then there are no dollars for paying the imports. This is simple.

What produces inflation in this country is complex. Paranoia, lack of dollars because they send them away, greed of Unions and companies together are a cocktel molotov with a lighter on.

Right now I am reading a lot about the 70s economy. It is interesting.

The market is too small in Argentina, without the State regulating it, it is easy to manipulate it.

Regards

 

[Bajo_cero2]

The dollar problem would be solved by allowing the currency to float freely, though of course this would initially cause both devaluation and more inflation, and steadying inflation by controlling wage increases. Commodities fluctuate up and down, wages only go one way so if they get built into the cost base the country very quickly becomes uncompetitive. However, if the government tackled labour inflation and put in place a stable regime, a lot of investment money that now finds Brazil expensive would flow to here..

I agree partially. They can only do that after the dollars from next harvest stay in Argentina. Otherwise the market is artificially distorted with a lack of currency and then the price rise and hiperinflation happend. Even it is a disaster for poor people and middle class, it is the best possible busisness for the high class because they get richer without even working.

Of course the YPF situation is currently having exactly the opposite effect.

Here I disagree. The State needs some ways to finance it self, not only taxes. YPF and the state companies did it very well for long time.

The owners of YPF instead of investing some of the profit, they took all away. Now we lack fuel because they didn t invest in looking for new deposits.

If this money stays in Argentina, the economy works better.

And about economy, this is not a science, it is doctrine.

This morning I read an intelligent comment from a stupid former military dictator while he was ruling. He said that the problem here is not the economy, it is political, I agree with him only about it. Remember that the farmers claim for the lomo at 80 pesos a few years ago, they made it happend. The problem here was the Union of farmers and as I shown you, the market is easy to distort producing ridicoulous profits for some greedy people while they destroy the economy of a country.
Regards

 

[jimdepalermo]

coming from London where young professionals i.e. doctors, nurses, teachers, etc. have very little chance of being able to rent or buy anywhere near where they work normally, let alone those from lower income brackets, I do see the destructive side of both high property values and high rental costs.

I'm from New York City, Miles, where the remnants of various rent control programs still operate from the 1940s and 50s. I think most New Yorkers now agree that they were counterproductive in the long run, by discouraging both the development of new housing and the maintenance of existing housing, with resulting shortages at all levels.

Gradually the laws were changed to exempt from controls properties renting for more than $X per month and then renters earning more than $Y per month, so that with modest inflation over time, only a small percentage of rentals is still controlled. (And highly coveted by the way!) In the last decade, without controls on newly-constructed and re-purposed housing, development has reached a pace not seen in 60 years. Rents, while very high by global standards, are once again negotiable, which hasn't been the case in 60+ years.

The dollar problem would be solved by allowing the currency to float freely, though of course this would initially cause both devaluation and more inflation, and steadying inflation by controlling wage increases. Commodities fluctuate up and down, wages only go one way so if they get built into the cost base the country very quickly becomes uncompetitive. However, if the government tackled labour inflation and put in place a stable regime, a lot of investment money that now finds Brazil expensive would flow to here.

I agree with your points here. Note, however, that a freed peso exchange would at least nominally cause inflation only for imported goods. In contrast, current controls requiring importers to match dollar-for-dollar their import volumes with exports has resulted in a new market that trades existing exports to importers in order to satisfy the currency-control requirement. Current estimates are that this market has added around 8% to import prices, while accomplishing little or nothing to actually reduce imports.

These types of controls just don't work, because clever people find a way to circumvent them, leading to more rules and more controls that are equally circumvented. The result is inefficiency, overhead, and bureaucratic costs that increase prices - ergo inflation - for everyone.

No comment on the YPF operation. Otherwise I might win the award for longest and rantiest post in history.

 

[Mano Negra]

In London they are finally forcing developers to build mixed use developments which include a percentage of affordable housing, which may help prevent rich only ghettoes but I still think expensive housing is one of the worst things that can happen from a societal point of view (i.e the percentage of income you need to spend just to keep a roof over your head. Sadly, while the boom was caused by cheap credit it will not adjust in the capital as it is in the rest of the country, because wealthy investor from all over the world have continued buying into the London market as a safe haven.

The deficit is certainly going down short term (http://www.lanacion.com.ar/1462089-cae-el-deficit-argentino), but of course it cant last once other countries take reciprocal measures.

Of course, perhaps the reason I like the Argentines so much is that they live in a state of constant uncertainty and very few of them spend time talking about how rich they are, what car they drive, how big there house is or how important their job is, which is what makes London so bloody insufferable.

 

[TomAtAlki]

I agree with J de P, I grew up in NY with rent control, totally paralyzing the city, nobody moving or subletting, property owners not maintaining properties because there is no money to be made.
And how about LA, where people to not sell their homes because they don't want to pay tax. These things cause stagnation.
Nancy