CDMX: frozen rents?; private investment hit

A strong blow to private investment is coming to Mexico City.

It goes directly against those who have real estate for rent.

The capital government sent a bill to regulate the rental of housing in the capital of Mexico.

It provides that the rents of apartments or houses cannot exceed the annual amount of inflation.

The argument is to “stop the excessive increase in the cost of rents and protect the poorest families.”

And presumably, it also seeks to combat gentrification in Mexico City. It will try to reduce the phenomenon with which digital nomads – that is, foreigners who come to live in Mexico – have displaced hundreds of settlers from their place of origin, by paying higher rents.

The initiative also proposes promoting the construction of social interest housing. As well as the creation of a registry of contracts between tenants and landlords. The City government intends, in its own words: “to put order to the rent prices in the capital of the country, which have skyrocketed in recent years.”

In addition to “promoting cheap rental housing through schemes and programs” focused on the lowest-income population. The initiative has already been sent to the Congress of Mexico City, where it will be discussed and –surely– approved in the following weeks.

The head of the capital government, Martí Batres, presented the guidelines of the initiative during the morning conference and President Andrés Manuel López Obrador gave his approval.

The bill proposes modifying the Civil Code of the capital of the country, so that the increase in rent is never greater than the inflation reported by the Bank of Mexico (Banxico) in the previous year.

And it provides for the creation of a digital registry of housing rental contracts.

The contracts will have to be registered within a period of no more than 30 days after being signed to provide legal certainty to owners and tenants.

The capital government also intends to modify the Housing Law of Mexico City, to allow “the production of housing intended for affordable rental.”

Likewise, within the project, it is intended to empower the government of Mexico City, through the Secretariat of Housing and Urban Development (Seduvi) and the Housing Institute (Invi), to promote cheap rental housing “through schemes and programs” focused on the lowest-income population.

Martí Batres stressed that the bill aims to put order to rent prices in the capital of the country, which have skyrocketed in recent years.

President López Obrador said that good times are coming for social housing in the country, with the reforms to the National Workers’ Housing Fund Institute (Infonavit) that will be discussed in the Congress of the Union and the project of Claudia Sheinbaum Pardo, virtual president-elect of Mexico, to build a million houses for workers.

The “Martí initiative” to regulate housing rents in Mexico City represents a leap into the last century.

At that time, in the 1940s, the then President of the Republic, Manuel Ávila Camacho, promulgated a law that froze rents in the city, to protect the economy of families from the inflation that was ravaging the country at that time.

Many years went by with the “frozen rent” regime and what at first seemed positive because of the benefit for the families that it sought to protect, over time became a harmful phenomenon for the city and families.

The buildings stopped being maintained and became dilapidated and risky buildings.

In the 1985 earthquake, most of the houses that collapsed were those that had frozen rents.

The physical deterioration of the Historic Center was notable, as was its depopulation. The frozen rents became a vicious circle.

The owners stopped investing in maintenance, the tenants, not being their property, did not invest in maintenance either, the legal framework prevented the owners from evicting the landlords and, consequently, they could not sell. The experience was disastrous for the city, for the owners and for the tenants.

The difference between today’s context and that of the 1940s, when a state of war was recorded at that time.

It should be remembered that it took half a century for the law on frozen rents to finally be repealed. We will see if this initiative, which from all angles, goes against private property and the forces of supply and demand in the market, is finally approved.

At the same time as it seeks to benefit the poorest families, it is also harming those who make an effort and invest in real estate to legitimately obtain a profit based on the free operation of the market.

Source: eleconomista