The Promoted Housing Lawespecially after the modifications implemented in 2020 by the current government of Luis Lacalle Pou has remained at the center of the controversy after the construction record within the regime in Uruguay, at the same time that a study revealed that 83% of the projects framed in this regulation were for real estate investment.
In this regard, the graduate in economics and senior consultant in Exante, Delfina Matos, highlighted that the relevant boost in the construction of housing within the law occurred from the regulatory changes that were introduced a little more than three years ago – flexibilities both for the construction and for the setting of sales and rental prices of the units. built and marketed—which led to doubling the number of projects promoted compared to the levels of the last decade.
However, and despite the fact that the number of projects in the interior of the country was also promoted, especially in Paysandú, Salto, Colonia and Florida —when, historically, most of the housing promoted takes place in Montevideo and Cannelloni-; and which has contributed to the decline in rental prices, according to Exante’s analysis, there are still challenges to be resolved regarding the promotion scheme.
Does the Promoted Housing Law contribute to access to housing?
The controversy surrounding the law arose after a report from the portal Infocasas revealed that 83% of the projects framed within the promotion scheme were for real estate investment, and that only the remaining 17% was intended for personal use. This, in a scenario of multiplication of projects that marked a record in 2023, with 205 initiatives against the 85 that were averaged annually between 2012 and 2020, according to data from the National Housing Agency (ANV).
However, Matos made an important point during his analysis on Radio En Perspectiva: “The objective of the regime is to give better access to housing but not exclusively by reducing the purchase and sale prices of homes, but also through greater housing offer for rent, which assumes a cheapening of rents.”
In that sense, the economist highlighted that “we should not evaluate as something negative that 83% of the sales of promoted homes have gone to investors.” “Ultimately, the most relevant thing is whether this greater supply of housing that was put on the market is being reflected in a lower cost of access to housing, whether due to lower prices in sales or in the rental market, which in fact has had a very positive evolution in recent years,” he added.
According to the data of the National Institute of Statistics (INE)In December, 85,500 current rental contracts were published, when the usual number is around 84,000, reflecting an increase in these operations, due to a greater supply of housing. Likewise, at the price level “the impact seems to be much more forceful”: “The average price of rents measured in real terms (that is, discounting the inflation) It has been showing a downward trend since 2018. The average rent in 2023 was 12% lower in real terms than the 2017 average,” Matos said.
With this data, and although she clarified that it cannot be assured that it is the only reason for the reduction in rental prices, the Exante senior consultant assured that the Promoted Housing Law—along with its recent modifications—“is a factor that has contributed.”
“In our opinion, the promoted housing regime has had relevant contributions: generating a higher level of activity in construction, more employment and achieving a greater supply of housing in the market, but this does not mean that it cannot be perfected or that it does not have to be complemented with other mechanisms that aim to facilitate access to housing for some segments of the population,” Matos considered.
Among the pending challenges in housing, he pointed out the high construction costs that exists in the country, as well as the need to “think about some change in incentives for the private sector to build cheaper unitssimpler in the quality of their finishes.”
Source: Ambito
