A study carried out by the Torcuato Di Tella University analyzed the impact that the real estate market registered from the regulations of the rental law 27,551 (repealed by DNU 70/23), the stoppage of mortgage loans and the inflationary phenomenon that during the 2023 year reached a level of 211.4%.
One of the findings of the study – carried out by the UTDT in the Autonomous City of Buenos Aires (CABA) – is that rent control measures and the collapse of the mortgage market, due to prohibitively high inflation rates, were the main drivers of significant market distortions. The 2020 rent control law, which extended the duration of contracts and implemented a new indexation mechanism, caused a substantial contraction in housing supply, with listings decreasing by 21.3% compared to the period prior to the existence of the legislation.
At the same time, the virtual disappearance of mortgage financing, with less than 0.5% of GDP in mortgage stock, forced potential home buyers to turn to the rental market, which further strained supply.
The effect of temporary rentals
In relation to the eventual impact of temporary rentals, often identified as the main distorting element in housing markets, it was determined that their effect is almost irrelevant, contributing to a reduction of only 1.5% in the availability of rentals. long term over a period of 4 years. This is in stark contrast to the more significant distortions determined by rent control, dysfunctional credit market dynamics, and the impact of macroeconomic volatility.
Precisely, the UTDT study clearly identifies the negative effects of the rental law, which caused a drastic reduction in the supply of rental housing in CABA, with an increase in prices to cover inflation and a redirection of properties towards the sale. All these variables were reversed and accelerated their normalization after the repeal of the law.
Not just tourism
The City of Buenos Aires is an important tourist destination, with 2.8 million tourists between the third quarter of 2022 and the second quarter of 2023. Temporary rentals have helped owners maintain a source of income in the midst of a challenging environment for the rental market. Of these tourists, 50% stayed in hotels and 22% in temporary housing, an increase of 7 percentage points compared to the previous year.
The city is a tourist center par excellence and a pole of attraction for digital nomads, students and young professionals from around the world who consider the city not only a gateway to get to know the country, but also a place to settle temporarily for study, work and development of entrepreneurial activities of different modalities, all of which generates an important contribution in foreign currency and in the generation of local activity.
Even beyond the presence of foreigners and domestic tourism itself, we cannot ignore the fact that CABA necessarily requires having a modern offer of temporary rentals for those who require prolonged stays to carry out administrative, judicial, regulatory procedures and even for care. health and medical treatments.
Academic study
The study by the Torcuato Di Tella University (UTDT) in collaboration with the CIPUV (Urban Policy and Housing Research Center) and the CEPE (Evidence-based Policy Evaluation) was based on a multiplicity of sources available on the market and was directed by Cyntia Goytia, Gastón Gertner, Ángeles Scetta and Guadalupe Dorna.
The study takes advantage of a unique and complete data set from a time series, combining detailed and granular information that allows the dynamics of the rental market to be disaggregated in the long term and in the short term. To address potential endogeneity issues and strengthen causal inference, the study employs instrumental variables-style methods. Bartik using a change-participation approach.
This instrument allowed us to isolate the causal effects of rent control policies and credit market failures while taking into account the influence of the emerging short-term rental market.
Source: Ambito
