The law that limited rents in Catalonia had a very different effect from that intended by its promoters, and mainly favored households with greater purchasing power, according to the conclusions of a report prepared by the EsadeEcPol Center for Economic Policies.
Thus, during the year and a half that it was in force, as of December 2020, the regulation led to a rise of more than 12.7% in the rents of the cheapest flats, while it reduced the rents of the most expensive flats, although only slightly (2.9%), because their owners opted in many cases to remove them from the residential rental market.
The study, carried out by José García Montalvo, professor of Applied Economics at UPF, Joan Monràs, advisor to the San Francisco Federal Reserve, and Josep Maria Raya, professor of Applied Economics at Tecnocampus-UPF, recognizes that "rent control is a policy with short-term effects, without a direct budgetary cost for the administrations, and easy to sell politically”.
For this reason, after the Constitutional Court annulled the measure on the grounds that the Generalitat had no powers to apply it, rent control is the core of the new Law for the Right to Housing that is being processed in Congress. For the authors of the study, however, the "unwanted side effects" that have occurred in Catalonia suggest that "the problem of high rents in tense areas is not the existence of large holders with market power but the lack of offer".
Josep Maria Raya, one of the authors of the study, points out that the effect of income control in Catalonia coincides with the experience of other countries. The study collects data from another carried out by José García Montalvo and Joan Monràs, which quantified the drop in rents at 5%, but due to the decrease in the highest rents since the lowest ones rose "since the owners tended to get closer to the reference price that the administration had set,” said Raya.
The controls also reduced the rental offer: signed contracts fell by 10%, especially those for the most expensive homes (-36%). The norm did not allow rent to be raised even if the house had unique characteristics such as terraces for private use, views, equipment such as home automation or jacuzzis, or unique architectural elements. "The owners took this type of housing off the market, which lowers the average quality of the rental stock," says Raya.
In his opinion, these houses surely did not remain empty, but rather "some owners sold them, unable to obtain the income they wanted, or more probably they used them for tourist housing, in localities where it was possible or for seasonal rental", that is, those that are less than 12 months in duration and are not regulated by the Urban Leasing Law.
The conclusions of the study contrast with those obtained by Jordi Jofre-Monseny, Rodrigo Martínez-Mazza and Mariona Segú, who found that the law had reduced prices by 6% without reducing the rental offer. According to EsadeEcPol, this study did not include the city of Barcelona (which accounts for 42% of the leases that are signed in the tense areas covered by the law), it only included the first months of the regulation and did not collect "microdata" that would allow identifying the characteristics of each house.
The study insists that "increasing the supply of rental housing, mainly public, but also private" is the only way to lower rents. To do this, remember, there are various ways such as public-private collaboration; reserve a percentage of each rental promotion; apply a tax to empty houses; tax incentives for owners to set affordable prices; improve the legal certainty of the owner in the event of non-payment or occupancy or reduce incentives for tourist rentals. For a short-term shock plan, the EsadeEcPol study points out that the state could buy the right to a temporary rental of housing packages from funds and large holders.
