One of libertarian Javier Milei’s first initiatives after winning the presidency of Argentina in November was getting rid of the country’s notoriously clumsy and counterproductive rent controls.
The results are in, and rents are falling sharply in Argentina as the housing supply explodes.
Rent control, a policy beloved of left-wingers in the United States and Europe, was imposed in Argentina by its socialist government in 2020. Among other things, the “Rental Law” stipulated that properties must be rented for at least three years, the national central bank would cap rents, and security deposits could be no more than one month’s rent.
The Rental Law gave tenants near-total control over terminating rental agreements, which effectively made it impossible for landlords to evict them. Tenants were even allowed to deduct the cost of home repairs they made themselves from their rental payments.
Socialists billed these rules as a form of “financial security” for the public, but the result was anything but. The Argentine housing market collapsed, leaving the cities full of empty apartments. House hunters said it was almost impossible to find landlords willing to rent property under the socialist laws.
In late 2023, the capital city of Buenos Aires — home to the most desirable real estate in the country — estimated that one in seven homes was vacant. The Argentine Real Estate Chamber said at the end of 2023 that the supply of rental properties in Buenos Aires fell by 95 percent in the three years since the Rental Law was passed.
As always with price controls, the actual price of rental property skyrocketed even though it was supposedly capped. A desperate house hunter told France’s Le Monde in September 2023 that when her old lease on a tiny two-bedroom apartment ran out, her landlord offered her an extension at a 350-percent price increase.
“The uncertainty makes you want to cry. At worst, we won’t be homeless, we’ll be able to rent a one-bedroom or a studio – but with an 11-year-old child?” she sighed.
Milei overturned the Rental Law with an executive decree in December, one of many sweeping changes he implemented in a program he described as “shock therapy” for Argentina’s moribund socialist economy.
Newsweek on Tuesday described the result as a “surge in housing supply” that directly caused a “drop in rental prices.”
“Since Millei’s repeal of rent control laws took effect on December 29, the supply of rental housing in Buenos Aires has jumped by 195.23%, according to the Statistical Observatory of the Real Estate Market of the Real Estate College,” Newsweek said.
Economics chair Ryan Bourne of the Cato Institute said Argentina’s experience should be a warning for the United States, where the Biden-Harris administration has proposed rent control measures to “protect tenants from corporate landlords.”
“Milei cut rent control and other tenancy regulations. The result confirmed economic theory: the supply of rental accommodation is surging, and rents have fallen,” Bourne said.
Rent control is one of the few Biden administration policies that Vice President Kamala Harris has not flip-flopped on since becoming the Democrat Party nominee. Harris restated her support for price controls on rental properties at her first rally as the presidential nominee.
“Evidence shows that rent caps may push landlords to convert rental units into condos, cut back on maintenance, and become more selective about tenants,” the Cato Institute said of the Biden-Harris proposals — an analysis written even before Milei decisively defeated rent control in Argentina.
Bourne pointed out in a January essay that price controls on rent increase the already fearsome risk landlords face, as does inflation, which inevitably distorts market prices. In Argentina, the Rental Law forced landlords to accept payment only in the hyperinflating Argentinian peso rather than the more stable U.S. dollar, as many would have preferred.
When Argentina’s socialists decided they could wave market volatility out of existence with their price-control magic wand, most landlords simply abandoned the old model of property rental, instead preferring to sell their properties for rapidly inflating prices or arrange short-term “micro-rentals” through services such as Airbnb. Even as the supply of rental properties in Buenos Aires evaporated from 2020 to 2023, the number of Airbnb rentals in the city nearly tripled.
Another predictable result of price controls was that landlords found ways around them, causing ostensibly “capped” rents to blast off into orbit. One simple technique was to raise rents by insane margins before the price controls took effect; another was to abandon maintenance efforts to reduce costs. Bourne noted the average monthly rent for a two-bedroom apartment in Buenos Aires went from 18,000 pesos in 2019 to 334,000 pesos at the beginning of 2024.
Even in January, when Bourne wrote his analysis, rental agents in Argentina were reporting increases in rental availability of up to 50 percent, while rental prices fell by 20 to 30 percent — and that was less than a month after Milei junked the socialist Rental Law.
“In recent years there’s been a new drumbeat for providing more security for tenants by controlling rents within longer, secure tenancies,” Bourne concluded. “Argentina’s experience provides a textbook warning of how this policy can backfire, and more grist to Milei’s educational mill.”
