The recent lifting of rent controls by Argentina’s libertarian President Javier Milei has led to a significant increase in housing supply. The previously limited freedom to negotiate leases has directly led to a decline in rental prices.

Milei, a self-described “anarcho-capitalist” known for his free-market approach, repealed the 2020 rental law enacted by former leftist President Alberto Fernández, which had imposed restrictions on landlords and led to a significant decline in rental supply.

With inflation in Argentina reaching 211.4%, the highest in 32 years, rent prices were adjusted every 12 months and leases had to last at least three years. The law, introduced in 2020, ultimately distorted the real estate market and harmed both landlords and tenants.

The law was intended to provide tenants with more financial security, but by the end of last year an estimated one in seven apartments in Buenos Aires was empty because landlords were unwilling to rent them in Argentine pesos. Security deposits were capped and it was almost impossible to end tenancies early.

For many locals, finding a new apartment had become an impossible task. But after the law was repealed, the number of available rental apartments in Buenos Aires doubled and rental prices stabilized. Under the new rules, landlords and tenants have more flexibility in agreeing on the rental terms. If the term is not fixed, it is two years by default.

“We have seen a significant increase in rental properties and in some cases we have had to lower the prices in pesos because there have been fewer viewings,” Soledad Balayan, head of the real estate agency Maure Inmobiliaria, told the Argentine newspaper The Nation.

Since Millei’s repeal of rent control laws came into effect on December 29, the supply of rental apartments in Buenos Aires has increased by 195.23%, according to the Statistical Observatory of the Real Estate Market of the Real Estate College (CI).

Not everyone in Argentina supports Milei’s measure. Critics argue that repealing the rule disproportionately benefits landlords at the expense of tenants, many of whom are already suffering from the country’s economic crisis. Some fear that the increased housing supply will be temporary and could lead to a rise in prices once the market stabilizes.

Lessons for the real estate crisis in the USA

The debate over rent controls is not an Argentine problem. The example of Argentina is also attracting attention in the United States, where housing affordability is a major issue. The libertarian Cato Institute in Washington DC pointed out that Argentina’s experience shows the inherent problem of price controls, which in the case of housing can both restrict supply and exacerbate affordability problems in general.

“Milei has loosened rent controls and other rental regulations. The result confirms economic theory: The supply of rental housing is rising rapidly and rents have fallen,” said Ryan Bourne, chair of the Public Understanding of Economics Chair at Cato.

President Joe Biden has proposed federal rent control measures, saying they are necessary to protect tenants from commercial landlords. He proposed capping rent increases for landlords with more than 50 units at 5% per year for the next two years.

Vice President Kamala Harris also recently expressed her support for rent control. At her first major rally since her nomination, she said she wanted to “attack corporate landlords and limit unfair rent increases.” After Oregon passed a statewide rent control measure in 2019, she praised the bill on Twitter.

Biden’s plan was designed to last for two years, which the White House says is enough time to create more housing and alleviate some of the affordability problems, especially in cities. But critics argue that rent caps, even with exceptions for new construction, hinder the construction of more housing.

“The evidence suggests that rent caps could encourage landlords to convert rental apartments into condos, save on maintenance, and be more selective in selecting tenants,” says an analysis of Biden’s proposal by the Cato Institute.

Housing costs have become a top concern for Americans as the real estate market struggles with the double whammy of high mortgage rates and tight supply, driving the cost of owning a home 26% higher than it was in 2020, according to a recent analysis from Redfin. With many potential buyers waiting, the result is an overheated, competitive rental market that continues to drive prices higher.

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