One of the main purposes of the director of the Chair of Housing of the University Rovira I Virgili (URV), Sergio Nasarre Aznar (Tarragona, 1974), is to make the rent an attractive form of tenure. However, he is aware that there is still a long way to go to reach the average rental rate in Europe. Currently, the chair has been commissioned to draft the principles for a new right of urban leases of Catalonia, a proposal that will later be studied by a commission of experts.
Nasarre and his team have made it their goal to apply to our real estate market many of the knowledge acquired during their participation in the TENLAW project, funded by the European Commission. A research study that has compared the operation of different rental systems in Europe for five years. But also, for his role, the professor will take into account the contributions of the greatest experts in the field of the European Union, who will visit the campus of the URV on the 29th and 30th of September.
The housing specialist ensures that there are “a series of essential elements” for a rental market to work. A recipe, undoubtedly necessary to lubricate the gear of the lease, especially in Barcelona and other large cities in the metropolitan area, where the number of flats that are offered in this type of regime is much lower than the demand, which many Sometimes it turns finding a “ceiling” in an odyssey face.
Do you see a new real estate bubble on the horizon?
Sure, that’s the problem. In addition, rent is stigmatized for several reasons: first, we have the lowest rental rate in Western Europe – around 13% and 15%, while the European average is around 35% -. We have a very unhealthy and attractive market because the offer is limited, the price is expensive and the owners do not have many incentives to improve the quality of the park, both by the existing regulations and by the high rental demand there is. Against this background, people buy back housing.
Those who can meet the requirements that the banks themselves, which are still being financed with public money from Brussels, are putting. Nobody prevents it since Spain did not transpose in March the European directive on credit agreements entered into with consumers for real estate for residential use – although in the summer the Proposed Draft Law for the Real Estate Credit Contracts was made public. The real estate operators want to go back to what happened, is entering a dynamic that looks bad.
Now banks are offering 80% of the purchase price of the property – and in some cases 100% -, but in Germany, the loan to value ratio (LTV) is usually only 60%.
That is why the percentage of the population that lives on rent in the Germanic country is higher.
Of course, that is, here we have two major models: the German, which assumes that there will always be families whose income will never be proprietary, but in return it offers a very stable, functional and attractive rental market, which avoids family over-indebtedness – 55% of families in Germany live on rent.
And then, we have the Latin model, in which property has been generalized: even without having anything saved you can buy a house for 250,000 euros, and that has led to the crisis of 2007. It is the same model as the United States, Ireland, Italy or Greece or Portugal, which leaves the rent as a super residual tenure.
What consequences can it have
Especially the family over-indebtedness. The European directive is saying: “Do not give loans to those who can not pay them and make a very thorough assessment of the present and future solvency of the debtor, that the approval of the operation does not depend only on the value of the property”.
One of the principles of our proposal is that in order to double the rental rate, this form of tenure has to be attractive to the middle classes, who seek stability and predictability in payments. This can only be achieved with indefinite lease contracts and with rents referenced to the market price, as in Germany, Switzerland, and Austria, the countries with the highest rental rate in Europe.
Current regulations limit contracts to only three years, the monthly rent that the tenant must pay is fixed freely -by the lessor, normally-, there is no reference as to whether the price is fair; third, the tenant has less stability than before – he does not even have a preference when buying the property if the owner decides to sell it; and fourth, if you leave the floor before the agreement, you must pay compensation equivalent to the first six months, and then, compensation is usually agreed on for the remaining month.
And what obstacles do homeowners have when it comes to renting?
One of them is the lack of rehabilitation: many homes are not rented because they are not in conditions. The latest figures say that about 46% of rentals are rented in black, without a contract or taxes because they do not meet the conditions of habitability. It is an absolutely precarious situation.
First, with public aid for rehabilitation; second, by promoting private rehabilitation mechanisms -such as rent rehabilitation or well-structured urban masovería-, in which the tenant pays with works, not with money; third, the possibility of being able to pass on part of the works to the tenants provided they are guaranteed to stay in the house as long as they want.