Formal housing increasingly inaccessible as rent control phased out: Built Environment Observatory

As rent control has reduced over the last 40 years, and been replaced by more competitive market rates, many are finding formal housing increasingly inaccessible, according to a report published by the Cairo-based Built Environment Observatory.

As part of the observatory’s “State of Housing 2017” series, the “Egypt State of Rent 2017” report was published on Tuesday, recording changes in the housing market over the period from 1986 to 2017.

Yahia Shawkat, the primary researcher of the report and co-founder of the Observatory, believes the liberalization of the landlord-tenant relationship, ushered in by 1996 property legislation (Law 4/1996) exempting new rental agreements from the previous rent controlled, or “old rent” system, needs to be reassessed. He told Mada Masr that the law was “a reaction to over regulation under the previous law.”

As old rent laws are being phased out and there is not enough demand for properties at new rental prices, renting as an option for low and middle-income households is fast reducing, the report states.

Egypt needs new legislation that will address the inability of the new rent system to catch up with market demand, Shawkat told Mada Masr.

According to the data analysed by the observatory, there was a surge in rental prices after the implementation of the 1996 law, which created a largely unregulated market. The report indicates that under the legislation, contracts were drafted in 94.3 percent of cases, but that only 15.2 percent of these cases were formally registered, leaving little room for monitoring and regulation.

This transformation from a heavily rent-controlled system to new market rates has led to record high rental prices, according to the report. This has resulted in “more households than at any other point in history being forced to live in inadequate housing that is crowded, unsafe, or lacks proper security, water or sanitation,” the report adds.

One of the apparent results of this trend is the reluctance of landlords to rent their apartments, which the report explains is due to low property taxes — meaning landlords can afford to leave their properties empty — and a lack of confidence in the state’s ability to evict non-paying tenants.

In 2017, only 14 percent of all households — 3.3 million — were rented, the report asserted, based on CAPMAS’ 2017 Census. The highest share of these rentals was in Cairo and the Red Sea governorates, at 39 percent and 38 percent respectively, while the lowest share of rentals was in Minya, Kafr al-Sheikh and Beheira, at around 4 percent of households.

Courtesy: The Built Environment Observatory

The rental market has lost 610,000 occupants over the last decade, as a result of a one million drop in spaces occupied under old rent.

“These statistics show that the deregulation of rent-controlled housing has not led in any way to the growth of market rentals,” according to the report. It explained this drop by two major factors: The repurposing of the majority of houses and the soar in rental prices, which priced many former tenants out of the market.

Affordability decreased by almost three fold, as the national rent-to-income ratio jumped from 14 percent in 2008, to 39 percent in 2017, the report noted.

Shawkat believes that the inefficiency of the rental market could be solved by establishing a new central and independent entity, with sub branches nationwide that protect tenants rights. This entity could work to spread awareness about the dynamics and legalities between owners and tenants, receive people’s complaints and monitor the market. It could also offer a rental contract template that would protect the rights of both parties and provide standard rental values in cities and neighborhoods that are regularly updated.

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