POMIDA welcomes yesterday’s clarification from the Ministry of Social Cohesion and Family that the government is not considering and does not intend to proceed with any form of administrative regulation or cap on residential rents, further explaining the reasons for this stance, and the statement that “Addressing the housing crisis requires structural interventions that increase the available housing stock, rather than administrative price controls,” Stratos Paradias noted in a statement.
However, since the issue has “come up” in public discourse—even if only due to a misunderstanding, as the relevant Ministry has assured us— POMIDA considers it necessary to outline the disastrous consequences of adopting such a measure in the past, as well as in the event of its adoption in the future, both for landlords and, above all, for tenants. It also takes this opportunity to outline its proposals for resolving the issue for the benefit of all.
The primary objective in today’s residential rental market—which is rightly identified as the top priority of the National Housing Strategy—is the adoption and implementation of measures that “open up homes,” that is, to increase the supply of housing on the rental market, thereby bridging the current gap between the steadily declining supply and the steadily rising demand for housing, because only this can bring rental prices into balance.
While the National Strategy Plan contains a host of positive proposals for significant measures that will indeed help increase the supply of rental housing, it also seems to indirectly describe a measure which, if it were to take effect, will automatically nullify all the others: the imposition of rent controls on both existing and new residential leases, specifically targeting older properties with low energy efficiency ratings—which make up the largest segment of the market— the majority of which are presumed to be owned by elderly and financially vulnerable small property owners, with the following inevitable consequences:
For existing leases, because the mandatory reduction or “freeze” on rents will, by definition, be accompanied by criminal or administrative penalties against landlords for enforcing it, followed by a mandatory extension of the lease terms, and thus will evolve into a full-fledged “Rent Control” system, which, once enacted, will be extended indefinitely, resulting in the complete abandonment and devaluation of properties by their owners, and a complete halt to the construction or renovation of rental housing.
For new leases, which must be entered into with a rent controlled by market forces from the outset, an inevitable consequence will be that, beyond the strong reluctance of owners to rent their homes to people unknown to them, the parties will be legally compelled to enter into agreements to conceal any amount exceeding the “cap,” in order to avoid both criminal and other penalties as well as the tax burden.
Thus, the first victims of the new Rent Cap will be not only young people and young couples—precisely those who need to be able to find homes but will not—but also the state’s revenue…
Since, therefore, what is needed are measures that “make homes available,” rather than “make them unavailable,” we demand the immediate withdrawal of this proposal from the consultation document, since its mere presence in the public discourse is enough to reflexively bring to the minds of older generations the criminal conviction carrying a six-month prison sentence and the heavy fines imposed on thousands of landlords for exceeding the rent by just a few drachmas under the Legislative Actof September 8, 1978, on Fair Rent (1978–1984); the subsequent multi-year (1984–1994) seizure of their properties due to forced lease extensions; and, earlier, the complete devaluation of their properties due to the occupation-era rent system (1940–1965)—haunting memories that can only foster wariness toward the necessary “opening up” of housing to long-term leases...
What does POMIDA propose to increase the supply of housing for long-term leases:
- Extension of the three-year income tax exemption on new primary residence leases for any residence that is currently unrented for any reason (newly built, renovated, recently acquired, owner-occupied, provided free of charge, or owned by any type of legal entity). This measure will bring a huge number of unrented residences onto the market, with virtually no loss of public revenue, since absolutely nothing is currently collected from them!
- Enact legislation allowing for the unilateral division of large apartments into smaller ones, even when prohibited by the apartment building’s bylaws.
- Further reduction of all income tax rates on rental income.
- Reduction of the VAT rate on materials and labor for functional and energy-efficiency upgrades to residential properties to 12%, and improvement of the terms for income tax refunds related to building upgrade expenses, within three years (instead of five years) and up to 50% of the cost of materials (instead of 25%).
- Launch of the application for assessing the creditworthiness of prospective tenants by the General Secretariat for the Financial Sector and Private Debt Management, so that landlords will not hesitate for a moment to “open” their homes to any tenant who honors their obligations.