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MEXICO CITY (AP) — Mexico City's legislature approved the most ambitious rent control law since the 1940s on Thursday, limiting rent increases to the previous year's inflation rate.
Rents in the megacity of 9 million people were largely frozen in the 1940s, and remained so for decades for older buildings. Those controls were largely lifted in the 1990s.
The new law would also require landlords to register all rental agreements with the city. It is unclear whether the new law would allow landlords to charge higher fees for improvements they make to their properties.
Mexico City, like many other cities around the world, has seen complaints about rising rents due to digital nomads and short-term rentals. But this seems to have affected only a small number of tourists. Neighborhoods near the sprawling city center.
“Many people with higher incomes are willing to pay more for housing, whether buying or renting it. Moreover, short-term rentals on the internet have made it a matter of profit, driving traditional residents out of the capital,” said Martha Soledad Avila Ventura, a legislator for the ruling Morena party.
In recent years, a shortage of saleable land and property has led to a rise in The real estate market is very competitive. Where property prices have risen significantly above the rate of inflation.
But the new law doesn’t address the city’s real problem: a housing shortage. Lawmakers estimate the city has 2.7 million homes and apartments, but it needs about 800,000 more.
The city has long relied on private developers to build housing, and it's unclear whether the new law might discourage investment in residential construction.
The history of rent control in Mexico City is complex. Under the fixed-rent laws of the 1940s, inflation rapidly reduced rents in real terms, causing people to pay a pittance for apartments. Landlords gradually abandoned buildings because rental income was not enough to cover routine maintenance costs.
Old rental laws also made it difficult to evict tenants for non-payment, and gave some tenants the right of first refusal if the units they live in were put up for sale. This created distortions in rental markets, with many landlords preferring to rent to foreigners, who were seen as less likely to avail themselves of such protections.
In the 1950s and 1960s, the government built several large apartment complexes in the city, although these were rarely built for rent. These apartments were always put up for sale to new buyers as soon as they were completed.
The current city government has no real plans to build large numbers of its own rental units, nor does it have the money or construction expertise to do so.
Moreover, almost any new construction is out of reach for the poorest people. The minimum wage in Mexico is about $1.50 an hour, while the average wage is only about $4 an hour.
President-elect Claudia Sheinbaum, also from Morena, said she hopes to implement a rent-to-buy program, whereby poorer tenants would pay reduced rent and, if they get a government housing loan, the rent they previously paid would be applied to the purchase price.
It also wants the Federal Housing Agency, which is funded by payroll deductions to fund individual workers’ accounts, to start building housing itself. At present, the agency operates largely as a financing agency, making loans to buy homes built by private developers.
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