Written by Caleb Thompson.
When Argentinian President Javier Milei repealed the nation’s rent control law in December 2023, the results were both immediate and significant. Rent prices, which had skyrocketed under previous regulations, began to drop at an impressive rate. According to a report from February, rents had already decreased by more than 20%, and this trend shows no signs of stopping. Additionally, the availability of rental properties surged by over 200%, a clear indication that the market is beginning to stabilize after years of restrictive policies.
This turnaround is especially remarkable given the bleak situation under Milei’s predecessor, Alberto Fernández. Fernández had imposed strict rent controls in 2020, leading to widespread disillusionment among property owners. Faced with diminishing returns, many landlords opted to sell their rental properties, while others turned to Airbnb, drastically reducing the number of long-term rental units available in Buenos Aires.
The Impact of Free-Market Policies
The repeal of rent control didn’t just change the numbers—it transformed the entire rental market. Enrique Abatti, president of the Chamber of Property Owners of the Argentine Republic, highlighted the shift: “Until about 20 days ago, there was zero supply; we did not reach 50, 60 homes. But by January 2024, there were more than 7,000 on offer.” This dramatic change underscores the power of free-market principles in correcting an imbalanced market.
However, despite the overwhelming evidence against rent control, governments worldwide continue to experiment with these policies. Scotland, for example, implemented a 3% rent cap in 2022, only to see a 12.7% increase in rental prices in 2023, far outpacing the 10.5% average across the United Kingdom. The lesson here is clear: rent control often exacerbates the very problems it aims to solve.
Global Implications: The Economics of Rent Control
Economist Ryan Bourne from the Cato Institute explains the fundamental issue with rent control: “By shifting more financial risks and hassle onto landlords, tenancy rent controls encourage property owners to get out of the rental market.” This economic principle, which played out so disastrously in Argentina, is universal. While Argentina’s high inflation made the effects of rent control particularly destructive, the underlying economics remain consistent across different markets.
As nations like Scotland continue to grapple with the consequences of rent control, Argentina’s experience serves as a cautionary tale. Free-market solutions, while not without their challenges, offer a more sustainable path forward in balancing supply and demand in the housing market.
Our Take
The repeal of rent control in Argentina highlights the dangers of heavy-handed government intervention in the housing market. While rent control may seem like a compassionate solution, it often leads to reduced supply, higher prices, and a less dynamic market. Argentina’s swift recovery following the repeal should serve as a wake-up call to other nations considering similar policies. Instead of stifling the market, governments should focus on creating an environment where both tenants and landlords can thrive.
