Most experts agree on the need to establish some kind of regulation and the debate has focussed on how to do it and the competencies held in this regard
The third session of the non-permanent commission for the study of rent regulation of Barcelona City Council was held on 8 September. This third session focussed on the competency frameworks and potential scenarios for the regulation of rent prices in the city of Barcelona. Participants included the Doctor of Law, Director General of Law and Legal Entities of the Department of Justice, Xavier Bernadí; the Civil Law Professor for the University of Barcelona (UB) and Jean Monnet of European Private Law, Esther Arroyo; the tenured Administrative Law Professor of the UB, Domènec Sibina; the Civil Law Professor for the Pompeu Fabra University (UPF), Josep Ferrer; the Civil Law Lecturer at the Rovira i Virgili University (URV) and member of the UNESCO Housing Chair at the URV, Héctor Simón; the Chair of the Chamber of Urban Property of Barcelona, Joan Ràfols and tenured researcher at Institut Ostrom Catalunya, Economist and graduate of International Business Economics from the UPF, Pol Borrellas. The committee was chaired by the ERC municipal group councillor, Eva Baró, and the deputy chair held by the councillor for Housing and Renovation, Lucía Martín.
The session took place at a particularly relevant moment, as on 9 September the Parliament of Catalonia voted on a bill for the regulation of rents. A bill that, as Martín reminded us, has arrived thanks to the driving force of citizens through a proposal by the Tenants Association and 4,000 other entities. “This shows that the debate is not on whether it should be done or not, but rather on the technical aspects”, said Martín, who also reminded us that the regulation of rent prices is one more measure, and not the only one; it must be accompanied by an increase in the budget, measures against speculation and housing emergencies. All the experts were in agreement on this point except the Chair of the Chamber of Property, Joan Ràfols, and the researcher from the Institut Olstrom, Pol Borrellas, who are against any kind of regulation arguing that it would reduce the offer of rental housing and called for the construction of more housing, public and private.
Competencies
So, the debate did not focus on whether rents should be regulated or not but on how to do it and the competency framework. “There is a problem accessing housing and asking whether the autonomous communities can remedy this is not just legitimate, it is a duty”, stated the Civil Law Professor for the UB and Jean Monnet of European Private Law, Esther Arroyo. The tenured Administrative Law Professor of the UB, Domènec Sibina, stated that housing should have the same treatment as health, and be deemed a need not a consumer good solely regulated by market laws.
The question that should be answered then is whether a Catalan law that regulates rent prices is constitutional or not and, in this sense, the experts explained that it is necessary to reflect on the reasons that may make it unconstitutional. Firstly, we could find objections for substantive reasons, in other words, whether it is thought that it is a matter that can be regulated. In this sense, the legal experts agreed there is no conflict, rent prices can be regulated. Therefore, the debate must focus on who can do it. This regulation would affect the right of ownership, a basic right but that must be linked to the social function of ownership and, therefore, it is not an absolute right. Therefore, what must be seen is how it is regulated, so it is not excessive or cause prolonged losses in the long term. In this sense, Arroyo stated that “no one knows better than the legislator how to address this and that this mechanism would be more effective than the promotion of new housing, at least in the short term”.
The biggest obstacle to rent regulation is the objections regarding the competency framework. In this sense, the Director General of Law and Legal Entities of the Department of Justice, Xavier Bernadí, was “convinced we have competencies for regulation aimed at containing rent prices. This was the case when promoting the first Decree Law, upon knowing the report of the Council for Statutory Guarantees, and after the second”. Although recognising that the competencies are not an exact science, the legal experts explained that the rental contract is a civil contract and the Generalitat government of Catalonia has competency in civil matters. However, this competency has exceptions, and among them we find the contractual terms and conditions. If the rent is deemed a term and condition, the Generalitat does not have competency and these terms and conditions have never been formalised by the State. This aspect, therefore, raises doubts and could be a loophole that allows regulation, or a reason for the Constitutional Court to declare it unconstitutional. In this sense, the Civil Law Professor of the UPF, Josep Ferrer, calls for an initiative coordinated with the Spanish State with mechanisms to give competencies to autonomous community institutions.
International experiences and variations
Another thing that was made clear is that rent regulation is not black or white, but there are many variations and possibilities. The Civil Law Professor of the URV and member of the UNESCO Housing Chair of the URV, Héctor Simón, explained that there is a great variety of models ranging from a completely free market to totally controlled rent passing through the possibility of a voluntary control, linked to tax incentives for ownership if it is adhered to, or an initial free price and control only of the updates. According to Simón, a suitable model needs to be found because one that is too restrictive could make the black market grow.
The experts also spoke about measures that could be applied within the current competency framework, such as, for example, fixing the Rental Price Reference Index, which is a guide. Arroyo also talked about how in Catalonia whenever a price is detrimental by more than 50% of the market price, the contract can be rescinded. In this sense she stated that, “if a contract can be challenged if the price is abusive, why can’t it be fixed when a price is abusive?”.