Housing at Risk

VenEconomy: The National Assembly has the first debate of the bill for Standardizing and Controlling Property Rentals on its agenda. This is the first piece of legislation that has come from the "Legislator People," a new mechanism that permits the country’s citizens to draft bills and submit them to the National Assembly for approval.

Unfortunately this bill came into being with a number of handicaps.

The first, and the basis of all the excesses contained in the bill, is that it was drafted without consultation and unilaterally by one of the parties affected by the bill, which, in turn, is protected by the government. As a result, the outcome is a bill that ignores the rights of the other parties -- the builders and owners of the houses and apartments -- who are precisely the ones who invest and risk their effort and capital.

Moreover, it is a bill that is being promoted by the government for electoral reasons, with its eye on the 2012 presidential elections. The government is perfectly aware that millions of Venezuelans are desperate because they do not have a home and will grasp at any promise that might offer a solution to their problem, no matter how empty.

But the fact of the matter is that, if this bill becomes law, instead of solving the housing crisis, it will make it worse, as the few houses and apartments that are available for rent will disappear.

Here are just some of the nonsensical things the bill proposes:

Private builders will have to allocate 25% of new housing units they build to be put up for rent. It also establishes the contractual obligation that builders sell the house or apartment to the tenant after 10 years have elapsed, at a price to be set by the government.

The government and the National Tenancy Bureau will be empowered to set the selling prices, with discounts of up to 25% if the buyer is the tenant.

Eviction from the house or apartment, even when this is for causes attributable to failures by the tenant to abide by the terms of the lease, may only be carried out when the tenant has somewhere else to live.

The maximum profit that can be made on residential properties will be between 1% and 4% a year, depending on the value of the property, and this value will decrease based on parameters that will be decided by the Executive.

The rented property will be expropriated, if the landlord commits three offenses, as established in the bill, and also owns more than five rented properties.

In its present form, this bill will adversely affect both tenants and landlords and will also have a negative impact on the construction of housing for sale. No one will risk investing their money when, apart from not being able to make a profit, they could well end up without their property.