With renting and home ownership in the UK a big talking point, let us examine how renting compares with other major European cities.
Renting remains the choice for the majority of Germans, who are at the bottom of the list of European homeowners, with just 46% of households owning their own home. People much prefer to rent, for a number of reasons which range from the historical to cultural and economic. Wartime bombing destroyed about 20% of residential areas in German towns and cities, at the same time as refugees from eastern parts of the former Reich who had lost everything, streamed into the country and in 1950 there was a drastic lack of living quarters.
Culturally, there is nothing like the drive to want to own as there is in other countries. Banks do not help by being unlikely to give a mortgage to anyone unless they can provide 20% of the purchase price, and on top of that high add-on costs such as extortionate estate agent fees (typically 7.14%) and stamp duty of up to 6.5% do little to entice people to buy.
Renters have felt safe in the knowledge that the law is more on their side than that of the landlord. However in recent years soaring rents in many German cities – often fuelled by largely foreign buyer-driven property booms currently being experienced in cities such as Berlin and Munich – have led to increasing social disgruntlement, sparking a recent wave of street protests across the country.
However, the percentage of their income Germans pay for rent is still relatively low compared with other countries – 25% in Munich, 21% in Berlin, Cologne and Frankfurt, while the national average is 27%. This compares favourably with London, Warsaw, Madrid or Rome, where it is more than 40%. While this remains the case, few people will have an incentive to buy, experts believe.
Spain has traditionally had a high rate of home ownership, about 80% in 2008, when the building boom ended and the bubble burst. It has now slipped back to about 78% but is likely to fall further as unemployment remains high and mortgages difficult to obtain.
An inevitable result has been a rise in rentals and rents. Rents have been pushed up by demand but also by Airbnb and other holiday rental platforms. According the housing platform Idealista, rents in Barcelona have risen 55% since 2012 (23% in Madrid).
Rental contracts tend to be for one or three years, after which they may be terminated or renewed and the rent renegotiated. Rent-controlled apartments dating back to the Franco era have mostly disappeared. Increasingly landlords in tourist areas are demanding excessive rents to force tenants out, so they can turn apartments into lucrative holiday rentals. A flat with a rent of €1,000 a month can make five times that as a holiday let. Eviction also continues to be a serious problem as lenders are reluctant to negotiate terms.
In Ireland, price controls were introduced in early 2017 amid soaring rents in Dublin’s super-heated property market. The “rent predictability measure” caps increases to 4% a year for three years. But, one year later, the rent controls have done little to halt rises. According to website daft.ie, rents jumped 10.4% in Dublin in 2017, and at an average of £1,476 in the north of the city and £1,675 in the south, are now substantially higher than the average for London (£1,276).
Like the UK, high deposits and high house prices – along with strict lending rules – are turning home ownership into a distant dream for many young Irish workers, particularly in the capital. Home ownership rates peaked at 80.1% in 1991, but have now fallen below 70%. Amid a worsening homelessness crisis and a lack of housebuilding since the country’s economic crash in 2007-08, housing has moved to the top of the political agenda. Stories of desperate queues at new housing developments abound, while just a fortnight ago more than 10,000 marched through the capital demanding action on housing.
French tenants benefit from much stricter rules on landlords than in Britain. Rents on unfurnished dwellings are only allowed to be increased by an index, called the IRL. This year it permits an annual increase of 0.51%, and was close to zero for much of 2015 and 2016. Anyone renting an unfurnished property as their main residence is given a minimum three-year tenancy with an automatic right of renewal after three years, or must give three months’ notice if they want to leave. If the landlord wants the tenant to leave, they must give them a minimum of six months’ notice. Landlords must also give the tenant a first right of refusal if they wish to sell.
What’s more, eviction is forbidden in the winter months. A rule called la trêve hivernale (the winter truce) runs for five months from 1 November when landlords are not allowed to evict their tenants for any reason. It is meant as a humanitarian measure, but it also means evictions jump on 1 April.
Rent controls and tenancy protections in the US are decided at the state level. In dozens of states, laws promoted by the conservative American Legislative Exchange Council, such as Illinois’ 1997 Rent Control Preemption Act, prohibit municipalities from passing laws that regulates rent. Last month, an advisory referendum in Chicago to lift the ban on rent control won 77% approval. The “Lift The Ban” coalition says a third of Chicago households cannot find affordable housing, and that a minimum wage worker will have to work 106 hours a week to afford the average city rent.
Elsewhere in the US, New York has the longest history of rent controls. More than 1m apartments in the city are rent-regulated under a complex set of laws. A tiny number have full rent control, with rents substantially below commercial levels. The vast majority enjoy rent stabilisation, controlled by the Rent Guidelines Board. It froze rents in 2015 and 2016 but in 2017 voted to allow landlords rises of up to 2%.
Home ownership levels have been falling in the US in common with much of the developed world. It peaked in 2004 at 69.2%, then fell to 62.9% in 2016, though it has recovered mildly since then.