Homeless in Buenos Aires

How the State broke housing in Argentina... and how the free market is fixing it

“...it was the age of wisdom, it was the age of foolishness...”

~ Charles Dickens, from A Tale of Two Cities (1859)

Joel Bowman with today’s Note From the End of the World: Buenos Aires, Argentina...

Tide comes in, tide goes out. Same as it ever was. 

Last week, we brought you a cautionary tale of “predictable tragedy,” one taken directly out of the Age of Foolishness that is modern day Cuba, where the communist government was recently forced to dock the weight of its subsidized ration of daily bread – a holdover scheme from the inglorious Castro era – by roughly a quarter.

The long-suffering people of that impoverished communist holdover have, apparently, not yet suffered enough for the experiment in central planning to be abandoned. Having spent some time on the island many years ago, where outside a tiny tourist enclave the shelves are as bare as the children’s feet, one shudders to imagine what rock bottom might actually look like there...

Today, if only in the interest of balance, we bring you a celebratory tale of “predictable bounty,” one taken directly from the Age of Wisdom that has lately come to characterize modern day Argentina... much to the surprise of the porteños themselves who had, after decades of governmental mismanagement, incompetence and corruption, all but given up the game for good.  

Let’s back up a bit... 

Law of the Landless

It was four years ago this month when Argentina’s then-socialist government, in its boundless incompetence, enacted the “Ley de Alquiler” (2020 Rental Law), which essentially amounted to national rent control. Evidently not keen students of the past, the leaders of the left-wing administration cheerfully whistled past 4,000 years of observable economic history on the subject, including a handy little book titled: Forty Centuries of Wage and Price Control: How NOT to Fight Inflation, by Robert L Schuettinger and Eamonn F. Buder (1979).

The basic Peronist pitch, common to all such “government knows best” conceits, relies on the heart taking a massive advanced loan of blood from the brain, such that feelings – for the poor, for the lame, for “those experiencing unhousedness” – take on lifelike animations… while reason, logic and empirical evidence are left to flail and fold, like an unarmed sock puppet.

The law itself, among the most draconian rent control measures in the world, mandated landowners shackle themselves to strict, three-year leases. Meanwhile, all contracts were required to be denominated in pesos, which the econo-clowns at the nation’s central bank were busy printing into oblivion. It also gave tenants wide discretion to dictate terms of lease termination and weighed heavily against landlords who sought to evict deadbeat tenants, even on grounds of property destruction and failure to keep up with payments. 

Predictably, instead of leasing their apartments to the rental equivalents of “tenants with tenure,” a situation in which they were virtually guaranteed to lose money thanks to the government’s world-beating inflation, many landlords simply kept their places vacant... or sold them for dollars. 

Home Sweet Homeless

Thus, by 2022, some 200,000 apartments were left vacant in the capital of Buenos Aires, up 45% from a year earlier. Last year, as many as one in seven homes in the country sat empty, an historic supply shortage in exactly the thing most needed by precisely the group the state claimed to be helping. 

Put another way, the Argentine state proved itself as incompetent a Realtor in Chief as the Cuban state is Baker in Chief. The pair join a long line of state interventionists –  from the Ancient kingdom of Eshnunna... to the Babylonian code of Hamurrabi... to the Roman Emperor Diocletian... and on down the ages – who thought they knew better than market participants what they needed and at what price. 

And then, just when it looked like Argentina might go “Full Cuba,” the tide turned...

In January of this year, newly elected president Javier Milei tore up the national rent control law, much to the harping and kvetching of state apologists, who accused him of hating on the homeless. Naturally. And yet, the results have been so astounding, so positive for free(r) market participants on both sides, even the mainstream press has caught wind of the story. From a recent piece in The Wall Street Journal:

The country’s new president, Javier Milei, has scrapped the rental law, along with most government price controls, in a fiscal experiment that he is conducting to revive South America’s second-biggest economy. 

The result: The Argentine capital is undergoing a rental-market boom. Landlords are rushing to put their properties back on the market, with Buenos Aires rental supplies increasing by over 170%. While rents are still up in nominal terms, many renters are getting better deals than ever, with a 40% decline in the real price of rental properties when adjusted for inflation since last October, said Federico González Rouco, an economist at Buenos Aires-based Empiria Consultores.

Milei’s move to undo rent-control regulations has resulted in one of the clearest-cut victories for what he calls “economic shock therapy.” He is methodically taking apart a system of price controls, closing government agencies and lifting trade restrictions built up over eight decades of socialist and military rule in an effort that has upended the lives of many Argentines.

You can see for yourself in the chart below, from local property consultants ZonaProp, how the monthly price of rent here (bold orange line) outpaced even the skyrocketing monthly inflation levels (this blue line). Note, too, the start and end dates of the Ley de Alquiler (shaded in gray)...

(Source: Zonaprop, Argentina)

Suddenly free to negotiate terms of their own contracts – including duration, conditions of termination and, all importantly, currency of settlement – landlords and tenants are now able to settle on mutually beneficial arrangements... even without central planners “helping” them out of house and home!

Race to the Bottom

Here in the capital, meanwhile, inflation continues to slow (disinflation). C&T consultants estimate consumer price inflation fell to 3.5% in September. The trend was led by food and beverages, which fell to 3.2% for the month. Core inflation also came in below 4%, down from 4.8% in August. Here’s the chart:

(Legend: Orange line, consumer price inflation; blue line, food and beverages; green line, core inflation. Source: C&T)

In addition to unshackling the rental market, Milei also binned price controls on other staples such as milk and sugar. His administration has also lifted similar controls on cooking gas and begun slashing energy subsidies, which had in the past led to woeful underinvestment in the country’s much dilapidated energy infrastructure. 

The moral of our little Tale of Two Ages is by no means new. State control and central planning belongs squarely to the Age of Ignorance. As for free markets, free minds and free people, the Age of Wisdom is at our fingertips, if only we choose it. 

Stay tuned for more Notes From the End of the World...

Cheers,

Joel Bowman

P.S. Happily for liberty lovers (and woefully for central planners), freedom is in the ascendency in many places around the world.

It seems like barely a day goes by down here at the End of the World where some nonsensical collectivist weed is not uprooted. And slowly but surely, people are catching on, thanks in large part to independent reporting.

Right here on Substack, for instance, tens of thousands of independent authors, journalists, investigators and opinion columnists are sharing their own perspectives on everything from politics to economics, financial markets to crypto investing, corporatist malfeasance and individual triumphs alike.

We may be small… but we are legion. And we are bringing down the mainstream narrative… one brick at a time.

As always, we are especially grateful to our generous Notes members, whose dues allow us to pursue this humble publication. If you would like to join our growing Notes community and help support the ideas of free markets, free minds and free people, please consider becoming a member today. Thanks in advance ~ JB