Waivered, Reduced Rents Amid Health EmergencyBy Alessa Flores | Tue, 05/12/2020 - 12:23
The average price of a home in Mexico City has been increasing over the past 10 years as demand increases. According to Gene Towle, Director of Softec, it is estimated that the average price of new city apartments has gone from MX$1 million (US$42,000) to MX$3.5 million (US$150,000) over the past 10 years. In addition, it is estimated that the average income per family is MX$49,610 per quarter (US$2,063.5), which is approximately MX$16,536 per month (US$687.8), according to the 2018 National Survey of Household Income and Expenses (ENIGH). This figure has also been decreasing compared to 2016, when it was estimated that a family earned close to MX$17,249 (US$717.5) per month.
Although achieving independence and buying a home is a desirable goal for Mexicans, it is not a possibility for everyone. An investigation carried out by Vivanuncios indicated that 94 percent of the population mentioned they wanted to buy a home. However, 45 percent of those surveyed responded that they did not have sufficient resources to do so, while only 14 percent already declared that they owned their house. The rest declared that they preferred to invest in a business rather than buying a house.
Ricardo Monreal, Coordinator of the Senators of MORENA, stated that in the face of the economic crisis derived from COVID-19 and the possibility of people being economically affected, modifications could be made to the Federal Civil Code for tenants and landlords to agree on exemptions or reductions on rent payments. According to Monreal, the suspension of non-essential activities due to COVID-19 forced several tenants to close their businesses, while they are still forced to pay the rent for the property, according to a note of Expansión Política. Monreal proposed to modify articles 2431 and 2432 of the Federal Civil Code, so that in the event of a health emergency that totally or partially prevents the use or enjoyment of a leased asset, there is the possibility of agreeing on an exemption or reduction on the agreed payment.
At the moment, the only way to get a rent deferment or a discount is through negotiation with property owners. According to Marco Torres, Operations Manager of the Homie real estate platform, the best way forward is to reach an agreement since in this situation both parties are affected, said in an interview with El Economista. In addition, Torres recommended agreeing on a fixed payment of the rent in installments without interest or for the landlord to waiver a month or two until the tenant recovers their economic stability and continues paying the rent.
The dilemma of being locked down or locked out from home is a worldwide concern. According to Emily Benfer, a professor specialized in real estate policies from the Columbia Law School explained that in New York, landlords cannot file eviction orders against tenants during the pandemic. However, the moment these moratoriums are lifted, the city will be witness to massive evictions. In other US cities, like Connecticut, the situation is different. According to Benfer, landlords are banned from evicting tenants during public health crises and must offer a 60-day grace period for tenants to catch up on their rent, according to a CNBC note.
In the case of housing income, the Homie platform predicts that the traditional operations of real estate companies may fall between 20 percent and 30 percent, due to the physical contact that visits require to complete transactions. Similarly, Roberto Esses, Director General of Vivanuncios, commented in an interview with the El Financiero that the situation begins to have an impact on the purchase and rental of housing in the country because people do not want to make long-term commitments because of the uncertainty caused by COVID-19.