Rent-controlled homes buck trend and go up in cost

FRIDAY, JULY 15: The monthly cost of budget properties under ‘rent control’ is rising — even as the overall property market stagnates.

A property that would have cost $2,000-a-month in May last year would now be $2,050, according to Government stats.

While the increase is not huge — $600-a-year — it is money out of the pockets of the poorest Bermudians at a time when they can least afford it.

And the increases, which must be sanctioned by the rent commissioner, are out of sync with a property market that has been plummeting.

Nicola Feldman, of housing charity Habitat for Humanity warned: “The community should be seriously concerned about rising rent prices at the ‘affordable’ end which is already highly unaffordable for many.”

A spokeswoman for the rent control department said the increases were largely due to properties that had been refurbished or had not been increased for years.

She added: “The laws are designed to protect tenants from inordinate rent increases and unjust eviction. 

“It is not the intent of the law to freeze rents or deny a landlord a reasonable increase in rent.”

But anti-poverty campaigners have questioned how any increases at all can be justified in a climate of job cuts and pay freezes.

Landlords

Rent Control laws are designed to keep a lid on costs at the budget end of the market. Roughly 17,000 properties fall under the purview of rent commissioner Eugene Foley and his staff.

Landlords who want to push up the prices on tenants have to apply to the commissioner and provide a reasonable justification for the increase.

A breakdown of the figures supplied by Government as part of the Consumer Price Index for May shows that properties that don’t fall under rent control rose by just 0.3 percent in the past 12 months, compared with 2.5 per cent for those that did face regulation.

Terry Lister, a Government minister who also runs real estate firm Seymour Realty, said that, in ordinary times, that statistic would seem ‘foolish’.

But he said it was the middle income sector that had been most deeply affected by the recession.

“The rent control properties are at the lower end of the market. Demand doesn’t go away because people need housing.

“That is a largely a Bermuda based market those people aren’t going anywhere.”

He said the rental market had been more deeply affected by the number of higher income expatriates and their families who had left the island because of job losses in the international business sector.

Susan Thompson, of Coldwell Banker, said rental prices had dropped sharply as the recession hit. But she said they had started to stagnate across the board.

“It’s hard to understand those statistics because we have seen no increase whatsoever.

“Properties have reduced in price over the last few years. It’s reached a plateau at the moment, but we haven’t seen increases in any part of the market.”

Job losses

Ms Feldman said any rent increase, however small, on the cheapest properties was concerning.

She said job losses, wage-freezes and overtime cuts meant that income was coming down for many people.

“If you do the math — increases in rents and decreased wages — then common sense will tell you we are not headed in a positive direction, and as always it is the poorest segments of our community which will bear the burden.

 “Rent control is in place to protect the less affluent, so where has the protection gone if rental prices under rent control have gone up when the overall trend in prices has not?”

In a statement last night a Ministry spokeswoman said: “The change in the rent control component of the rental sector of the Consumer Price Index (CPI) is mainly attributed to rental adjustments approved in respect of renovated and refurbished premises. 

“The rent control component has also been impacted by rental adjustments approved on premises where the rent on such premises has remained unchanged for many years.

“The recession has had a negative impact on the non-controlled rental housing market. 

“For example, many tenants occupying the premises in this market have left the island. 

“This has created a void in the market. There is an abundance of vacant properties in this market.  Tenants have more choices and are negotiating with landlords for lower rents. 

“This situation has contributed to a spiralling-downturn of rental rates. The CPI confirms this in that there has not been any increase in the rents of non-controlled properties. The non-controlled component of the rent sector is static and will probably remain so the foreseeable future.”