A Global Trend With Local Characteristics: The Housing Crisis in Buenos Aires

When I think about housing, one memory and a reflection come to my mind. The memory goes back to 2001 when I was only 11 years old. Then, my mom and I had to move from our rented apartment to my grandmother’s house because we couldn’t pay the rent amid the most severe economic, political and social crisis Argentina had ever experienced.

My reflection is also related to the housing problem. When I think in San Francisco, London, or New York, usually one of the first things that come to my mind is how unaffordable housing is for the people living there. However, I’m well aware not only for my academic understanding but also my personal experience; this is not a problem exclusively of these metropolises or even the Global North. If there is a common issue in most of today’s megalopolises, both in the Southern and Northern Hemispheres, this is the crisis of the housing market.

 This is the case in the Buenos Aires Metropolitan Area (AMBA), where I was born and raised, Argentina’s main and largest urban area. With around 15 million people, this massive metropolis encompasses the City of Buenos Aires (CBA) and 40 surrounding municipalities in the Province of Buenos Aires (PBA), larger in surface than the entire island of Puerto Rico. The right to housing is recognized by the Argentine National Constitution (Article 14bis) and most families aspire to  purchase a home. However, the housing crisis in this region has only worsened in the last couple of years, becoming one of the most pressing issues for local dwellers and local and national governments are not doing enough about it.

Satellite image of the Buenos Aires Metropolitan Area (AMBA). Located along the shore of La Plata River (Río de la Plata in Spanish), if we consider the municipalities not yet entirely urbanized, this area has around 13,285 square kilometers, larger than the entire island of Puerto Rico. Credit: NASA.

The AMBA housing crisis intrigues those of us who work on urban issue, but at the same time its distinctive features make it a headache for policymakers. First, as Argentina is a country with historically high inflation levels, constant devaluations and strict exchange controls, the housing market of existing units is appraised in US dollars. Thus, high-income groups have strong incentives to finance the construction of properties with Argentine pesos to end up having assets valued in dollars. In the medium- and long-term, accumulating housing units is one of the only ways the well-off have to preserve the value of their savings.

Currently, new buildings are being constructed everywhere in the AMBA. However, most of these new apartments remain empty, especially those in Buenos Aires. Credit: Ejes de Comunicación.

Second, similar to other countries in the region, Argentina has been experiencing a surge of informal settlements in the AMBA, with families in vulnerable situations occupying squatter land and property. With insufficient public social housing programs, usually organized groups take empty public or private land to build their housing solutions and make incremental improvements over time. With limited resources to implement massive housing projects and only a few alternatives to offer to these families, local and national governments tend to upgrade these informal settlements and grant legal ownership of the taken land and/or property in the long term.

Third, due to the historically high inflation rates and, as mentioned, a dollarized housing market, the mortgage market is almost nonexistent in Argentina. It represents around 1% of the country’s Gross Domestic Product (GDP), compared to around 6% in Colombia, 9% in Brazil, 24% in Chile and 77% in the United States.  Thus, medium-income and even some high-income families cannot purchase their first homes. Unless they inherit a property, they end up being renters.

This problem has become even worse in the last few years. First, salaries measured in dollars have decreased (68% since 2012), and the inflation rate has increased (reaching an interannual rate of 83% in September 2022), a situation that was exacerbated during the pandemic. Consequently, the percentage of tenant households has increased in Argentina, especially in the AMBA. Second, the combination of a general distrust of the government, the uncertainty generated by the Covid-19 crisis and a new national regulatory framework on the rental market passed during the pandemic has resulted in many owners not wanting to rent their properties at the moment. With increased demand by tenants and a reduced supply of rental units, renting costs have skyrocketed in real terms.

With a nonexistent mortgage market and a general decrease of income during the pandemic, the AMBA has experienced a surge of unsold apartments. As a consequence, the housing stock has increased significantly. Seeing “For Sale” signs all around the AMBA has become very common nowadays. Credit: Hernan Zenteno, La Nación.

What’s to be done about the housing crisis? The whole AMBA, with an emphasis on the CBA, is becoming an urban area full of empty new constructions, whose role is to serve as “built saving accounts” for the wealthy, with no incentives to rent them. In the meantime, vulnerable families are forced to live in overcrowded housing, informal settlements or social housing.  Middle-income groups, who do not have access to any market-based or public-housing solutions, have no other option than to be tenants, and find rental options increasingly expensive. Families must spend a higher percentage of their income on housing, compromising their financial well-being, or relocate to smaller shared units or farther from the business centers.

In Argentina, owning apartments is perceived as a strategy to preserve the value of family savings rather than an investment to be paid off through renting the unit. Thus, housing units are considered “built savings accounts.” Credit: iProfesional.

This also generates a mindset dissociation between those who have properties and those who demand housing solutions. For the former, housing units are the only possible way to protect their savings, not having real incentives to allocate them in the renting market. Under this perspective, any government intervention is a threat to one of their only profitable assets. For the latter, housing is a right ensured by the National Constitution, for which the government should intervene in the market to provide adequate housing solutions. This dissociation also exists among policymakers, who propose different policy solutions depending on their constituencies.

 What has been the response of public authorities? Regardless of specific and temporary local and national programs, a comprehensive approach to the issue is lacking with a high degree of fragmentation in existing housing policies. After all, various elected governments have jurisdiction over the AMBA: the National Government, the CBA, the PBA, and the municipalities from the PBA. Each district has its own budgets, interests, political affiliations and motivations, making any coordination attempt a complex and almost impossible task. Thus, each level jurisdiction implements different housing strategies, leading to fragmented policies, poor coordination and a lack of efficient measures.

The housing crisis in the AMBA requires a comprehensive and participatory approach that is not based solely on regulatory changes or the construction of a few social housing units. It also demands a governance structure that allows a more standardized and efficient type of solution. Furthermore, future policies should be framed under three different modes, looking for a more traditional mortgage market-based solution in the long term, agreements between private developers and the public sector to share the costs of policies in the medium term and an aggressive public program to support renters that have been experiencing a decrease in well-being in the short term. Hopefully, renting will become just a choice sooner rather than later, and we can once again aspire to own a home in Buenos Aires.