More than spare change

Without proper appropriations, the rent law will do more harm than good

Greg Demarque | Executive

Lebanon sorely lacks affordable housing options. This is true across the country, but is especially acute in Beirut. Renting in the capital is a case in point. Rental agreements signed before 1992, in which rent increases were tightly controlled, allow some tenants to pay only a fraction of the going rate in the open market. This created a persistent imbalance in the market that has, over the last 20 odd years, favored pre 1992 long term renters to the detriment of building owners and apartment landlords. This must be rectified, but passing the newly amended rent law without a proper financing mechanism for the draft’s proposed public housing fund will create a legal mess, a judicial nightmare and, if possible, further erode public confidence in the government. The law calls for a fund of $1.5 billion to help tenants adjust, over a period of nine years, to the demands of the rental market.

After decades of debate the government finally introduced a draft law in 2012. What has resulted since then has been at best legislative incompetence, and at worst a deliberate attempt to indefinitely delay the issue. The end result of the law if passed without funding is totally unpredictable — never a good sign for any public policy. Landlords will sue tenants who cannot afford to pay the increase, meaning a massive disruption to the city’s demographic and social fabric will occur. While the landlords and owners have been getting shafted for years because the previous law limited them from increasing rents in line with the rising cost of real estate in the city, such a flurry of litigation would not necessarily mean judgments are given swiftly, and even then, they may not be enforceable.

The Lebanese government cannot effectively implement this law, or any other, because the fund represents new expenses that can only be met by passing a new budget. The Parliament has not done so since 2006, instead relying on the Council of Ministers to allocate new funding on a case by case basis. Even if the 2015 draft budget is passed this year it would be of little consequence — the draft budget does not consider funding for the rent law.

Protecting Beirut’s tenants while allowing landlords to receive fair rental compensation for their apartments has no simple solution. The government has only half assed an attempt to present an alternative to the current controlled market — but it is destined to be more disruptive than leaving the situation as is. Upon the rent law’s implementation, those tenants who cannot afford increased rents that landlords demand will be forced out of their homes. The government has no official data on the number of households renting, so it has no idea of the scale of displacement — potentially in the tens of thousands — that might follow the law’s implementation. Because of the lack of data, there is also no way to know whether the $1.5 billion is a sufficient amount. It’s policymaking with the lights out, a game fit more for a dinner party than for sober committee hearings.

When, and if, the Parliament votes on the rent law is anybody’s guess — some members of Parliament are insisting no legislation before the election of a president, wishful thinking, perhaps. Parliament should use this time to reexamine the cost of the rent law and make sure funds are properly appropriated for it when the current impasse ends. The unenviable alternatives are to leave the market as it is, to the significant financial detriment of the landlords, or enact a law that, without proper funding, will do more to harm social cohesion and the rule of law than it does to help.