Landlords and economists hail move to scrap Egypt rent caps

The ruling has unnerved tenants, but it won't go into effect until June of next year, giving time for the state to come up with alternative safety measures for society's most vulnerable

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Landlords and economists hail move to scrap Egypt rent caps

Marcelle Nasr

last update on 23 Nov 2024

A recent ruling by Egypt's Supreme Constitutional Court allowing landlords to raise rent prices has been largely hailed in the country. The ruling overturns rent control laws in place since the 1950s, which have prevented landlords—even owners of prime real estate—from raising their tenants' rent.

Landlords have welcomed the ruling, which they say is long overdue. In their view, they have suffered from the rent cap laws for decades—with some even being forced into homelessness—and are finally regaining their rights. Some rental contracts dating back 80 years and passed down through generations have been absurdly stuck at 15 Egyptian pounds—the equivalent of $0.30. This includes some properties in upscale neighbourhoods like Garden City, Zamalek, Heliopolis, and Korba.

Legal experts have also hailed the decision as a step towards a more equitable rental system aligned with market realities. According to a 2017 census by Egypt's Central Agency for Public Mobilisation and Statistics, approximately 1.8 million residential units have had their rent capped for decades, with around 400,000 vacant.

Successive governments have shied away from tackling the issue due to its potentially profound social and economic repercussions. Therefore, the Supreme Constitutional Court’s decision to nullify two articles of the Old Rent Law—related to fixed rental rates for residential properties—is a significant development, with benefactors touting it as a "just ruling".

Legal experts have hailed the decision as a step towards a more equitable rental system aligned with market realities

Prominent legal expert and practising lawyer Osama Deif described the court's ruling as a "historic transformation". Speaking to Al Majalla, he emphasised the importance of legislative follow-through to establish a fair baseline for rental value and annual adjustments for each unit.

Tenants now face the prospect of rental increases and possibly losing the flats they have called home for decades. Some campaigns against the ruling have gained traction on social media, but there haven't been visible outpourings of anger or social tension yet. Many are reserving judgment and are optimistic that the government will be able to strike a balance and devise fair solutions when the situation calls for it. There is still time, after all, as the law will only go into effect in June of next year.

Economic knock-on effects

For his part, economist Dr Walid Gaballah praised the ruling as a milestone in rental law and called for periodic adjustments in line with inflation and loosened restrictions on contract terminations, particularly for vacant flats.

"State-imposed rental caps are outdated and aligned with Egypt's previous socialist leaning. There is no place for such interference amid the structural reforms currently underway in the country," he added.

Gaballah, however, acknowledged the need for social protection mechanisms and other support measures for those who cannot afford rent hikes, but he believes this should be in the form of government subsidies instead of landlords bearing the brunt of these costs.

AFP / Mohamed el-Shahed — An Egyptian elderly man poses for a picture in the village of al-Nehaya, one of the poorest in the country, in the province of Assiut in central Egypt.

Another economist, Mohamed Abdel-Aal, believes the decision will help stimulate the real estate market. He explained that landlords could reinvest their added income into the market, helping bridge Egypt's supply and demand gap. With more housing supply, rents would naturally fall, he said.

A reinvigorated real estate market would also have knock-on effects for other industries, help drive economic growth, create jobs, and boost salaries. "Such growth would, in turn, boost direct investments across various real estate sectors, including residential, industrial, and tourism projects," Abdel-Aal added.

He explained that the demand for construction materials and raw supplies would rise, stimulating other industries and boosting state revenue through property taxes. Finally, the added state revenue would not only help reduce the national budget deficit but also provide social safety nets for those who cannot afford the rent hikes, bringing the benefits of the court's recent ruling full circle.

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