Egypt’s historic rent controls are a problem to be solved

December 6, 2024, 11:52 AM

Rent on older housing in Cairo can be set at historically low amounts, which the government is now attempting to address

Historic rents extremely low
Previous reform attempts failed
Court ruling worries tenants

Ahmed lives in a four-bedroom apartment in a concrete tenement with his ailing mother. The flat has been in the family since his father, who died several years ago, began renting it when he graduated from university in the 1960s.

It is in Manial, a bustling, lower-middle-class area of Cairo, the kind of place where all the neighbours know each other and delivery boys send groceries up to the upper apartments in wicker baskets hoisted on string.

On the open market, rents for a four-bedroom apartment in Manial generally start at around EGP 20,000 a month ($402.95). But Ahmed and his mother pay just EGP 8 ($0.16).

Although the precise number is unknown, there are hundreds of thousands of people on “old rent” contracts like this in Egypt, paying archaic prices. According to their rental agreements, their annual payment cannot exceed 7 percent of the property’s value, as listed at the time of signing in 1960s prices.

Subsequent devaluations in the Egyptian pound means that 26-year-old Ahmed and his mother pay less than $2 a year.

“I don’t exactly think it’s fair,” says Ahmed. “But if this was not the case, we would have been made homeless.”

On November 9 renters on old contracts were given cause for concern when Egypt’s supreme court ruled that the most recent iteration of the law – Law No. 136/1981, Relating to Renting and Sale of Buildings and the Relations Between Landlord and Tenant – is unconstitutional.

In its ruling, the court said that the statute violates the rights of landlords and is “against Islamic Sharia law”. It gave parliament until the end of the current legislature at the end of June to amend the existing law or pass a new one.

“The new law must create a balance between landlords and tenants,” says Mohamed Attia Al-Fayoumi, chairman of parliament’s housing committee. He said in a press statement that rent reform will be a major priority for parliament.

There are competing visions around what a new rent law should look like. The Association of Tenants, a pressure group that defends the interests of those on old rent contracts, has called for prices to be raised but only gradually to protect those who have come to rely on them.

According to the Association's proposals, rents should increase in proportion to their current value, increasing five-fold before further increases of 10 percent a year. Under this scenario, Ahmed would begin paying EGP 40 a month ($0.81) for the first year. By the fifth year, his rent would rise to EGP 585.64 ($11.80) a month.

Mostafa Abdel Rahman, chairman of the Association of Old Rental Properties, which represents the unfortunate freehold owners of the rent-protected properties, says that this proposal is unfair.

“We need to find a solution”, he says. Rahman himself owns 23 residential and four commercial properties in Dar el-Salam, a desirable southern suburb of Cairo, from which he gets “no money”.

He has proposed that residential rents increase immediately by no less than EGP 2,000 ($40.28) followed by further increases of up to 10 percent each year. Ahmed and his mother would find themselves paying upwards of EGP 2928.2 ($58.97) in five years' time, possibly much more, although likely still less than market rates.

“That is fair,” says Abdel Rahman. Previous attempts at reform have stalled but Abdel Rahman is confident that this time will be different.

“It’s clear the government has the determination to change the law,” he says, pointing to statements by President Abdel Fattah El Sisi that he believes indicate the president’s desire for reform. Speaking at a conference a year ago, Sisi called the current law “unacceptable”.

Those who have previously tried to reform the law are less confident, however. Back in 2017 Mohamed Fouad, a now former member of parliament, proposed to amend the law and introduce gradual rent increases.

“It came to nothing,” he says. “It was never discussed, it never piqued interest.”

Rent control laws have become a touchstone in public political discourse. An outsized number of renters on old contracts are pensioners with modest incomes and others who are now dependent on their decades-old agreements. With inflation at more than 26 percent, it is an inauspicious moment for the government to be seen hiking rents for hundreds of thousands of people.

“The government doesn't want to meddle into this because it has nothing to gain,” says Fouad. “It's not like they could collect any more tax.”

However, alongside attempts to dampen high inflation and increase austerity measures, the Egyptian government is also trying to promote itself as a more attractive destination for investors.

The country has ambitious targets to attract a record $30 billion in foreign direct investment this financial year. Onerous and uncertain rent control laws are unlikely to attract potential investors.

Ahmed says he and his mother are just waiting to hear what is decided.

“It all feels very sketchy and not exactly safe,” he says. While he sympathises with the landlord’s position, he says that “in this economy, if [anyone is] staying in an apartment like this it’s probably because they haven’t got the money to move to a nicer neighbourhood. If I had the money to go buy a fancy house in Maadi or Sheikh Zayed or New Cairo, I would have done it already.”