Rentals with subsidized contracts: it is boom in Italy

If the pandemic hit the residential rental market, it also blew up the rents with a subsidized contract. Those a agreed fee, so to speak.

The numbers speak for themselves: the number of residential rentals fell by 8.8% in 2020 compared to the previous year. But the stipulations of the subsidized contract “3 + 2” they increased over the same period dell’8,2%.

True it could affect the renegotiation of contracts for the arrears of tenants. But this reason only partially explains the increase in rents with a subsidized contract.

The crisis has narrowed the gap which has always existed between rents at market prices and controlled rents.

Subsidized rental agreement and tax benefits

The reason for this growth also lies in the tax benefits that the rents with facilitated contract allow the owners: l‘Imu with state discount of 25% and the addition, often, of one reduced municipal rate and a la flat rate coupon at 10% (in municipalities with high housing voltage).

But there could be other reasons as well:

the decline in rents reduced gross yield:

and the attempt to render the monthly fee is more sustainable, a guarantee for tenants and owners.

What are subsidized lease rentals

First of all let’s explain what are the rents with a subsidized contract:

were introduced in 1998, and are also called «3+2» because they provide for a minimum duration of 3 years and the rental of the property comes renewed automatically for another 2 years at expiration.

This contract is considered “agreed” because the rent is defined on the basis of the indicators of the territorial agreement. In practice it is lower than those of the market.

In the last year, the rent price has gone down up to approaching that envisaged in the subsidized contracts. This made it convenient for the owners to use this rental method.

The exponential increase in many cities

In 2020 the rents with subsidized contracts and those for students were more than 60% of the new registrations is a Roma, both a Genoa. Altitude that has reached the 45% in Palermo.

The situation is quite different a Milano, where rents with a subsidized contract never took off and even in this period remained confined to a marginal 5,4%.

However, nationwide, there is a widespread boom in subsidized lease rentals.

This is also demonstrated by the numbers of homeowners who have chosen the fixed coupon of 10% (linked to the agreed rent). In 2020 they went from 165 to 875 thousand.

The government now plans to extend cedolar of 10% throughout Italy, now – as mentioned – it has been established in municipalities with high housing tension or where natural disasters have occurred.

The general decline in the cost of rents

Therefore, the exponential growth of rents with a subsidized contract was caused by the reduction in rents due to the pandemic. The drop is 2.2%. The first stop to the growth that had restarted from 2015.

The drop in prices was caused in particular by the reduced demand for off-site workers and students (which have moved much less with the pandemic).

However, the trend is changing: i rents are in fact increasing – as the Idealista website reports – in 57 provincial capital municipalities. On the other hand, they are stable in 8 and downhill in 34.

Evictions and layoffs increase tensions

However, prices are unlikely to return to pre-pandemic prices. Not immediately at least. The contractions of family income they affect above all on long term rentals.

There are also two aspects destined to fuel tensions in the sector in the short term:

  • the end of the freeze on evictions
  • the end of the freeze on layoffs.

The freeze on evictions was renewed until December 31, 2021. Confedilizia has asked to distinguish between the various arrears, and in particular those started before the covid and those that are related to the health emergency.

In practice, the trade association asks to block only evictions of the people who have gone in trouble because of the covid.

Until now, these requests have fallen on deaf ears.

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