American Univesity of Beirut

Despite Vacancies, Housing Prices Remain High

Childhood friends Marie Sarkis and Vera Mawad moved from their ​​hometown of Zgharta in northern Lebanon to Beirut for university and found work in the city after graduating - Sarkis in an insurance office and Mawad with an NGO.

The two of them live in an apartment in Ashrafieh shared by five young women, each paying $350. Tired of the cramped quarters and constantly changing cast of roommates, they began searching for a place the two of them and Sarkis’ cousin could rent by themselves. After several months of searching fruitlessly for an apartment in Beirut that the three of them could afford, Sarkis took to Facebook to vent her frustration on a page where apartment listings are posted.

“How is it logical that the minimum wage in Lebanon is around $450 and the rent of a room is around $400?” she wrote. “How on earth can you pay three to four months in advance while most of us are barely able to survive till the end of the month?”

The frustration is a common one among lower and middle-income residents of Beirut, where housing prices have remained high despite extremely high vacancy rates.

A recent survey of buildings in Beirut constructed over the past two decades, carried out under the Beirut Building Database project by researchers with the Social Justice and the City program at the American University of Beirut’s Issam Fares Institute, found that almost 25 percent of apartments built after 1996 - in total, more than 8,200 apartments - were vacant, said Dounia Salame, a researcher with the institute. Economists generally consider 7 percent to be a healthy vacancy rate.

In spite of the large number of vacancies, housing prices have remained high in proportion to salaries. According to Numbeo, a crowd-sourced database of consumer prices worldwide, the rent of a one-bedroom apartment in central Beirut ranges between $600 and $1,390, and between $1,325 and $3,000 for the three-bedroom, while the average monthly salary reported was $975 a month. “I think there’s a consensus that Beirut has become really unaffordable,” Salame said.

As to why market prices have remained high despite the large number of vacant buildings, Salame pointed to the lack of policies that would encourage renting or selling at affordable rates.

The elimination of Lebanon’s “old rent” law, which took effect in 2017, is phasing out the rent control that had been in place for leases signed before 1992. Apart from that, she said, “there is no tax on vacant homes, so the person that owns that apartment can just decide to sit on it and wait until they find a buyer or renter for the price that they want.

“And most of the time, we’re talking about unsold apartments or apartments that were sold to people who are speculating with them. These can wait as long as they want until they find the right buyer, because they are not losing anything.”

Mawad said she and Sarkis had tried in several cases to negotiate with landlords over the price or the requirement to pay several months up front, without success.

“They told us, ‘If you don’t want to pay, we have other people, foreigners who work in an embassy or university, and the embassy or university will pay their rents - so it’s fine, we don’t need you,’” she said.

For those looking to buy, rather than rent, houses, a popular program though Lebanon’s Public Corporation for Housing, funded by the Central Bank, used to provide subsidized loans to about 5,000 buyers a year with household incomes under $4,500 a month. But last year, the program halted due to funding issues. While it has now restarted, PCH Director-General Rony Lahoud told The Daily Star that only about 500 subsidized loans have been given so far in 2019, far below the number in previous years.

“Now we are trying to have subsidized loans in a different way, instead of taking it through the Central Bank, through the banks, we are trying to get some money from outside Lebanon or even from Lebanon, from certain taxes to give loans or subsidized loans,” he said.

The new loan structure will make up part of a national housing policy, which will include strategies to improve affordability for renters as well as home buyers, Lahoud said. He declined to discuss the plan in detail, as it has yet to be approved by the Cabinet.

Salame noted that the subsidized loan program “has helped a certain middle class population to buy apartments, mainly in the cheaper areas of Beirut and outside Beirut, but it has not helped to get the prices down,” as developers had pegged prices to the maximum loan amount.

In the absence of national policies that would encourage landlords to drop the rents - such as a tax on vacant units - measures could be taken at the municipal level, she said. The city, for instance, could implement inclusionary zoning, requiring a certain percentage of units in newly constructed buildings to be offered at affordable rents, as has been done by cities elsewhere. Public authorities could also facilitate the formation of housing cooperatives.

Whatever the measures to be taken, Salame said, “Affordability cannot be achieved unless the government or governmental entities actually adopt a policy for affordability of housing.”​

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