Mexico City Caps Rent Hikes Amid Rising Housing Costs

Mexico City’s Congress has approved sweeping reforms to limit rent increases and ensure affordable housing in response to growing concerns over gentrification and the impact of digital nomads on the local housing market.

In a significant move aimed at curbing rising housing costs, Mexico City’s Congress approved a comprehensive package of reforms to the Civil Code and Housing Law. The reforms passed with 57 votes in favor. They introduce a cap on rent increases, tying them to the inflation rate reported by the Bank of Mexico in the previous year. The new legislation marks a shift from the previous rule, which allowed for rent hikes of up to 10% annually, regardless of inflation.

Under the new regulations, landlords must limit rent increases to match the inflation rate, ensuring tenants are not subjected to excessive hikes. This change relieves many residents who have struggled with rapidly rising rents in recent years. For instance, with inflation currently hovering around 4%, a tenant paying 23,000 pesos ($1,250) in rent could see an increase of no more than 920 pesos ($50) per month, rather than the previous potential increase of up to 2,300 pesos ($125).

This policy aims to provide better financial stability for renters, particularly in a city where the average monthly rent has soared to over 23,000 pesos ($1,250) while the average monthly salary remains around 5,400 pesos ($295). The disparity between wages and housing costs has made it increasingly difficult for families to afford decent living spaces, exacerbating economic inequalities in the city.

Digital Contract Registry and Affordable Housing Initiatives

In addition to capping rent increases, the reforms also mandate the creation of a digital registry for lease agreements. Landlords must register all rental contracts within 30 days of signing, allowing the government to monitor compliance with the new regulations more effectively. This digital registry is expected to enhance transparency in the rental market and provide a centralized database for tracking housing trends and disputes.

Another critical component of the reforms is the commitment to producing affordable housing for low-income residents. The government will fund the construction of these homes, targeting vulnerable groups such as single mothers, young adults aged 18 to 35, and workers. By increasing the supply of affordable housing, the city hopes to alleviate the pressures driving up rents and displacing long-term residents.

Tackling Gentrification and the Impact of Digital Nomads

The reforms are part of a broader strategy by Mexico City’s government, led by Mayor Martí Batres, to mitigate the effects of gentrification, which the influx of digital nomads has accelerated. Since the COVID-19 pandemic, remote work has become more prevalent, leading to an increase in the number of foreigners choosing to live in Mexico City, drawn by its cultural vibrancy and relatively low cost of living compared to other global cities.

While the arrival of digital nomads has brought economic benefits, it has also contributed to rising rents and the displacement of residents. The presence of higher-income newcomers willing to pay more for housing has driven up demand, particularly in trendy neighborhoods, pricing out long-term residents and altering the character of these communities.

The government’s response to this trend includes rent control measures and earlier reforms to the city’s Tourism Law, which occurred in April 2024. These reforms introduced new responsibilities and requirements for short-term rental platforms like Airbnb, aimed at slowing the pace of gentrification.

Stricter Rules for Short-Term Rentals and Their Hosts

The April 2024 amendments to the Tourism Law established a Host Registry, requiring individuals renting out properties on platforms like Airbnb to register up to three properties. Those with four or more properties must now register as a commercial establishment with the city’s Electronic System of Notices and Permits for Commercial Establishments. Also, hosts must obtain liability insurance for each property and report occupancy data to the local Tourism Secretariat every six months.

These regulations are intended to curb the proliferation of short-term rentals, which have been blamed for exacerbating the housing crisis by reducing the availability of long-term rental properties and driving up prices. By imposing stricter controls on short-term rentals, the city aims to ensure that housing remains accessible to residents rather than being dominated by tourists and temporary visitors.

The government’s efforts to address the housing crisis reflect a growing recognition of the need for comprehensive policy responses to the challenges posed by globalization and urbanization. As Mexico City continues to evolve as a significant global metropolis, balancing the needs of its diverse population with the pressures of a rapidly changing housing market will remain a critical issue.

Also read: Mexico’s “Barrios Mágicos” Spark Hope for Tourism Revival

The recent reforms represent a significant step forward in protecting tenants and preserving the social fabric of Mexico City’s neighborhoods. By capping rent increases, creating a digital registry of rental contracts, and investing in affordable housing, the city is taking proactive measures to ensure all residents have access to secure and affordable homes. As the effects of these policies unfold, they will serve as a crucial test of the city’s ability to manage growth and maintain its unique character in the face of global economic trends.