The House of Representatives announced this week that it will review laws regulating rents for housing units and residential properties. In an official statement, it said the review was a response to the Supreme Constitutional Court’s (SCC) 9 November ruling that the 1981 landlord-tenant relationship law — the so-called the old rent law – is unconstitutional.

In a session presided over by judge Boulos Fahmi, the Supreme Constitutional Court called on the House to amend the first two articles of the law before the legislative season ends in July.

The court argued that the fixed rent cap — set at seven per cent of the value of the land and building at the time of licensing — fails to take inflation into account and is unfair to landlords.

Determining rent levels, said the court, must be based on objective controls that achieve a balance between the two parties to the rental relationship and the legislator should now intervene to create this balance.

The two disputed texts (articles 1 and 2) prohibit increasing the rent of places licensed for residential purposes — as of the date of the implementation of the provisions of the law — beyond the seven per cent valuation at the time of licensing which, explained the court, leaves rental values fixed at a point in time and, decades later, has resulted in a decline in the return on investment in the rented properties to almost zero.

Due to the need for a sufficient period of time to consider potential legislative changes to regulate rents and protect tenant rights, the court set the day following the end of the House of Representatives’ current eight-month legislative season as the date for the implementation of the effects of its ruling.

The House issued a statement saying it has entrusted the Housing Committee with preparing a comprehensive report on laws regulating housing rents and on the SCC’s ruling on the relationship between landlords and tenants. The statement added that the committee has already prepared a preliminary report on the old rent law scheduled to be presented during plenary sessions and concluded that amendments to the rent law must conform with the SCC ruling and at the same time observe the interests of both landlords and tenants.

“The House will protect the interests of all parties and not place the interests of one above the other,” said the statement.

Housing Committee head Mohamed Attia Al-Fayoumi said amending the old rent law will top the committee’s agenda in the current legislative season.

“The new law must create a balance between landlords and tenants,” said Al-Fayoumi. “There are two potential approaches to resolving this long-standing issue: either amend the old law to allow for a gradual increase in rents or draft an entirely new law.”

The SCC ruling was delivered a year after President Abdel-Fattah Al-Sisi said the old rent law was stymying the use of up to two million housing units, valued at a LE1 trillion, and called on the House of Representatives to review the legislation. The 40-year-old law, he said, was no longer fit for purpose.

As a result, a joint committee composed of six MPs and four government officials began meeting to draft a more balanced landlord-tenant relationship law, work that was never completed.

Ahmed Al-Sigini, head of the House’s Local Administration Committee, described the SCC ruling as “historic”.

“The SCC decision and directive to lawmakers to amend the first two articles of the law before the legislative season comes to a close has significant implications for both landlords and tenants in Egypt,” said Al-Sigini.

While it allows landlords more flexibility in terms of increasing rents, Al-Sigini said it also raises concerns about potential rent hikes and affordability for tenants.

In ruling that the old rent law is unconstitutional because it freezes rents regardless of economic developments and inflation rates, Al-Signi argued that the SCC was effectively saying no to the concept of fixed rents. At the same time, he stressed that the court had directed the House of Representatives to raise rents gradually in order to create a balanced relationship between landlords and tenants and not cause social unrest.

Mustafa Abdel-Rahman, head of the association of old residential properties, complained that “under the old rent laws, which apply to houses and apartments in upscale districts of Cairo such as Zamalek, Heliopolis, Garden City, and downtown Cairo, properties worth millions are still rented out for as little as LE17-30 a month due to rent freezes.

Abdel-Rahman proposed that the 1981 law be amended to raise rents to no less than LE2,000 a month and then allow an annual 10 per cent increase.

“This will address the injustice done to landlords and at the same time be affordable for most tenants,” said Abdel-Rahman.

Michel Halim, a legal consultant for the Association of Tenants, believes the old rent should be raised by a multiple of five, and then increased annually by 10 per cent.

He explained: “If a tenant of an old rent flat pays LE20 a month, this should first be raised to LE100 a month, and then this amount be raised annually by 10 per cent,” arguing that such a system would protect pensioners who cannot afford a sudden and dramatic increase in rents.

* A version of this article appears in print in the 14 November, 2024 edition of Al-Ahram Weekly