Renting a home in Iran has become nearly impossible for tenants who not only have buried their dream of owning a home, but also struggle to afford rent despite reducing the size and amenities of their homes every year to continue making ends meet. This is especially in Iran’s major cities.
As we approach the summer season and the time for tenants to move, the unbridled rise in residential rent costs, coupled with the alarming increase in housing prices, have put them under even more pressure. Some are forced to move to the slums, while others have no choice but moving into substandard houses. Iran’s cities are witness to a new phenomena known as “rooftop living” as people are literally living on the rooftops of various buildings, and “shared housing.” The latter refers to two or more families sharing a small, rented house and living together.
According to statistics published by the Central Bank of Iran, the housing rental price index witnessed a 16.8% increase in the fourth quarter of 2022 compared to the third quarter of the same year. This is while rental rates had already grown by 12.4 percent in the third quarter of 2022 compared to the second quarter.
In other words, from the beginning of summer season to the beginning of winter in 2022, rental rates in Iran grew by 29.2 percent. All the while, the decision to increase the rent ceiling had set the maximum growth rate at 25 percent. In other words, this decision had no effect on the market due to the lack of a reliable enforcement mechanism.
The problem in Iran’s rental market becomes more apparent when the rental growth rate in the fall of 2022 is compared to fall of 2021, indicating a whopping 46 percent increase. Based on the statistics, more than 24 million people in Iran are facing rental increases of 46 percent if they were paying 40 million rials per month (approximately $76.7) for rent in 2021. This year, they will also face the problem of high rental prices, which puts special pressure on their economic and livelihood capabilities.
It is worth noting that the minimum monthly salary of wage earners in Iran is approximately 80 million rials or $155.
Migration mainly due to increase in housing rental prices
Hossein Raghfar, an economist linked to the Iranian government and a member of the faculty at Al-Zahra University, said that the sharp increase in rental prices across Iran is heavily influenced by the rise in housing prices.
Iran is riddled with what is known as “housing mafias”, in which many powerful entities are under pressure and have significant power, causing rental prices to be heavily influenced by housing prices. Therefore, not only do people’s housing prices increase significantly, but commercial property prices also increase to the same extent, leading to a decrease in jobs.
“Many businesses are unable to cover the cost of rent at their workplace. On the other hand, people’s cost of living, which is the commodity they buy, is also increasing,” Raghfar continued. “More than 50 percent of the cost of clothing that people buy from shops is now the cost of rent for that particular store. Therefore, this has very serious consequences, and the severe and unpredictable increase in housing rental prices, particularly in major cities, is one of the main reasons for migration from the country, especially among the younger generation who are not even able to afford rent,” He explained.
“Unfortunately, some unpredictable and very unfortunate phenomena have emerged in this regard, including rooftop living, bus sleeping, and more recently, shared family rentals in one room,” according to a May 21 report by the sem-official Didban Iran website.
Banks at the service of housing mafias
“Banks are serving the mafias. That is why banks are the main financial providers for this category of profitable activities that are carried out by various mafia entities, including automobiles, drugs, housing, etc,” Raghfar added.
“Since the government is the maincustomer in this market, when expenses increase, government expenses also increase. Its revenues, however, which are obtained through taxes or foreign income, do not increase at the same rate. Inevitably, the government raises the exchange rate,” Raghfar explained.
“This is the main engine behind future inflation. In addition, the country’s political economy and the interests of mafias become meaningful with the increase of inflation; the higher the inflation, the more profits the housing builders make. However, the consequences of this are the growth of social anomalies such as migration, suicide, and crime across the country, which unfortunately has grown unprecedentedly,” he continued.
Increase in marginalization renders the “underclass”
“Cities become empty of those who cannot afford to live in them due to the high cost of rent,” Raghfar said in response to a question about what social damages are associated with the emptying of urban centers and the growth of marginalization. “And a significant portion is pushed towards city outskirts. However, the outskirt areas themselves are severely affected by the increase in prices, which leads to the growth of a class known as the ‘underclass,’” he added.
Raghfaar described the characteristics of the “underclass” as: “The main feature is that they are prone to social harms such as addiction and homelessness. They also have no prospects for employment and naturally engage in crime and offenses. Theft, drug addiction, and many other damages have a close tie with the economic anomalies caused by these policies. Solving them is only possible through structural reforms in the country’s economy. However, the reforms pursued by the government and parliament are just hollow measures that will render nothing special.”
”Any incident can lead to protests”
Raghfar went on to warn that the increase in housing rents can lead to protests and social tensions. “Anything can happen. The damage is serious, and people are angery over the unprecedented increase in prices. Officials are busy with their personal issues and clinging to their posts, forgetting the great danger lurking in our society. In my opinion, at any moment, the unpredictable, such as protests and unrest, can erupt,” he explained.
“This unpredictability is due to the fact the exact time of its occurrence is not clear. However, it can happen at any moment. In the country’s current circumstances, I think we should be ready for the return of protests and unpredictable unrest in the streets,” Raghfar added.
“Even the recent protests were also due to economic dilemmas. What happened was the spillage of these economic anomalies that were just waiting to emerge. In my opinion, today, any incident can lead to similar unrest,” he concluded.