Why are long-term apartment rentals 'disappearing' in Italy?
The number of apartments available for long-term rental in Italy has recently fallen by more than a third. Here's a look at what's behind the growing shortage - and rising prices.
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If you've done any apartment hunting in Italy in the past few months, you may have noticed a dearth of good options.
It's not just you: the number of properties available for long-term rent has dropped sharply in Italy in recent years. In fact, data from property search engine Idealista shows that the number of long-term rentals on offer decreased by more than a third in the last quarter of 2022 compared to the same period in 2021.
There are some outliers - notably, Trento and Trieste both substantially increased their offering - but at the national level, there were 36 percent fewer long-term rentals available in Italy at the end of 2022 than in 2021.
The issue is most pronounced in major cities: there were 66 percent fewer rentals available in Rome and Florence, 57 percent in Venice, 49 percent in Milan, 41 percent in Genoa and 40 percent in Naples by the end of last year.
In Turin and Ferrara, the rental housing stock fell even more dramatically, by as much as 81 percent.
Inflation-driven shortage
The lack of long-term rentals is largely driven by soaring inflation, according to an analysis from the Corriere della Sera newspaper.
In the past year, the price of most goods and services has spiked, and housing is no exception; Idealista found that rents across Italy rose by a national average of 3.5 percent in 2022.
Regional capitals saw the highest increases, with rents in Venice rising by as much as 17.4 percent, those in Bologna by 12.5 percent, Milan by 11.2 percent, Florence by 11 percent, and Rome by 6.8 percent.
READ ALSO: What you need to know about navigating Italian rental contracts
Italian rental contracts are designed to protect tenants from sudden hikes like these: on standard '4+4' or '3+2' contracts, rents are more or less (see below) locked in for four/three years, extendable to an additional four/two years - so if a tenant wants, they can keep the same rate for up to eight years.
But when market rents are climbing rapidly, the prospect of committing to one of these long-term contracts is naturally unappealing to landlords who otherwise stand to cash in.
And that's before you factor in a more direct consequence of soaring inflation on rental contracts.
Rents in Rome rose by 6.8 percent between 2021 and 2022. Photo by Tiziana FABI / AFP.
There's also the question of the taxes landlords have to pay, which put simply tend to be lower on short-term contracts.
Landlords have two options when it comes to paying tax on rental income: the cedolare secca, or standard Irpef income tax regime.
The cedolare secca is a flat tax, usually of 21 percent (but sometimes as low as 10 percent) levied on the total rent. Landlords on this regime don't have to pay regional and municipal income tax or stamp duty.
READ ALSO: Can my landlord legally increase my rent in Italy?
The cedolare secca is usually far more fiscally advantageous than the alternative option, which is to add your rental income on to the rest of your annual income and pay the income tax (Irpef) on all of it.
Irpef is a progressive tax that starts at 23 percent and rises to 43 percent, so even at the lowest end, you'd be paying more than you would with the cedolare secca.
But when you opt for the flat tax, you waive the right to provide in your contract for rent increases in line with inflation based on Istat's (Italy's national statistics agency) national consumer price index.
In normal circumstances, this is very unlikely to matter (one guide from 2019 dismisses it as being of "negligible" importance). But in the current economic climate, it means landlords on the cedolare secca regime are losing out on a potential rent increase of 11.3 percent.
This all means that as of early 2023, it's currently not beneficial for a landlord to sign a standard long-term rental contract on either the Irpef or the cedolare secca regime.
Short-term rentals in Italy
Most of these landlords, as Corriere points out, haven't stopped renting out their properties altogether; instead they've turned them into short-term holiday rentals while they wait to see how things pan out.
Short-term lets can of course be a headache to run, and involve significant cleaning and management costs that landlords on long-term contracts don't have to factor in.
But in cities popular with tourists, they can also be far more lucrative than long-term contracts - as in Venice, whose permanent population has steadily declined in recent years and dropped below 50,000 last August.
READ ALSO: How can I find an apartment to rent in Rome?
Some parts of the country are taking matters into their own hands to combat the problem of tourists supplanting permanent residents: Bolzano recently introduced a cap on the total number of holiday rentals.
But for now, renters in most of the rest of Italy will have to make do with a dwindling pool of increasingly unaffordable properties.
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If you've done any apartment hunting in Italy in the past few months, you may have noticed a dearth of good options.
It's not just you: the number of properties available for long-term rent has dropped sharply in Italy in recent years. In fact, data from property search engine Idealista shows that the number of long-term rentals on offer decreased by more than a third in the last quarter of 2022 compared to the same period in 2021.
There are some outliers - notably, Trento and Trieste both substantially increased their offering - but at the national level, there were 36 percent fewer long-term rentals available in Italy at the end of 2022 than in 2021.
The issue is most pronounced in major cities: there were 66 percent fewer rentals available in Rome and Florence, 57 percent in Venice, 49 percent in Milan, 41 percent in Genoa and 40 percent in Naples by the end of last year.
In Turin and Ferrara, the rental housing stock fell even more dramatically, by as much as 81 percent.
Inflation-driven shortage
The lack of long-term rentals is largely driven by soaring inflation, according to an analysis from the Corriere della Sera newspaper.
In the past year, the price of most goods and services has spiked, and housing is no exception; Idealista found that rents across Italy rose by a national average of 3.5 percent in 2022.
Regional capitals saw the highest increases, with rents in Venice rising by as much as 17.4 percent, those in Bologna by 12.5 percent, Milan by 11.2 percent, Florence by 11 percent, and Rome by 6.8 percent.
READ ALSO: What you need to know about navigating Italian rental contracts
Italian rental contracts are designed to protect tenants from sudden hikes like these: on standard '4+4' or '3+2' contracts, rents are more or less (see below) locked in for four/three years, extendable to an additional four/two years - so if a tenant wants, they can keep the same rate for up to eight years.
But when market rents are climbing rapidly, the prospect of committing to one of these long-term contracts is naturally unappealing to landlords who otherwise stand to cash in.
And that's before you factor in a more direct consequence of soaring inflation on rental contracts.
There's also the question of the taxes landlords have to pay, which put simply tend to be lower on short-term contracts.
Landlords have two options when it comes to paying tax on rental income: the cedolare secca, or standard Irpef income tax regime.
The cedolare secca is a flat tax, usually of 21 percent (but sometimes as low as 10 percent) levied on the total rent. Landlords on this regime don't have to pay regional and municipal income tax or stamp duty.
READ ALSO: Can my landlord legally increase my rent in Italy?
The cedolare secca is usually far more fiscally advantageous than the alternative option, which is to add your rental income on to the rest of your annual income and pay the income tax (Irpef) on all of it.
Irpef is a progressive tax that starts at 23 percent and rises to 43 percent, so even at the lowest end, you'd be paying more than you would with the cedolare secca.
But when you opt for the flat tax, you waive the right to provide in your contract for rent increases in line with inflation based on Istat's (Italy's national statistics agency) national consumer price index.
In normal circumstances, this is very unlikely to matter (one guide from 2019 dismisses it as being of "negligible" importance). But in the current economic climate, it means landlords on the cedolare secca regime are losing out on a potential rent increase of 11.3 percent.
This all means that as of early 2023, it's currently not beneficial for a landlord to sign a standard long-term rental contract on either the Irpef or the cedolare secca regime.
Short-term rentals in Italy
Most of these landlords, as Corriere points out, haven't stopped renting out their properties altogether; instead they've turned them into short-term holiday rentals while they wait to see how things pan out.
Short-term lets can of course be a headache to run, and involve significant cleaning and management costs that landlords on long-term contracts don't have to factor in.
But in cities popular with tourists, they can also be far more lucrative than long-term contracts - as in Venice, whose permanent population has steadily declined in recent years and dropped below 50,000 last August.
READ ALSO: How can I find an apartment to rent in Rome?
Some parts of the country are taking matters into their own hands to combat the problem of tourists supplanting permanent residents: Bolzano recently introduced a cap on the total number of holiday rentals.
But for now, renters in most of the rest of Italy will have to make do with a dwindling pool of increasingly unaffordable properties.
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