Akademik Veri Yönetim Sistemi
36. International Public Finance Conference, Antalya, Türkiye, 27 - 30 Ekim 2022, ss.360-361
There is a strong relationship between the increase in rental prices and the cost of living since a
significant portion of personal income is allocated to housing. It is assumed that individuals in many
countries allocate approximately one-third of their income to rent, and housing expenses have a
significant share in the goods and services baskets used in inflation calculations. However, in cases
where rent increases are determined according to the inflation rate, this relationship becomes a cycle
that feeds each other. Although other important expenditure classifications, such as food, include
many different products, a very large part of the housing cost consists of rent alone. In addition, rent
hikes may indirectly cause the price of many different products to increase. This situation brings along
the thought that inflation can be restrained if rent increases are limited. It is possible to present many
different examples in which certain rules are applied to the determination of rental prices and increase
rates and the eviction of the tenant. These applications can be in different forms such as the
determination of the rental price per square meter by the state, limitation of the reasons for eviction,
application of the ceiling price, and freezing of prices. Although price controls and other restrictions
within the free market mechanism are not tolerated that they will disrupt the supply and demand
balance of the market, it is seen that there are controls on rental prices or other regulations have been
made in this regard in many countries that have adopted the free market economy. The general
purpose of these controls and regulations is to enable large masses to access housing, to protect the
tenants, and not to allow rent increases to trigger inflation. Although the target inflation rates could
not be fully reached, it is possible to say that the price increases in our country remained at relatively
acceptable levels throughout the 2000s. However, with the reflection of the recent poor economic
policies and external developments on the general level of prices, Turkey again faced the phenomenon
of very high inflation. In addition, the average rental prices in Turkey approached the minimum wage
in many provinces and reached figures that even exceeded the minimum wage in provinces such as
Muğla, Istanbul, and Izmir. While the impact of the various economic problems that emerged with the
pandemic has not passed, the serious increases in both the average rent and the general level of prices
have increased the living problem in the country and left many people below the poverty line, even
hunger. Refusing to increase interest rates, which is the most basic intervention tool of the orthodox
economic policy against inflation, and even going for an interest rate cut in the opposite direction,
Turkey tries to restrain both exchange rates and inflation with practices such as regulations on reserve
requirement ratios, changes in duty rates and threshold values, and offering exchange-rate-protected
deposit accounts. However, it is difficult to say that these interventions have the desired effect on the
general level of prices and exchange rates. Factors such as the payments that the Treasury has to
undertake due to exchange-rate-protected deposits, unavoidable dollarization, high current account
deficit, and foreign debt make it difficult to keep inflation under control. In a situation where
expectations are negative and there is a loss of confidence in economic policies, increasing the policy
interest rate alone will not be sufficient as an intervention against inflation. At the point that the
Turkish economy has reached, heterodox economic policies remain in order to prevent the
depreciation of the Turkish lira. The legal regulation limiting the increase in rent prices by twenty-five
percent, which is on the agenda of the Turkish Grand National Assembly in June, is an example of an
incomes policy implementation in this respect. The aim of the study within this framework is to
examine the effect of rent controls and regulations on inflation and to discuss how these practices will
affect inflation in Turkey and other economic outcomes, especially the developments in the housing
market. In the first part of the study, general information about rent controls and regulations is given,
while in the second part, different application examples in the world are explained. In the third
chapter, while the price controls and regulations that have been put into practice in Turkey are
summarized, the most recent rent increase limitation and its possible consequences are emphasized.
In the conclusion part, rent controls and regulations, as an example of heterodox economic policies,
and the effects of these policies on reducing inflation in Turkey and their reflections on the markets
are evaluated.