Rents, one third of rents are fixed-rate

About one in five families in Italy live in rented accommodation. For decades, there have been no major housing construction programmes, incomes have stagnated and inflation has come back to bite. No wonder, then, that tenant households are among the most fragile.

Against this backdrop, the 'cedolare secca' seems to have given a boost to the spread of 'canale concordato' contracts, in which the landlord accepts a lower-than-market rent in exchange for a discount from the tax authorities. In the first year of full application, 2012, agreed contracts accounted for 13% of the total taxable amount of the flat tax. This percentage then rose to 35% in last year's declarations. In fact, thanks to the coupon rate reduced to 10% - accompanied by the Imu discount of 25% - in 2022 tenants paid 6.8 billion in lowered rents.

It is interesting to see what has happened in recent years marked by Covid and inflation. In 2020, for the first and so far only time, the declared taxable amount for freehold and short-let contracts remained unchanged from the previous year. The average amount even decreased by 1.1 % (a decrease probably due to the stop of tourist rentals and the downward renegotiations granted by several landlords). In the same year, however, the taxable amount of agreed rental contracts increased by 5.5%, a sign that a good number of landlords have 'shifted' to the formulas most facilitated by the Inland Revenue, perhaps taking advantage of an early termination or the opportunity of an expiring contract. The greater use of this contractual solution can also be seen in the fact that last year more than 200,000 landlords declared both rents taxed with the coupon at 21% and rents taxed at 10% (the options number just over 3 million, the taxpayers 2.8 million).

In 2022, with average annual inflation at 8.1 per cent, the average agreed rent declared by landlords increased by 3.7 per cent; the free rent by 6.3 per cent. Of course, these changes do not depend on the updating of monthly amounts, which is forbidden as long as the landlord applies the flat tax. Rather, it is an increase in short leases, new contracts signed for higher amounts than old ones, and probably the renewal at higher values of some local agreements for subsidized rents. However, a more tepid dynamic in the growth of subsidised rents is evident.

On the other hand, not all that glitters is gold. The agreed rent, to be attractive to landlords, cannot be too much lower than the market rent. And, in any case, for truly struggling families even a fixed rent may prove too heavy a burden.