VZCZCXYZ0001
RR RUEHWEB

DE RUEHAM #0137/01 0151043
ZNR UUUUU ZZH
R 151043Z JAN 09
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 4199
INFO RUEHGB/AMEMBASSY BAGHDAD 6145
RUEHLB/AMEMBASSY BEIRUT 2971
RUEHEG/AMEMBASSY CAIRO 3879
RUEHDM/AMEMBASSY DAMASCUS 4048
RUEHJI/AMCONSUL JEDDAH 0851
RUEHJM/AMCONSUL JERUSALEM 5304
RUEHRH/AMEMBASSY RIYADH 2074
RUEHTV/AMEMBASSY TEL AVIV 1485
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS AMMAN 000137 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA AND EEB 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV SOCI JO
SUBJECT: DELAYED END OF RENT CONTROL HIGHLIGHTS HOUSING CHALLENGES 
IN JORDAN 
 
REFS:  A) 08 AMMAN 2369 
       B) 08 AMMAN 2316 
 
¶1. (SBU) Summary: The government is currently drafting amendments to 
the Tenants and Landlord Law which was set to end Jordan's de facto 
rent control as of December 31, 2010, by cancelling and requiring 
the renegotiation of all rental contracts.  The amendments, which 
are backed by the King and PM, will delay the cancellation date 
until 2013 for the oldest rental contracts.  Critics of the 
amendments, primarily landlords, argue that they merely delay rather 
than solve the problem and point out that Jordan's real estate laws 
discourage investment in needed rental properties.  Supporters of 
the amendments argue that canceling leases or dramatically 
increasing housing prices for the 40% of Jordanians who rent homes 
would be untenable and could lead to civil unrest.   This law will 
not impact the approximately 200 leases held by the Embassy because 
the law does not apply to expatriate leases.  End Summary. 
 
¶2. (SBU) In a bid to avoid adding further instability to Jordan's 
real estate market in the midst of a global economic downturn, the 
government is expected to refer to Parliament an amended version of 
the controversial 2000 Landlords and Tenants Law before the end of 
January.  Article 5 of the law stipulated that all rental contracts 
in Jordan will be null and void on December 31, 2010.  The current 
law was passed as an economic reform measure to end decades of rent 
control.  Ayman Shwyat, a member of parliament's legal committee, 
said that the current law was needed because historically tenants 
have been able to keep their leases at the prices of the original 
contract even after its expiration and this has meant that many 
residential and commercial renters have paid the same rent for 
decades.  Under the new amendments, the 2010 deadline for tenants to 
vacate properties or renegotiate contracts will be extended while 
landlords will have the power to increase the rental rate of their 
properties. 
 
New Deadlines for Negotiating Rental Contracts 
--------------------------------------------- - 
 
¶3. (U) The proposed amendments would extend the 2010 deadline to 
2013 for rental contracts older than 24 years and delay other 
contracts from one to seven years based on their age.  Until the 
revised deadline, landlords will be able to raise rents based on a 
calculation determined by how long the lease has been held.  In some 
rare cases, landlords will be able to increase rents by over 200 
percent.  After the deadline, tenants will be required to vacate the 
premises unless they renew the contract with their landlords.  Abu 
Judom Real Estate Company president David Abu Judom said that 
landlords are unlikely to make large increases for residential 
tenants but will be targeting commercial tenants in the oldest and 
well-trafficked parts of Amman. 
 
¶4. (SBU) Ibrahim Al-Zu'bi, an official at the Legislative and 
Opinion Bureau (LOB), said the new amendments were first sent to the 
Cabinet by the Prime Minister in fall 2008 but were returned to LOB 
for further review.  Al-Zu'bi said this law is now scheduled to 
return to the Cabinet in January and the King has indicated that he 
wants to fast track it so as to quell popular anxiety over the 
looming changes.  Al-Zu'bi complained that it is a weak law that 
"deals with the symptoms but not the disease" inherent in Jordan's 
real estate system referring to the problem of long-expired leases 
and low rents.  Shwyat agreed with Al-Zubi's assessment and said 
this law has been and will continue to be vigorously debated in 
parliament.  Shwyat expected, however that it would pass this term, 
because of its importance and timeliness. 
 
Housing Initiatives to Fill Rental Property Gap 
--------------------------------------------- -- 
 
¶5. (SBU) Dr. Mahmoud Al-Kafawin, general manager of the National Aid 
Fund, Jordan's welfare program, was confident that the government 
would pass the new amendments because otherwise thousands of people 
would be on the street and there would be a "revolution."  He said 
housing already accounts for at least one-third of the income for 
most Jordanians.  He lamented that while it was once possible to 
rent an apartment for $75 - $100 per month, it was now difficult to 
find an apartment for less than $300 even in the poorest areas.  An 
estimated 40% of Jordanians rent their homes. 
 
¶6. (SBU) The government has long been aware of the looming 2010 
deadline and Al-Kafawin and Shwyat said that the many recent housing 
 
initiatives have all been designed to address the problems that will 
result when all rental contracts are ended.  While they complimented 
these programs including the King's housing initiative, the army 
housing initiative, and a housing project in Zarqa funded by Saudi 
Arabia, they said the programs are insufficient to house the many 
people who might be affected by the law's changes (ref B). 
 
¶7. (SBU) Opinions about the law are sharply split along landlord 
versus tenant lines.  Property owners for the most part criticize 
the delay, noting that rents in Jordan are quite low and that 
current practices discourage investment in existing rental 
properties.  They argue that current real estate laws and practices 
have distorted the housing market.  Because of rent control, Abu 
Judom said builders and developers have disproportionately focused 
on high-end homes for purchase, often by Jordanians working in the 
Gulf, and have not developed sufficient low and medium-priced 
housing for rental.  There is an estimated 150,000 housing unit 
shortage in Jordan and an additional 35,000 units are needed 
annually to cope with the growing population. 
 
¶8. (SBU) Conversely, tenants worry about sharply rising rent prices 
after coping with a year with record 15.4% inflation (ref A). 
Jordanians have already cut back on expenditures because of rising 
food and energy prices and it is unclear how additional income for 
housing could be earned.  Abu Judom acknowledged that with the 
inflation, Jordan's middle class has vanished and the government is 
eager to be seen protecting the vulnerable by not allowing the 
contract cancellations to proceed. 
 
The Rush to Home Ownership 
-------------------------- 
 
¶9. (SBU) Officials at the Central Bank of Jordan and at local banks 
said that the discussions over this law do not impact the banking 
sector outside of encouraging home ownership.  Abu Judom said that 
since 2000, his company has sold many apartments to first time 
home-owners aware of the 2010 deadline.  Samir Sunnoqrot, General 
Manager of Capital Investments, said that the cultural desire 
towards land ownership has meant that historically anyone who is 
able to own property purchases it, even if rent control would make 
renting financially advantageous.  Comment:  Jordanian banks were 
not heavily invested in mortgage-backed securities and generally 
emerged unscathed, although more cautious, from the sub-prime 
fiasco.  End Comment. 
 
Embassy Rentals Excluded 
------------------------ 
 
¶10. (U) This law will not impact the approximately 200 leases held 
by the Embassy because the law does not apply to expatriate leases. 
GSO also noted that all embassy residential rental properties have 
specific lease terms unlike the leases that will be voided by the 
2000 law. 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
BEECROFT