Rent for $1 a Month? Egypt Says No, Ending a System That Aided the Poor
But that security came at the expense of landlords who saw valuable properties going for next to nothing and the housing problems officials say it created. Now Egypt's government is jettisoning the system known as 'old rent,' ending tenant protections that have been in place in some form since 1920.
Under a new law ratified this week by President Abdel Fattah el-Sisi, rents on protected apartments will rise significantly over the next seven years until they are raised to market rates.
Officials say the legislation will rebalance a housing market long distorted by rigid rent controls, which led to property neglect, a surfeit of vacant units and abuse by some tenants who sublet dirt-cheap apartments at market rates. But tenants and their advocates say it will also leave about 1.6 million households at risk of homelessness at a time when Egyptians have already been battered by repeated economic crises.
Poverty has claimed more and more Egyptian families, with at least a third now under the official poverty line. Inflation has remained in the double digits for more than three years straight.
All the while, Egypt's social safety net, which has underpinned the social contract for decades, has grown increasingly threadbare. Subsidies for bread, electricity and gas are gone or going. Free public education and health care have deteriorated.
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Daniel S. Kern, CFA®, CFP®, is the chief investment officer of Nixon Peabody Trust Company. The S&P 500 returned more than 13% per year from 2015 through the end of 2024, conditioning many investors to expect a continuation of double-digit equity returns. Unfortunately, several factors that have contributed to positive returns have either run their course or are likely going into reverse. Globalization is reversing amid trade conflict and a post-pandemic need to create less fragile supply chains. The Russia-Ukraine War was a turning point for countries that have underinvested in defense since the fall of the Berlin Wall. Plans by many of these countries for increased defense spending will create budget challenges, likely leading to higher budget deficits. Inflation remains above central bank targets in many countries. 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Central banks intervened with rate cuts during periods of economic weakness, helping to cushion the blow when equity markets were under pressure. The rise in inflation during the pandemic was a preview of a world in which 2% could be the floor for inflation rather than the ceiling, largely as a result of supply shocks. Although tariffs are considered a one-time increase in prices rather than a persistent rise in the rate of inflation, realignment of supply chains may add stickier longer-term costs. Climate-related disruption of food supplies, as well as immigration policies that reduce the supply of labor, will likely make inflation more volatile. Investors should assess the implications of higher and less stable inflation for their investments. 2. The role of fixed income may change over the next decade. Bonds will be a less reliable hedge against equity downturns in an environment of higher and less stable inflation. The experience of 2022, when stocks and bonds both performed poorly, may repeat itself in future years. Consequently, investors should diversify portfolios to include inflation-resistant holdings. These may include real estate, infrastructure and real assets such as commodities. Government and investment-grade bonds provided limited income for much of the past decade and were commonly used for diversification rather than income. Short- and intermediate-term bond yields are now high enough to provide meaningful income supporting the returns needed to achieve financial goals. 3. U.S.-China competition may be the defining geopolitical trend of the next decade. Although most of the current focus of attention is on tariffs imposed on goods imported directly or indirectly from China, multinational companies that have significant sales in China face underappreciated risks. Chinese brands are increasingly competitive and may continue to capture market share from high-profile U.S. brands. Also underappreciated is the degree to which the U.S. services economy has benefited from Chinese tourists and students. Investors should revisit the outlook for holdings with direct and indirect exposure to China, looking for relative winners and losers in a decoupling between the U.S. and China. Investors can also explore opportunities outside the U.S. created by competition between the two countries, with China an important innovator in areas such as AI, electric vehicles and robotics. 4. The U.S. may be less 'exceptional' relative to the rest of the world. U.S. equities have far outpaced the world since the GFC, helped by leadership in technology innovation, higher profitability of U.S. firms, favorable demographics and energy security. Policy mistakes by several leading economies outside the U.S. also contributed to the performance gap between the U.S. and the rest of the world, in my opinion. Non-U.S. stocks have rebounded strongly during the first half of the year as countries such as Germany and China made long-overdue economic and policy changes. Although the U.S. is expected to continue to grow faster than other developed international markets, the growth premium between the U.S. and the rest of the world may narrow. Investing in international markets, which remain much less expensive than the U.S., should be an important strategy for investors seeking to diversify beyond the U.S. market, which remains expensive and highly concentrated. 5. Investors should consider whether private equity and private credit should be added to diversified portfolios. The case for including private assets is a shift in how capital is raised in today's economy. The stock of public equity is shrinking, with fewer companies going public (see Private Equity section, "U.S. public vs. private equity") and many successful private companies staying private for longer. 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