Frozen in time: phasing out the remnants of Mexico's fixed rent policies won't be easy. (Spotlight).

As odd as it may seem, many Mexico City tenants pay a mere 10 centavos a month, a rent that has been frozen since 1947. Annually, that costs them less than a postage stamp in the United States. Sound like a steal? Real estate companies and landlords certainly think so. Yet residents benefiting from so-called frozen rents say they refuse to become the latest victims of an unregulated market that has been rife with fraudulent acquisitions.

Despite a law passed in 1997 that prohibits all types of rent control, about 20,000 Mexico City families continue to live virtually rent-free, according to city housing authorities. Property owners say the tenants are nothing more than squatters, who in effect are receiving informal housing subsidies from the private sector. Renters, however, say that's a far stretch of the truth, especially since property rights are often in a state of legal limbo. That's because many of the original owners, who allegedly sold their property, have either died or simply vanished over the years. Consequently, rights groups and tenants say many of the new landlords came by their properties by signing bogus power of attorney documents in order to acquire the properties at a fraction of their market value.

Needless to say, dead or absent owners make poor witnesses, and a court eviction order tends to be a painfully long process. So it is hardly surprising that as legal disputes drag on, the haves and have-nots have resorted to taking the law into their own hands. Sometimes, it gets downright ugly.

Arturo Visoso, lawyer for Mexico City-based real estate giant Lomelin, says serving an eviction order can be a dangerous business. On numerous occasions, renters' rights groups wielding clubs and stones have formed human barricades in front of tenants' doors with the intention of thwarting possible evictions, he says. Once, Visoso had to make a hasty exit after being punched several times in the face. In other circumstances, protesters have forced lawyers and court clerks to strip from head to toe and ordered them to march off the property completely naked.

Renters groups, however, say real estate firms, attorneys and alleged building owners are to blame for the foul play.

"We have seen situations in which the owners send hired thugs to strongarm tenants out of their buildings," says Agustin Gonzalez of the social organization, Francisco Villa Popular Front. "In some cases, we later learn that the owners had no legal grounds to evict the residents."

No PLACE LIKE HOME

The conflict between property owners and renters dates back to 1947 when former President Miguel Aleman introduced a law that aimed to protect commercial and residential tenants from rent increases in the midst of a crippling recession year. During the five decades that followed, however, frozen rent made it virtually impossible for property owners to provide basic maintenance to their buildings, much less to make needed renovations. Today, many of those aging structures, most in the capital's historic center, are showing the signs of years of neglect.

It wasn't until 1997 that former President Carlos Salinas de Gortari officially eliminated frozen rent laws. Yet the controversial presidential decree, which came as good news for landlords, had a major flaw from a tenant's point of view: the renters' market had become completely deregulated, giving owners free reign to charge unlimited rent increases.

According to Adolfo Lopez, president of the Federal District Housing Committee, there are currently no limits as to how much an owner can increase a tenant's rent.

"If they want to increase it by 100% or 200%, they can legally do so," he says. "That of course makes it more difficult for low-income families to find affordable housing."

With demand outpacing supply, rental prices remain high. Some people have been forced to look for cheaper housing on the city's outer limits, while others have illegally built makeshift homes on property owned by the government. After the 1985 earthquake, which claimed an estimated 9,500 lives, thousands were left homeless. Soon after, more and more people were looking for a new home, even if it meant building on someone else's land. Currently, about 60,000 Mexico City families are occupying land illegally, according to housing authorities.

Lopez says the lack of rent control only makes matters worse.

"The real problem is rent control, or lack thereof," says Lopez, of the center-left Democratic Revolution Party (PRD). "That's why we are proposing rent increases that fall in line with inflation rates. How it works is if both parties agree on a monthly rent under a one-year contract, for example, the owner can only raise the following year's rent by 5%, or whatever the inflation rate is at that time."

Lopez's proposal, which must pass through the Federal District Legislative Assembly, is sure to meet opposition from conservative lawmakers and property owners alike. Lomelin attorney Visoso says the prospect of rent control would have a devastating impact on the local real estate industry.

"The problem is that for many years, many real estate ventures have not been profitable," he says. "Frozen rent is a perfect example of how owners cannot receive a decent return on their investments and that is why you have so many old buildings deteriorating in the downtown area and in other parts of the city. There is nothing left over to reinvest."

MARKET FORCES

A housing shortage exacerbates the problem. Since demand far outweighs supply, the housing commission estimates that the Federal District has an annual deficit of about 500,000 homes a year, meaning that local builders are far from keeping up with the pace. So while it is true that an unregulated market means higher profits for investors, the social benefits of a free market are less obvious.

Gonazalez, of the Francisco Villa Popular Front, says the solution lies somewhere between free-market practices and government intervention.

"We understand that if someone is paying $1 peso a month or less, that the building will not see improvements and that there will be less investment," he says. "The problem is that most of the politicians and lawmakers have a capitalist vision and they are not interested in reforming the law so that both sides can benefit. They are not offering alternative solutions for low-income families."

His group and others like it have pushed for more low-interest credits and a stringent form of rent control that would make buying and renting more accessible for the working class.

But until that happens, many low-income families are caught somewhere in between the wall and the sword, as the local saying goes. It's bad enough that owners can charge whatever they please, especially since a large majority of families are scraping just to get by, says one anonymous tenant who has benefited from frozen rent. Even worse, he says, is that some families must pay into a protection racket so that neighborhood watch groups will protect them from people that claim to be the legal owners.

"We're trapped," he says. "And the strangest thing about it is that the only thing that we are asking for is a fair deal. I think that most people would agree that that's not asking for too much."

John Hecht is a Mexico City-based freelance writer and correspondent far The Hollywood Reporter.