(Bloomberg) -- Former Turkish Central Bank Governor Sahap Kavcioglu is seeking a rental lifeline for his staff at his new role amid a housing crisis fueled by loose monetary policy during his tenure.
Kavcioglu is seeking to secure living allowances of over 30,000 liras ($1,038) per month for employees of the Banking Supervision and Regulation Agency, or BRSA, according to a parliamentary proposal seen by Bloomberg.
Kavcioglu wanted the clause on rent support to be added to a separate piece of legislation under discussion at the parliament, according to people with direct knowledge of the matter, who asked not to be identified citing the sensitivity of the matter. The banking regulator declined to comment.
The move comes as the regulatory body struggles to recruit skilled staff as a result of a policy constraining salaries at government institutions.
The aid addresses the challenging living conditions faced by the regulator’s staff in Istanbul, where housing costs have surged and affordable options are scarce. Similar challenges have been observed among Turkish central bank employees, especially with the impending relocation of the bank’s headquarters to Istanbul.
After overseeing a low-rate policy during his tenure from March 2021 to June 2023 at the central bank, Kavcioglu was removed from his post and appointed as the head of BRSA simultaneously. During Kavcioglu’s roughly two-year tenure helming Turkish monetary policy, the central bank charted an unorthodox course, setting ultra-low rates to keep growth strong despite highest inflation rates since since the 1990s.
The surge in cheap and easy credit was championed by President Recep Tayyip Erdogan and drove prices sky-high, particularly in the rental market. That left many in Turkey struggling to keep up with the escalating cost of living. While minimum wage hikes brought relief to low-income earners, middle-income professionals have been hit hard by rising living expenses. Two earthquakes that hit the country’s south in February and years of refugee inflows further deepened the housing crisis.
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Rents in Istanbul surged more than sevenfold from March 2021 to last month, according to Endeksa data. The trend has transformed the city into a battleground for affordable housing. House prices also followed a similar path, Istanbul house price index rose to 942 from 143 in the same period.
Efforts to ease the situation haven’t worked. Although the government imposed a 25% cap on rent increases last year, which led to legal, and at times physical, disputes between tenants and landlords, it failed to offer solution on new rental agreements. Landlords began demanding exorbitant rents to offset the 25% limit as annual inflation surged over 85%.
After winning re-election in May, Erdogan abandoned the low-rate experiment and removed Kavcioglu from the central bank management, appointing him as head of the regulator instead. Since then, Turkey’s central bank raised the policy rate to 40% from 8.5%.
The fate of the proposition remains uncertain as it undergoes parliamentary discussion. Erdogan’s AKP has previously retracted similar proposals due to a public backlash.
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