In the middle of 2020, with the coronavirus pandemic keeping Brazilians shut inside their homes, residential tenants were dealt an unwelcome surprise with the news that their rent would increase by around 18 percent in one fell swoop. Occupants were left perplexed by the size of the annual increase, given that the 12-month inflation rate stood at only a few percent. But in Brazil, rental contracts are not typically adjusted each year using the official Consumer Price Index (IPCA) — in fact, they use a different measure, the IGP-M, commonly referred to as “rent inflation.”
Despite its nickname, however, the IGP-M has little to do with rent, being a broad thermometer of prices from various sectors, including commodities, industry, and inputs for civil construction. The fact it is used to adjust rental contracts is something of an industry quirk and act of convenience.
The perceived arbitrariness of using the IGP-M became the topic of much discussion in 2020, but it has become even more prominent this year, with the index spiraling out of control and forcing rent increases of well over 30 percent between March and August.
Landlord-tenant negotiations have become increasingly common since the eye-watering rise of the IGP-M, with many rental contracts now adjusted for inflation according to the IPCA...
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