Real Estate Market Control in Spain: Measures to Protect Tenants and Promot

The real estate market is a topic of concern for many people, especially for those looking to buy or rent a home. In this regard, recent regulatory changes have been implemented with the aim of controlling the real estate market and providing greater protection to tenants in Spain. 

After a long period of several months of stalemate in negotiations over a rule that has been the subject of discussion within the Spanish Government throughout the legislature and which was approved in the Council of Ministers more than a year and a half ago, the coalition Executive has unblocked talks with partners in Congress to secure the necessary parliamentary backing for the Housing Law. 

The next step will be approval in the Senate, with the aim of the law coming into force before the regional and municipal elections scheduled for May 28th. 

The text of the new housing law includes a series of measures aimed at addressing various aspects if the rental market. These measures include: 

• Rent updates
• Declaration of tense zones
• Tenant protection 
• Affordable housing
• Tax incentives

Below is a detailed explanation of each of these new measures. 

Rent Updating: 

Until now, landlords had the right to increase rents once a year based on the variation of the Consumer Price Index (CPI). 

In March 2022, the government approved a limit of 2% for the update of prices in existing rental contracts. This limit, which was initially proposed as an exceptional measure, will become the norm. In 2023, the limit for rent increases will be 2%, in 2024 it will increase to 3%, and starting from January 2025, a new index will come into effect that will establish limits for rent increases always lower than the CPI. 

Declaration of stressed areas: 

A stressed zone is an area where the price of rent has increased significantly, such as the center of Madrid. To generate stability in these areas, one of the main measures implemented refers to the requirements for the declaration of stressed areas. Previously, two conditions were required for an area to be considered as stressed, but now it is sufficient for one of the two situations to be met. The first condition establishes that the average burden of the cost of the mortgage or rent plus expenses and supplies must exceed 30% of the average household income. The second condition establishes that the purchase or rental price of the home must have increased at least 3 points above the CPI in the five year prior to the stressed area declaration. In addition, the threshold of increase over the CPI has been reduced from 5 to 3 points, which broadens the criteria for declaring an area as stressed.

Tenant Protection: 

In terms of tenant protection, measures have been implemented to prevent real estate expenses and fees from being passed on to tenants. Rent increases by way of a new expenses that are not previously agreed upon are also prohibited, which guarantees greater transparency in rental agreements. In addition, clauses that allowed the non-application of measures established by law are eliminated, which protects tenants and guarantees that regulations are complied with in all cases. 

Affordable Housing: 

In relation to affordable housing, the percentages of land reserved if affordable housing in developable land and non-consolidated urban land have been increased. This aims to promote the availability of affordable and accessible housing for those with lower economic resources, promoting equity in access to housing. 

Tax Incentives: 

The private sector has strongly criticized the housing law, arguing that the guarantees offered to one part of the market create an imbalance and lack of protection for the other side. To address this situation, the Government in seeking to balance this disparity through tax incentives for homeowners in tensioned areas. These homeowners may benefit from deductions in the Personal Income Tax (IRPF) if they apply discounts on the rental price or if they rent the property to young people or other vulnerable groups. 

Marta Batalla Eguidazu

martabatalla@gentile.law

+34 684 460 426