Housing Law in Spain: Important developments and key aspects.
The new Housing Law in Spain, officially Law 12/2023, of 24 May, for the Right to Housing, was finally approved by the Senate on 17 May 2023, thus being the most recent publication
in the regulations regarding real estate rentals.
Its main objective is to regularise the rental situation in the tensest areas of the market and to help all those who have difficulties in accessing decent housing to live in.
What is the intention of the Spanish Housing Law?
This law is responsible for regulating rental prices in areas recognised as stressed, i.e. those where the average rental price is well above what households can afford to pay for it.
At the same time, it seeks to promote the creation and maintenance of public housing with the intention of ensuring the supply of available rents at reasonable prices, as well as to prevent situations of tension from arising in this market.
What is a stressed area?
A zone is declared stressed when one of the following circumstances occurs:
1. Average rent or mortgage burden plus basic expenses is more than 30% of the average household income in the area.
2. The rental or purchase price has experienced a minimum growth of 3 points above the CPI in the corresponding autonomous community during the five years prior to the declaration of the area as a stressed area.
The Autonomous Communities are responsible for classifying the areas as stressed areas, and may maintain this status for a period of 3 years, which may be extended depending on the circumstances.
What is a large landlord according to the Housing Law?
“Gran tenedor” or “large owner” means any natural or legal person owning more than 10 properties or areas of up to 1,500 m2 suitable for residential use, in the case of non-stressed areas.
In case of stressed areas, the consideration changes. A large owner is the one who owns 5 or more urban properties for residential use located in the same area declared as stressed.
Garages and storage rooms are excluded in both cases.
Limit on the annual updating of rental contracts, the CPI (consumer price index) is eliminated.
Rent updates will always be limited to the index stablished in this Law; the CPI will no longer be taken as a reference to avoid disproportionate increases. This way, a maximum of 3% is set for 2024, and from 2025 onwards a new index will be created that can be updated annually, which has yet to be determined.
Rent price regulation in stressed areas.
The most important measure aimed at controlling the abusive increase in rental prices is the regulation of rents in stressed areas. The obligation is imposed on new tenants to maintain the price of the previous contract, and this cannot be increased by more than the corresponding annual price index.
Let’s look at an example of a property that had a rent of 1,000 euros per month. When a new rent is proposed, the price of the new rent will be limited by the price of the previous contract (€1,000) plus the corresponding annual index (3% in 2024). Thus, when a new contract is agreed, it cannot exceed €1,030 per month.
Where it is a large tenant, or in the case of properties that have not been rented as a principal residence in the last five years, it may not exceed the ceiling of the price applicable under the reference price index system.
Exceptionally, in cases where the intervention of the competent administrations is necessary, the law recognises the possibility of an extraordinary annual extension of the contract once it ends for a maximum period of three years, provided that the tenant proves to be in a situation of social or economic vulnerability.
Now the real estate agent’s fees are paid by the owner.
Previously, it was not compulsory for the landlord to pay, however, with the current regulation, the expenses derived from the real estate management and the formalisation of the contract will be assumed by the landlord and not by the tenant.
IBI tax surcharge for empty properties.
Townhalls will be able to apply the IBI surcharge to properties that have been empty for more than 2 years, as long as the owner has at least 4 properties in this situation.
Exceptionally, the IBI tax may reach up to 150% if the local councils deem it appropriate.
Tax benefits for property owners
In terms of taxation, the Housing Law presents a beneficial regulation of the IRPF for those owners who obtain rental income in stressed areas. The benefits will be higher or lower depending on different factors.
- 50% for new contracts in stressed areas.
- 60% on the net yield when refurbishment work has been carried out in the previous two years.
- 70% for those rented to young people between 18 and 35 years of age in stressed zones.
- 90% for new contracts in stressed areas with a reduction of at least 5% on the previous contract.
These rental benefits are presented as compensation for the capping of rental prices.
New measures to protect against evictions.
The Housing Law shows a certain degree of tolerance towards evictions, providing re-housing solutions for those affected and delays in judicial evictions as notable measures.
The scope of protection is extended in the case of situations of vulnerability, and the pre-judicial conciliation procedure is made compulsory when the owner is a large owner and the property is the occupant’s habitual residence.
In addition, the tenant is recognised as being able to benefit from the various instruments of the housing policy programme.
Prohibition to increase the price of the rent with extra expenses.
It is prohibited to increase the price of the rent with new additional expenses such as rubbish charges, community fees, or others when these were not agreed in the contract.
To find out more about this regulation you can contact our team of lawyers by email at info@legaliuris.eu or by contacting our offices.
Any doubts?
Fill in the form to contact your lawyer and get your questions answered !