New Spanish housing law: Regulations and changes

The Spanish Government has agreed on substantial changes to the Housing Law.  The approved right-to-housing regulations became the first state law since the approval of the Constitution.

The Spanish Government has agreed on substantial changes to the Housing Law.  The approved right-to-housing regulations became the first state law since the approval of the Constitution.

What are the main objectives of the new Housing Law?

  • Essential regulation of the rights and duties of citizens concerning housing.
  • Access to suitable and appropriate housing for anyone with difficulties obtaining housing under the current market conditions.
  • Working to ensure safety, access, and habitable conditions, to uphold the dignity and health of tenants.
  • To define the basics of state planning for housing.
  • To advocate housing development in line with current demands for all.
  • To provide safeguarding in purchasing and rental processes.

What are the primary considerations of the Law?

The Law focuses on the central issues:

  • Regulation of evictions
  • Possibility to impose a tax on Landlords with empty houses.
  • Confirmation of a ceiling on the updating of rents.
  • New Tax incentives for homeowners from 2024
  • Creation of a reference index by the National Statistics Institute for updating rents different from the CPI.

Some measures are still to become operational; below is a summary of those in effect.

Housing Law: the new legislation in operation 

The framework will ensure rental control regarding rental increases in areas that are ‘stressed’.  

Any increase is required to be approved by the CCAA (Comunidades Autonomas or Autonomous Communities).

Read more about Stressed Areas here.

Housing Law: resolutions that are already effective

Rental income cap

The cap on the annual increase for the renewal of current housing rental contracts. This cap will stay in place until the end of December 2023, allowing for an increase in the rental agreement of no more than 2%. After that, throughout 2024, up to a 3% increase will be permitted, and as of 2025, a new rental index will come into effect.

Minimum information: housing purchase, sale and rental operations

For house purchases and sale and rental properties, minimum information must now be offered by the real estate agent if required by the potential purchaser or tenant.

This should include:

  • Price and what’s included in the deal
  • Financing or payment conditions
  • Energy efficiency certificate
  • Habitability certificate
  • Functional and constructed area of the property
  • Services relating to the building or its age

Extraordinary extensions of rental contracts up to one year in a situation of social and economic vulnerability

A modification of article 10 of Law 29/1994, of November 24, on Urban Leases (LAU) – the right to housing allows the tenant to request an extraordinary extension of up to a year if a person is of social or economic vulnerability in the property.

In order to substantiate the request, there must be a report or certificate by the municipal or regional social service undertaken during the last year.

This applies to a landlord with more than 10 properties, or 5 if it is declared a stressed area.

Empty property IBI surcharge

If a property has been empty for at least 2 years, the IBI (Real Estate Tax) surcharge applies with immediate effect and could reach as much as 150%.

IBI may be applied to Landlords with 4 homes per owner (empty for more than 2 years).  If the cause of a vacant property is due to temporary unemployment, the law may assess and justify the situation.

The IBI surcharge increase is established up to a maximum of 150% and is calculated on the length of unemployment and the number of empty properties owned by the same owner.

The aim is to maximise the use of residential property to apply pressure on the Town Halls to deal with unoccupied housing through taxation.

Affordable or incentivised housing 

Affordable or incentivised housing, known in Spanish as vivienda asequible incentivada is defined by the law as private housing where the authorities grant various benefits to the landlord e.g. in exchange for the properties being made available at reduced prices for rental housing to people and families on a low income.

Acceptance of electronic payments

For new contracts, rental income payments should be made electronically unless the tenant has no means of payment in this way or doesn’t have a bank account. In this case, the rent can be paid in cash.

Large homeowners – owning more than 10 properties

Spanish law, for the first time, defines what large homeowners are.

“Private persons or legal entities (companies) who own more than 10 urban properties for residential use or a constructed area of more than 1,500 square meters for residential use, excluding garages and storage rooms.”

Large homeowners consider this essential aspect of the housing bill controversial, marking them guilty of increased market prices.

Regulation of evictions procedures and real estate auctions

The bill introduces considerable changes in suspending eviction procedures, foreclosures, and auctioning properties concerning vulnerable people.

With the new regulations, tenants will be granted enough time to find alternative accommodation until the eviction date. Tenants can only be evicted by the predetermined date.

It is prohibited to force an eviction without notification to the tenant of a date. In addition, further protection measures have been introduced when vulnerable people are affected.

In the case of foreclosure of mortgaged assets, the homeowner’s protection as a vulnerable person is the same as eviction proceedings.

The protection of a vulnerable person is also covered in the cases of a real estate auction when the owner is a large homeowner.

The Right to Housing Law: changes still to become operational

The regulation of price limits will come into effect in ‘Stressed Areas’.

Stressed areas (Zona Tensionada) are defined as areas with high housing prices, forcing out tenants.  The regulation of rents will impose controls on these areas.  These areas are neighbourhoods, districts, or provinces where the average cost of rents and mortgage exceeds 30% of the average household income.

The responsibility of enforcing this regulation will fall to the autonomous communities, and in some cases, administrations have already indicated they will not adopt the laws.

Another change is the modification of ‘large owner’. For example, owning 5 properties is considered a large owner in a stressed area.

There is a distinction between properties that have already been rented and those that have not.  Existing rental agreements will allow for an increase in prices within an authorised annual increase limit but no more.  

New rental prices must comply with the new INE index.

The autonomous communities of Madrid, Andalusia, Murcia, Galicia, and Castile, and Leon have shown themselves to be against the new regulation.

Stressed areas – rental expenses

General expenses relating to the maintenance of the property, services, taxes, and charges are a tenant’s responsibility.  If the property is located in a stressed area, and this agreement was not included in the original contract, it cannot be changed.

Rent control index

A new reference price index will be introduced before December 2024, which will be updated rental contracts.  The new law will also limit the annual increase for rental payments from 2025 onwards.

Tax deductions for Landlords from January 1, 2024

From 2024, Landlords may be able to benefit from specific tax incentives.

Those designated as ‘small owners’ may benefit from as much as 90% discounts through Personal Income Tax if they are prepared to lower the price of their rental homes.

Sa significant discount will only be applied if the Landlord is willing to lower his tenant’s rent by 5% compared to the previous contract.

A discount of 70% may be available if the landlord rents to a young person, between the ages of 18 and 35, in a stressed area for the first time.  The same discount would also apply to houses for social rent at low prices.

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