What can we learn from Spain's new housing law?

The Spanish parliament has passed a new law on housing. This came into force on 26 May 2023 and is mainly aimed at solving the major problems associated with rental property in Spain. Immo365 Costa Brava explains in detail the main thrusts and measures of this law for both tenants and landlords.

The introduction of rent control

The new housing law in Spain provides for rent prices in tense areas to be regulated and capped. This rent control will apply to homes owned by both large and small landlords. What's more, the measure will be applied both to contracts on properties already on the rental market and to new contracts.

For the rent ceilings under the current regulations for renting in Spain, they will vary according to two main criteria:

• the type of lease contract,
• the profile of the landlord.

For small landlords who own 5 units in a tended area, the rent cap will be defined by indexation on the previous rent in force. In other words, the cap will be set by taking into account the previous contract. The law has, however, provided for a series of bonuses for small landlords to encourage them to put their properties up for rent.

The CPI is no longer the reference index

With the entry into force of the new housing law in Spain, the CPI (consumer price index) ceases to be the reference index for the annual updating of rental prices. At present, it is the CPI that caps the rent increases applicable when a lease is renewed each year.

For 2023, the 2% limit will continue to apply. From 2024, the limit will rise to 3%. After 2024, a new reference index will have to be drawn up. This will have the merit of being more stable and lower than the trend in the CPI.

Improving the tenant eviction system

The new housing law in Spain institutes a systematic eviction procedure. As a result, a landlord can only evict his tenant from the property on a date fixed in advance and for predetermined reasons. Thanks to this regulation, tenants will have much more time to find another home before the deadline. Any landlord who evicts a tenant without a predefined and notified date commits an offence and therefore incurs penalties.

The increase in social housing

The Spanish Housing Act that came into force at the end of May 2023 aims to boost the social housing sector. Several of its texts regulate public property holdings to prevent these assets from being sold to investment funds. In addition, the new law increases the amount of land reserved for the construction of HLM (low-cost housing) from 30% to 40%.

The abolition of agency fees for tenants

With the new regulations, the entire estate agency fee is payable by landlords. As a tenant, you are therefore not required to pay agency fees when renting commercial premises, a flat or a house. These fees will have to be paid in full by your landlord.

This measure applies only to rentals and not the sale of flats on the Costa Brava between private individuals for example. With this new law, however, estate agents fear losing clients or having unpaid fees.

The development of a new system for controlling vacant properties

Owners are not allowed to leave their property vacant for two consecutive years. They must either live in the property or let it out. When a property is vacant for more than two years without any valid reason, the owner incurs a penalty. This is determined and applied according to the amount of IBI, i.e. the value of property tax in Spain, which fluctuates between 50% and 100%.

If the number of vacant properties held by the owner exceeds two and are in the same municipality, however, the penalty can reach 150%. The aim of this measure in Spain's new housing lawis to increase the number of new homes on the rental property market.

Changing the definition of large landlord

Housing regulations in Spain make a difference between large landowners and small landowners. Specific measures apply to large landowners compared with ordinary landowners. The new law considers landlords who own at least 5 properties or more in a tense area to be large landlords. This was not the case under the previous legislation as only owners with at least 10 properties qualified as large landlords.

The extension of so-called "tense" areas

In addition to the many changes mentioned above, Spain's new housing law also extends the declaration of tense areas. Under the old regulations, two conditions would have to be compulsorily met for an area to be considered tense. With the new text, it is sufficient to meet one of the two conditions.

As far as these conditions are concerned, they break down as follows:

• the average burden of the price of the mortgage or the cost of rent in addition to basic expenses and supplies, must exceed 30% of household income,
• the purchase or rental price of the dwelling must increase by at least 3 above the consumer price index over the last 5 years preceding the declaration of the area in tension.

Thanks to Spain's new housing law,more than 13 million Spanish households will be in tense areas. This figure represents 61% of all households in Spain. The majority of tense areas are located in Spain's most densely populated provinces. These include the Balearic Islands, Malaga, Alicante, Barcelona, Madrid and Las Palmas.

All in all, Spain's new housing regulations bring a number of changes to rental property. These changes include capping the annual increase in rents, the eviction system, the CPI, the definition of large landlord and the extension of tense areas. The new text does not, however, bring any changes to the formalities for buying a flat in Spain, whether in new or existing property. The conditions to be met and the documents to be provided for the purchase of a flat thus remain unchanged.