Spain’s Updated Housing Law in 2023: What’s New?
- Introduction of the term “stressed” rental markets: areas of high demand and what are considered overpriced rentals
- A shift from the CPI for rent references – So inflation proofing the rent increase for tenants
- Adjusted criteria for large property ownership – Owners of more than 4 properties will be treated as large property owners and subject to different rules.
- The continuation of the 2% cap for 2023, transitioning to 3% in 2024
- A new rental index set for 2025 – The return of rent control indexes and control.
- Mandatory dates and times for evictions – extensions in eviction notice.
- Cap Adjustments for Rent Contract Renewals:
- The rental contract renewal cap for 2023 remains at 2% until the end of the year. It will then elevate to 3% in 2024. A novel Rent Index will be initiated in 2025, aiming for stability and rates lower than the CPI.
- The government emphasizes the goal to stabilize and lower rental increases during annual renewals.
- The existing provision for tenants to request a special extension of their current contract remains, valid for up to three years.
- The National Statistics Institute (INE) is tasked with outlining a new reference index for annual rent updates by the end of 2024 to avoid extreme rent spikes.
- Identifying “Stressed” Rental Areas:
- The criteria to label an area as a “stressed” rental zone have been simplified. Previously, regions required to meet multiple conditions, but now only one of the two primary criteria is necessary: either local households pay over 30% of their income towards housing costs, or there’s been a surge in prices more than 3% above the CPI in the past half-decade.
- Defining Large Property Owners:
- The threshold for what constitutes a large property owner in stressed regions has been lowered. Now, possessing five properties in such areas, rather than ten, categorizes one as a large landlord. This definition applies to both individuals and legal bodies, and the decision is subject to validation by the respective Autonomous Region.
- Rental Contracts & Landlord-Based Price Caps:
- The application of rent caps in stressed regions will differ based on landlord classification. For private landlords, rent will reference the prior rate, adhering to the aforementioned caps. However, for large landlords, the price will be determined by a newly devised index set by each Autonomous Region.
- New Rental Properties in Stressed Zones:
- If a property hasn’t been rented in the past five years, it will adhere to the pricing guidelines of the new reference index.
- Landlord Responsibilities:
- Owners must now cover real estate fees when renting out their properties. Additionally, contracts cannot bypass the provisions of the Housing Act. Landlords can’t impose new costs on tenants unless previously agreed upon.
- Encouraging Affordable Housing:
- The land allocation for affordable housing is increased, and a fixed date and time for evictions are mandated. Furthermore, large property owners performing evictions must undergo specified procedures.
- Consistent Aspects of the Housing Law:
- Various incentives and provisions remain unchanged, such as tax reliefs for smaller landlords, measures to motivate the use of vacant homes, and the importance of maintaining the public housing stock. Spain’s current public housing provisions cater to only 1.6% of households, a fraction of what’s observed in neighboring nations.
Concluding Remarks: Spain’s 2023 Housing Law revisions aim to better regulate the rental market, protect tenants, and ensure more stable housing prices, reflecting the coalition government’s commitment to housing rights and affordability.
FAQ for Tenants
- What is a “stressed” rental market?
- A “stressed” rental market refers to areas where either the local households spend more than 30% of their income on housing or where there’s been an increase in prices more than 3% above the CPI in the last five years.
- How will the new Housing Law affect my rent renewal?
- For 2023, the rental contract renewal cap will remain at 2%. It will rise to 3% in 2024, and a new Rent Index will be introduced in 2025 which aims to provide lower rates than the current CPI.
- Can I extend my current rental contract?
- Yes, tenants still have the provision to request a special extension of their current contract for up to three years.
- What protections do I have against extreme rent increases?
- The National Statistics Institute (INE) will define a new reference index by the end of 2024 to ensure there aren’t disproportionate increases in rent.
- Will the owner or I be responsible for real estate fees during rental?
- The owner is now mandated to cover real estate fees when renting out their properties.
- Can landlords impose new costs on me?
- Landlords can’t add new costs unless they were agreed upon previously.
FAQ for Landlords
- What defines a “large property owner” now?
- In stressed rental areas, if you own five properties (down from ten), you’re considered a large property owner. This applies to both individuals and legal entities.
- How will the new caps affect rental pricing in “stressed” areas?
- For private landlords, the rental pricing will be based on the prior rate with the set caps. For large landlords, a new index determined by each Autonomous Region will dictate the price.
- What if I’m renting out a property for the first time in a stressed area?
- If the property hasn’t been on the rental market in the last five years, the pricing will be based on the new reference index.
- Are there any changes to eviction processes?
- Yes, evictions now require a fixed date and time. If you’re a large property owner, there are specific procedures you must adhere to during evictions.
- How will the Housing Law changes impact affordable housing provisions?
- There’s an increase in the land allocation for affordable housing. This is part of the effort to promote affordable housing development.
- What remains unchanged for landlords in the 2023 Housing Law?
- Many provisions remain consistent, like tax incentives for smaller landlords, promoting the usage of vacant homes, and emphasizing the importance of the public housing stock.