Government has approved a rent reform that caps rent increases at 2% in an effort to control prices. This comes on the same day it was revealed that inflation is approaching 5% due to the “change in economic scenario” caused by rising fuel costs across the economy.
On one hand, prices are skyrocketing well beyond expectations; on the other, rent controls penalize around 1.3 million small landlords, who will have to extend their lease agreements every five years with a capped price update that could limit their income for a decade.
Most real estate industry players agree that the decree fails to address the root of the problem: the country’s chronic housing shortage. On the contrary, the resulting legal uncertainty could worsen the drop in housing supply observed since 2023, following the passage of the Housing Law. It was during that election campaign in 2023 that Pedro Sánchez promised to deliver 183,000 housing units—about which nothing further has been heard. Organizations such as Idealista and the Fundación Alquiler Seguro estimate that rental housing supply has dropped between 18% and 20% over the last three years, directly following the entry into force of the Housing Law, a decline that could now intensify.
As if this intervention were not enough, the Government has actually approved not one, but two royal decree-laws on the matter. The first was agreed upon with many of the parliamentary groups that supported the investiture. The second proposal was negotiated solely with its coalition partner, Sumar; however, its approval is considered impossible because it includes an indefinite lease extension to which several parties are strongly opposed. That indefinite extension sought by the far left mirrors the measure enacted by Franco in 1964, which led to the virtual disappearance of the rental market in Spain—a policy the PSOE Government later rectified in 1985 with a complete deregulation of rental prices.
