Presented in Congress by the spokespersons of EH Bildu and ERC, the agreement on the future Housing Law maintains the 2% limit for this year on rent rises, a ceiling that will be increased to 3% in 2024 to create a new reference index applicable throughout the territory before the end of next year. The CPI will therefore be eliminated as the reference index for the annual updating of rent contracts throughout Spain, as these political groups consider that inflation “has proven to be an index that can generate enormous fluctuations in just a few months”.
The new indicator, which will be drawn up by the National Statistics Institute (INE), is intended to be more stable and lower than the evolution of the CPI and will also be applicable to those contracts signed prior to the law that were subject to the CPI.
The new regulation establishes new causes for the application of control measures in areas classified as “stressed”. Thus, areas will be declared “stressed” when the average burden of the cost of the mortgage or rent plus basic expenses and supplies exceeds 30% of the average household income, or when the purchase or rental price of the home has increased by at least three points above the CPI in the five years prior to the declaration of the stressed area.
It is sufficient for one of the two conditions to be met for the area to acquire this qualification. In these areas, if landlords want to extend a tenant’s contract, the new tenant must maintain the same conditions as the previous contract for a maximum period of three years.
However, the declaration as a stressed zone will always be the responsibility of the autonomous community. Thus, all rents in stressed areas will be regulated and capped “in all cases”. This will be effective for both large and small landlords – “large” landlords will now be defined as owners of five properties, as opposed to the previous ten – as well as for contracts for properties that are already on the rental market and for new contracts.
On the other hand, evictions without a predetermined date and time will be prohibited. It also includes new extensions to eviction procedures, which will postpone proceedings for more than two years, and stipulates mandatory access to out-of-court settlement procedures for vulnerable people.
Another key aspect of the agreement is that real estate costs and fees incurred in renting a property will always be borne by the landlord. In this sense, in order to apply an increase in the rental price for carrying out refurbishment work in the property, this renovation will have to exceed 10% of the purchase value of the house.
The agreement, described as “historic” by Prime Minister Pedro Sánchez, has not gone down well with the real estate sector, which has highlighted the adverse consequences on the market. Analysts point out that “far from containing prices”, its effects will complicate the already difficult rental market throughout the country, and in the long run will lead to a general rise in rents for new tenants, due to the obvious restriction that it will cause on supply.
