New housing law in Spain: what does it regulate and how does it work?

 

The Law on the Right to Housing develops the right to decent housing enshrined in the Constitution. It aims to help those groups with the greatest difficulties in accessing this asset with measures such as the limit on the price of rent or the promotion of public housing.

 

The draft Law on the Right to Housing was approved by the Council of Ministers on 1 February 2022, by the Congress on 27 April 2023 and finally by the Senate on 17 May. On 25 May it was published in the BOE as Law 12/2023, of 24 May, on the Right to Housing. It is one of the reforms included in the Recovery, Transformation and Resilience Plan, which includes other housing rehabilitation and urban regeneration projects.

The law includes measures to increase the supply of housing at affordable prices, to prevent situations of tension in the rental market and to support young people and vulnerable groups in accessing housing.

It also offers autonomous communities and municipalities different tools that will help to contain or reduce the price of renting and increase the stock of social rental housing.

Boosting public housing

  • Regulation of the public housing stock to prevent sales to investment funds.
  • Indefinite qualification of subsidised housing to always guarantee a period of at least 30 years.
  • A minimum percentage of 50% for rental housing within the land set aside for subsidised housing and an increase in the percentage of land set aside for subsidised housing, from 30% to 40% in land for development, and from 10% to 20% in unconsolidated urban land.
  • Drawing up and maintaining an inventory of public housing stock.

Limits on rental prices

One of the objectives of the Housing Act is to contain the rise in rental prices. To this end, it provides for the creation of a State Housing Rental Price Reference System that offers information on the cost of rent in each residential area, thus bringing transparency and competitiveness to the rental market. In addition, the law provides for a series of more specific measures to contain prices:

  • Tax benefits for landlords who facilitate affordable access to renting. They will be able to benefit from a 90% reduction in rental yields if they lower prices by 5% in stressed residential market areas. There are also other reductions linked to carrying out improvement works, renting to young people or joining incentivised or protected affordable housing programmes.
  • Declaration of stressed residential market areas for a period of 3 years, renewable annually, in order to be able to apply rent reduction measures.
  • Maximum annual rent increase, from 2025 onwards, according to the Reference Index for the Updating of Housing Leases (known by the acronym IRAV), defined by the National Institute of Statistics to avoid disproportionate increases in the rent of contracts.

In areas declared to be under stress:

  • Large landlords will not be able to sign new rents with prices higher than the Reference Index for their area, nor with rises higher than the maximum permitted update increase compared to the price of the previous contract.
  • For small landlords, increases in new contracts may only be of the permitted annual percentage increase over the price of the previous contract. In addition, rent in homes that have not been rented in the last 5 years may be limited to the maximum price set by the Reference Index.
  • The possibility of an extraordinary extension for the tenant after the end of the contract is introduced, for annual instalments and for a maximum period of three years.

Improvements to strengthen the balance in the relationship between lessor and lessee.

  • Extraordinary extension of one year in lease contracts for accredited situations of social or economic vulnerability.
  • Property management and contract formalisation costs to be borne by the lessor (e.g. real estate agency commission or fees).

Protection against evictions

  • Improvements to ensure effective communication between the judiciary and social services to ensure that people in vulnerable situations receive prompt attention.
  • Housing solutions for those affected and, while these solutions are in place, extension of the deadlines for suspending evictions.
  • When the plaintiff is a large owner and the eviction demand affects vulnerable people, the application of a conciliation or mediation procedure must be accredited.

New definition of large owner and vacant home

  • Those who own more than 10 properties may be considered to be ‘large holders’. In addition, this consideration may be extended to the owners of 5 or more residential properties located in the same area declared to be under stress, when so requested by the Autonomous Community.
  • Definition of ‘empty property’ so that local councils can apply the Property Tax (IBI) surcharge to those properties that have been empty for more than 2 years, provided that the owner has a minimum of 4 properties in this situation.
  • Modulation of the IBI surcharge (currently at 50% of the net IBI quota), which may reach 150%.
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