More than 900 days were spent in progress on housing law. It was definitively confirmed this Wednesday after receiving Senate approval. The norm was published with 134 in favor, 117 opposed and one abstention. The State Official Bulletin (BOE) will take effect the same Thursday and, therefore, Friday, as campaigning for the general election gets underway. The two parties, PSOE and Unidas Podemos, who have debated the authorship for weeks, are using the moment as election leverage against Podemos.
After numerous quarrels, stalled negotiations, and secret conversations, housing law emerged with the clear aim of regulating rental prices. The decisive moment came when the Socialists and their allies signed an agreement with the two main partners, ERC and EH Bildu, attempting to finalize the norm. Ultimately, after securing the support of regional powers, both entities endorsed the legislative text.
The ratification of the law in the middle of an election campaign is crucial because housing powers rest with autonomous communities. Thus, the enforcement of most provisions, such as identifying stressed areas where large property owners must lower rents, falls to regional governments. For example, PP-led communities have already announced they will not implement it, while PSOE-led ones will. Here are all the details of the standard:
Rent increase limit
The regulation eliminates the CPI as the reference index for updating income. At the start of 2022, the Government set a 2% cap for annual income reviews to avoid the then-skyrocketing 7.6% CPI in the prior February. This 2% cap remained through 2022 and will apply through 2023. The agreement reaches a 2024 increase of up to 3% and, thereafter, a new framework will determine future increments. This index, prepared by the National Institute of Statistics (INE) before 2025, should be more stable and lower than CPI, to curb rent increases at annual renewals.
Definition of major owners
The housing law defines a major owner as a natural or legal person who owns more than 10 properties. It was agreed that this figure could be adjusted in areas with a stressed market, potentially reducing to five. This decision rests with autonomous communities, considering their strengths and realities. It will affect the application of measures such as limiting rents in stressed areas, which primarily target major beneficiaries.
Stressful market areas
Most provisions apply in areas declared as having a stressed housing market, where there is a shortage of housing under favorable conditions. At the request of each community, the area will be categorized. Three years are allowed for areas where the average mortgage or rent plus utilities exceeds 30% of the average income, or where prices rise at least three points above the CPI in the last five years. Only one of the two conditions must be met.
Ceiling price
Small beneficiaries renting in highlighted areas, during the validity of the declaration, may not raise prices except for the built-in updates (2% in 2023; 3% in 2024 and later as established by the index) when signing a new contract. The text includes an exception for increases up to 10% if the housing costs at least 10% of the purchase value of the property.
Discounts for major owners
Large property owners, whether individuals or entities, must lower rents in stressed areas. The rent at signing or renewal is capped by the reference price index.
New and unrented homes in the last five years, whether owned by small or large owners, are affected by these measures.
Bonus system
To encourage smaller owners in distressed areas to reduce prices, the regulation includes a personal income tax credit system: 90% if the rent is reduced by 5%; around 70% if rented to young people aged 18-35; around 60% if the dwelling has undergone rehabilitation in the last two years. If conditions are not met, the bonus is 50%.
Tenant protection
The standard will require that real estate management expenses and contract formalization costs always be borne by the landlord. In other words, tenants seeking a rental flat will not bear the monthly rent demanded by real estate agents. Additionally, new expenditures may not be used to raise rental income.
Evacuations
The agreement includes measures to protect tenants from evictions. Evictions without a fixed date and time are prohibited, and extensions to eviction procedures and mandatory access to out-of-court settlements for vulnerable tenants are included. Government housing funds can also be used to offer housing alternatives.
Requirements for housing vacancy
The rule slows the process to reclaim a property. It states that possession requests will not be accepted unless the property constitutes the habitual residence of the occupant. A small-ownership land registry certificate justifies the situation, and major holders must prove that the occupant is not in a vulnerable situation with supporting documents and consent from the defendant.
Protection of sensitive persons
Under the current act, the urban rental law does not necessarily extend to five years if the tenant wishes, while legal entities may extend to seven years. The new rule allows the tenant to claim an extra year if a situation of social and economic vulnerability is justified by reports from social services.
In addition, authorities should maintain a housing stock of at least 20% of the total in stressed areas within a 20-year period to support social policies. The aim is to ensure access to stable housing for vulnerable groups across the region.