The government’s attempt to limit rent increases in Spain has sparked debate across the real estate sector. At a minimum, skepticism persists. A new reference price index for rents, which comes into force this Saturday, has triggered controversy because it effectively places a cap around 30 percent of current market prices, according to real estate intermediaries. Among the cautious voices, the prevailing view is that the law will have little impact on actually lowering rents; it will affect at most new contracts and could discourage landlords from increasing the supply of rental units.
This rent price control mechanism in currently stressed areas has so far only been requested by Catalonia, which announced an electoral advance for May 12 after failing to pass its 2024 budgets. The index targets large landlords in stressed zones, whether individuals or legal entities owning five or more residential properties in those areas. For the majority of rental supply, which is held by small proprietors, there is already a cap of 3 percent on contract updates. It also applies to homes that come onto the market and have not been rented in the last five years.
According to Fotocasa, the housing market is composed predominantly of small owners, about 80 percent, who hold one or two properties, with only around 10 percent of private individuals owning three or more units. From the housing portal Pisos.com, Ferran Font, its head of studies, expresses skepticism about the new government measure, noting that it opens with big questions that currently have no answers. He raises concerns such as which administration will implement the law, what sanctions exist, who enforces the regime, and how buyers can verify whether a prospective landlord is a large landlord. In short, there are many doubts surrounding this new cap. He adds that the measure will primarily affect new contracts with large landlords and those properties held by small owners that have been off the rental market for more than five years and are returning to it. He concludes that most of the rest will see updates limited to three percent.
Guifré Homedes Amat, the chief executive of the Catalan real estate firm Amat, argues that the new law will make landlords more selective when choosing tenants, potentially disadvantaging lower-rent segments. He notes a broader housing crisis of limited supply and rising demand. Real estate agencies have reported a noticeable drop in rental market activity in recent months, driven by both landlords and tenants extending existing leases.
Industry observers warn that the index could backfire, deterring owners from bringing new properties onto the market, further shrinking supply and driving prices higher. There is also a growing trend toward short-term or tourist rentals to circumvent the housing law.
APCE, the Spanish federation of promoters and builders and a member of CEOE, finds the price differences between the index and what portals list to be surprising. It plans to monitor effects wherever the rule is applied, particularly regarding supply and pricing.
Idealista, a leading portal, argues that the government index sets prices a third lower than market values, echoing levels from 2017 when supply was not as tight as it is today. A February 2024 sample shows an average price of 11.6 euros per square meter, while the government index stands at 7.9 euros per square meter, about 32 percent lower. The largest gap appears in Valencia, where the index is 47 percent below market. Palma, Lugo, Alicante, Cuenca, and Málaga show declines around 40 percent, with major markets Barcelona, Madrid, and Seville showing gaps of roughly 36 percent, 24 percent, and 24 percent respectively.
ASVAL, the landlord association with more than 6,000 members, most of whom are small owners, has spoken out against the rent control and argues that it will not improve access. It calls for the sector to be heard. Alquiler Seguro, managing around 22,000 properties and analyzing 852 homes across twelve provinces, found that in the majority of cases the rents were about 130 euros higher than the index would suggest, roughly 14 percent above the proposed figure. In about 15 percent of cases, rents could rise even more, with examples from Málaga exceeding 400 euros and Madrid reaching six hundred euros. Alquiler Seguro labels these findings as imprecise and arbitrary, contending that in provinces like Barcelona and Madrid the index implies minimum price ranges of 300 to 400 euros—figures they say belong to a decade ago.
Catalan real estate agents put the average price difference at around 20 percent and, when compared to the Catalan index, the reduction in rents could reach about 25 percent below the proposed market price.
Grupo Mutua de Propietarios highlights concerns that the rise of illegal rentals (31 percent in a related survey) and the shrinking supply (about 29 percent) are the main fears attached to this index, reflecting responses from a survey of two thousand people.
In summary, the rent control index is a contentious tool that has sparked a wide spectrum of opinions among policymakers, landlords, tenants, and industry groups. As markets in Spain adjust to the new framework, the economic and social effects will likely unfold incrementally, with ongoing debate about the balance between affordability, supply, and fair returns for property owners.