The coalition government has reached an agreement to introduce significant changes to the Housing Law with the aim of boosting its approval, compared to the previous version that was approved by the Council of Ministers. These changes include a reduction in the conditions for an autonomous community or city council to declare a stressed rental market zone, the elimination of the CPI as a reference index in rental contracts, and a revision of the definition of "large owner" in stressed zones, which will now include those who own five or more homes, whether they are individuals or legal entities.

In addition, a maximum rent increase cap of 2% on lease renewals will be established for this year, which will increase to 3% starting in 2024. Starting in 2025, a new rent index will be implemented that will never be higher than the CPI.

These changes seek to improve conditions for tenants and provide greater protection against abusive rent increases in stressed areas. The new law is intended to ensure greater stability and equity in the rental market, promoting access to housing as a fundamental right for all citizens.

These amendments to the Housing Law are the result of an agreement reached by the coalition government, which has worked together to find solutions to the challenges facing the rental market in Spain. With these changes, it is hoped to achieve a balance between the rights of tenants and landlords, and to foster a fairer and more accessible housing market for all.

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Changes in the Housing Law

The Housing Law has undergone significant changes in several aspects. First, a new cap on the renewal of current rental contracts has been established. Until December 31, 2023, the increase will be limited to 2%, while in 2024 it will be increased to 3%. As from 2025, a new Rent Index prepared by Mitma will be applied, which will be a reference in lease contracts and will seek to be more stable and lower than the evolution of the CPI. In addition, the possibility of extraordinary extension of the current contract for a maximum of three years has been maintained.

Another relevant change is the declaration of stressed areas in the rental market, which has been simplified. Now, it is sufficient to meet one of two conditions: that the payment of housing represents an effort greater than 30% of the income of households in the area, including expenses and supplies, or that prices have risen more than 3 percentage points above the CPI in the last five years.

Likewise, the definition of large tenant has been broadened, reducing the number of dwellings required to be considered as such in stressed areas, from 10 apartments to 5 apartments of the same owner, with justification from the corresponding Autonomous Community.

With respect to the new leases, it is established that the application of price caps in stressed areas will be different for small landlords and large tenants. Private landlords will be indexed to the previous rent in force, while large landlords will be indexed to a price index established by each Autonomous Community.

In the case of a rental property that is being leased for the first time and has not been rented in the last five years, the limits established by the price reference index will apply. In addition, it has been established that real estate expenses and fees will always be borne by the owner of the property.

The clauses that allowed the non-application of the measures of the Housing Law in the event of an agreement between the parties are eliminated, and it is prohibited to increase the rents through new expenses not previously agreed upon, such as community expenses or garbage fees.

It also promotes subsidized housing for rent at a limited price, increasing the percentage of land reserved for subsidized housing on developable land and unconsolidated urban land.

Now, evictions without a predetermined date and time are prohibited, which provides greater security and protection to tenants. In addition, new extensions are established for eviction proceedings, which may postpone evictions for more than two years. It also stipulates mandatory access to out-of-court settlement procedures for vulnerable people.

One of the most important new features is the possibility for the autonomous communities to implement their own mediation and alternative housing mechanisms, obliging large landlords to submit to them. In this way, the aim is to promote fairer and more equitable solutions for tenants in vulnerable situations.

In addition, for the first time, the possibility of using funds from state housing plans to offer housing alternatives to people at risk of eviction, through subsidized social rents, re-housing or other similar policies, is recognized for the first time. These agreements will be incorporated into the bill sent by the coalition government to the Congress of Deputies, which is evidence of the authorities' willingness to promote these changes and prevent the regulations from becoming stagnant.

The Housing Law also maintains measures such as tax incentives for small landlords who rent housing at affordable prices, with deductions that can reach up to 90% in stressed market areas.  

The mobilization of vacant housing is also promoted through surcharges on the Real Estate Tax (IBI) for owners with homes unoccupied for more than two years without just cause.  

In addition, it establishes the indefinite protection of the public social housing stock and sets basic conditions at the state level for subsidized housing.

These changes to the Housing Law have been welcomed by the Government, which highlights the importance of this agreement after a year of negotiations in the Congress of Deputies. Undoubtedly, these amendments seek to promote greater protection and security for tenants in vulnerable situations in Spain.

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