The Spanish Government is working on the new Housing Law. The approval is currently pending, although it is expected to be approved before the next elections due on 28 May 2023.
Some of the main novelties of the Housing Law draft are detailed below, focusing mainly, among others, on the limitation of rental prices in stressed areas, modification of the concept of large holder, limitation of repercussions and increases, rights regime and inflation, etc.
1.NEW FEATURES OF THE FUTURE HOUSING LAW
We would like to emphasize that at the time of this note, the aforementioned Housing Law has not yet been definitively approved. Therefore, the following should not be considered definitive.
- Expansion of stressed areas
In order to declare an area as a stressed area, the following shall be taken into account:
- That in the area in question the cost of the mortgage or monthly rent exceeds 30% of the average income in the area.
- That the sale or rental price of the house has increased 3 points above the CPI in the 5 years prior to the declaration of stressed area.
- Regulation of rental prices in stressed areas
For new rental contracts, rental price limitations will apply in stressed areas. On the other hand, in “Non-stressed” areas, no limits will apply.
However, the criteria for setting these limitations will depend on the status of the owner.
- For large holders, a price containment index would be applied that is to be determined and that will be set by each Autonomous Community.
- For small owners, the price will be determined by the indexation to the previous agreed income, so only the corresponding increase can be applied, that is, 2% in 2023, 3% in 2024, and the new index that would apply from 2025.
In addition, an important novelty is that it is prohibited to increase the rental price by adding expenses such as IBI, community fees, garbage rate, etc.
- New definition for large holders
The new Housing Law considers a large holder to be the natural or legal person who owns 5 or more properties. These properties should presumably be of an urban nature, and garages or storage rooms will not be taken into account. It is also likely that anyone owning a built-up area of more than 1,500 m2 would be considered a large holder.
On the other hand, small owners would be those individuals or legal entities who own less than 5 dwellings.
- Limit to the update of the rental income eliminating the CPI
For existing rental contracts and those signed once the new Housing Law has come into force, the annual rent update will be limited to 2% until 31 December 2023 and 3% throughout 2024.
By 2025, it is planned to eliminate the CPI, which would be replaced by a new reference index by which all rents will be updated and which will be more stable and lower than the CPI.
- Fees of the real estate agency in charge of the property
It is widely assumed that the payment of real estate fees and expenses arising from the rental will be borne by the owner of the property.
- Regulation of seasonal rentals
The draft includes an additional provision requiring the creation of a group to study this type of contract. It provides that within six months of the entry into force of the law, this working group is to be set up to make progress on a legislative proposal for the regulation of rental contracts for use other than as a dwelling and, in particular, for seasonal rental contracts for dwellings.
- Punishment for empty properties
With the intention of bringing properties to the market, the new law provides for local councils to be able to apply a surcharge of up to 150% of IBI.
Specifically, if property has been empty for more than 2 years, the surcharge would be 50% and if it has been more than 3 years, 100%.
In addition, an additional surcharge of another 50% is foreseen if the owner has two or more properties in the same municipality.
Finally, it should be noted that 20% of new developments must be allocated to social housing, either for rent or sale.
2.CONCLUSIONS
We are facing a future Housing Law especially focused on renting, although it also refers to tax incentives for owners, or measures in eviction procedures, and that in any case, will mean a normative and restrictive regulation for homeowners.