New Housing Law in Spain (2024) This is how it will affect landlords, tenants and students

The Housing Law in Spain has been a topic of great relevance and debate in the real estate sector. This law, the first to regulate the basic rights and duties of citizens in relation to housing, introduces important changes that affect both landlords and tenants. With the intention of establishing a homogeneous framework that guarantees access to decent housing, this law seeks to address various challenges in the real estate market, such as the shortage of affordable rents and the protection of tenants’ rights.

One of the most notable impacts of the Housing Law is its effect on the temporary rental market, especially relevant for students. With the new regulations, an increase in the supply of seasonal rentals is expected, which could result in lower prices and more accommodation options for students moving to different cities in Spain to continue their studies. However, this same change may be detrimental to families, as many large landlords prefer to rent to students or groups sharing flats, rather than signing long-term contracts with families.

In this article we will explain how the Housing Law affects landlords and tenants in Spain, highlighting how it could benefit students through increased temporary renting and possible price reductions, but also how it could harm families by restricting their rental options. We will address the main changes introduced by the law and their impact on the real estate market, providing an insight into the new dynamics that are taking shape in the rental sector in Spain.

Understanding these changes is crucial in order to adapt to the new regulations and take advantage of the opportunities they present for landlords, tenants and students looking to rent, without losing sight of the challenges that families will face in this new scenario.

Understanding the New Housing Law in Spain

The Housing Law in Spain has been enacted with the aim of creating a regulatory framework that guarantees the right to decent and affordable housing. This law arises in a context of increasing difficulty in accessing affordable rents, especially in stressed urban areas, where prices have risen considerably. The Housing Law seeks to establish a homogeneous regulation at the state level, ensuring equal and fair treatment for both landlords and tenants.

The main objectives of the Housing Law in Spain are to

  • Facilitate access to decent and adequate housing for people with difficulties in accessing housing under market conditions, especially young people and vulnerable groups.
  • Promote an affordable rental offer adapted to the realities of urban and rural areas.
  • Ensure the functionality, safety, universal accessibility and habitability of housing.
  • Improve protection in housing purchase and rental transactions.
  • Regulate the basic legal regime of public housing parks and encourage the development of housing typologies suitable for different forms of coexistence and habitation.

Main changes introduced by the Housing Act

The Housing Law introduces significant changes that affect both landlords and tenants in Spain. The most relevant of these are detailed below:

1. Definition of large landlord and empty dwelling
– The new housing law in Spain defines a large landlord as a natural or legal person who owns more than 10 urban properties for residential use or a built-up area of more than 1,500 m2 for residential use.
– In stressed areas, a large tenant is considered to be the owner of 5 or more urban properties for residential use in the same area.
– The possibility of applying a surcharge on the Real Estate Tax (IBI) to empty properties that have been unoccupied for more than 2 years and whose owner has at least 4 properties in this situation is introduced.

2. Maximum annual increase in the rent price
– The law sets a maximum increase of 3% in the rental price for contracts that proceed to update the rent during 2024. From 2025 onwards, a new reference index will be used for the annual updating of contracts, replacing the CPI.

3. Extraordinary extension in cases of vulnerability

– An extraordinary extension of one year is introduced at the end of the contract, which may be requested in accredited situations of social and economic vulnerability when the lessor is a large landlord.

4. Property management and contract formalisation costs
– The law establishes that the landlord, not the tenant, is responsible for the costs of property management and the formalisation of the contract.

5. Protection against eviction
– Protection measures for tenants in vulnerable situations against eviction are improved, extending the scope of protection and establishing conciliation or mediation procedures when the claimant is a large landlord and the tenant is in a vulnerable situation.

6. Declaration of stressed areas
– The law allows the competent administrations to declare stressed residential market areas, where measures such as limiting the rent to the rent of the previous contract in new contracts and the possibility of an extraordinary annual extension for the tenant can be applied.

These changes favour students by increasing the supply of temporary rentals and potentially lowering prices, as many landlords may opt for short-term contracts to avoid price controls on long-term rentals. However, this same dynamic may be detrimental to families, who may face greater difficulties in finding stable and affordable rents, as large landlords may prefer rentals to students or groups sharing flats rather than long-term contracts with families.

How does the new housing law in Spain affect homeowners?

Large landlord and vacant property

As explained in the previous section, the new Spanish Housing Law introduces changes in the classification of owners and their real estate. A “large tenant” is now defined as a natural or legal person who owns more than 10 urban properties for residential use or a built-up area of more than 1,500 m² for the same purpose. In stressed areas, a large tenant is considered to be the owner of 5 or more residential properties in the same area. This classification implies that large landlords will be subject to stricter regulations compared to small landlords, defined as those who own less than 5 dwellings.

In addition, the law establishes the definition of “vacant housing” to facilitate the imposition of tax surcharges on unoccupied properties. A property is considered vacant if it has been unoccupied for more than 2 years and the owner has at least 4 vacant properties.

IBI surcharges for empty dwellings

In order to discourage property speculation and encourage the effective use of the housing stock, the Housing Act allows local councils to apply surcharges on the Property Tax (IBI) to empty dwellings. This surcharge, which was previously limited to 50% of the IBI tax liability, can now reach up to 150% depending on the duration of vacancy and the number of empty properties owned by the same owner. This measure aims to put pressure on owners to rent or sell their unoccupied dwellings, thus increasing the supply available on the market.

Limitation on annual rent increases

One of the most controversial aspects of the Housing Law is the limitation on annual rent increases. The law establishes that, for housing leases that need to update the rent in 2024, the increase cannot exceed 3%. This limitation applies to both large tenants and small landlords if there is no explicit agreement between the parties for another percentage. From 2025, a new reference index, developed by the National Statistics Institute (INE), will replace the CPI to avoid disproportionate increases in rental rents.

Tax benefits for homeowners

The Housing Act also introduces tax benefits for landlords who align themselves with the objectives of the regulation. From 1 January 2024, landlords are eligible for various tax reliefs:

  • 50% rebate on personal income tax for income derived from renting a home.
  • 60% rebate if the property has been refurbished in the two years prior to the rental contract.
  • 70% discount if the property is in a stressed area and is rented to young people between 18 and 35 years of age, or if it is rented to a public administration or non-profit organisation for social rentals.
  • 90% discount if a new rental contract is formalised in a stressed area with a reduction of more than 5% in the rent with respect to the previous contract.

These tax incentives are designed to encourage the supply of rentals at reduced prices and to ensure that more housing is available on the rental market, especially in areas of high demand.

Spain’s Housing Law presents a comprehensive approach to regulating the real estate market. While some measures may appear restrictive for landlords, especially large tenants, others offer tax benefits that may offset the new regulations. The new housing law in Spain seeks to balance the market by increasing the availability of temporary rentals for students and young people, although this may be detrimental to families seeking stability in their rental contracts.

How does the Housing Act affect tenants?

Protecting tenants from evictions under the new Housing Law

Spain’s Housing Law introduces measures to increase tenants’ protection against evictions. Now, in cases of economic and social vulnerability, the law eliminates the need for the consent of the interested party for public administrations to assess their situation. This measure ensures that people at risk are not evicted without a thorough assessment of their situation. In addition, the new Housing Law establishes a compulsory conciliation or mediation procedure when the claimant is a large tenant and the tenant is in a situation of vulnerability. These measures aim to ensure that vulnerable tenants receive the necessary support before an eviction is carried out.

Lease extensions

The New Housing Law also facilitates the extension of rental contracts in Spain. In accredited situations of social and economic vulnerability, tenants can request an extraordinary extension of one year at the end of their contract. This measure is particularly important for students and young people who rely on temporary renting and can provide them with the stability needed to complete their studies without the additional stress of having to find new housing. The law provides that this extension is applicable when the landlord is a large tenant, thus providing a safety net for those tenants who need it most.

Property management fees payable by the lessor

One of the most important measures of the Housing Act is the obligation for landlords to bear the costs of property management and contract formalisation. This means that tenants will no longer have to bear these additional costs when looking for rental housing. This provision is particularly beneficial for students and young people who often have limited resources and rely on family support to cover rental costs. By shifting these costs to landlords, the law seeks to ease the financial burden on tenants and make the rental process more affordable.

Payment of rent by bank transfer

The new Spanish Housing Law establishes that rent payments should preferably be made by bank transfer. This measure increases transparency and security for both tenants and landlords. For tenants, especially students who often manage their finances digitally, this provision simplifies the payment process and ensures that there is a clear record of all transactions. For landlords, this measure provides additional assurance that payments are made in a timely and verifiable manner, reducing the risk of rent-related disputes.

As we have seen, the new Spanish Housing Law introduces several measures that strengthen the position of tenants and ensure their protection in the rental market.

Housing Act benefits for students

The Spanish Housing Law has introduced significant changes that offer several concrete benefits for students seeking accommodation during their academic training. These measures are designed to improve the accessibility and affordability of temporary rental housing, as well as to increase the supply available on the market.

Increase in temporary renting

One of the main advantages of the new Housing Act is the promotion of temporary renting. This means that more landlords could opt for short-term rental contracts instead of traditional long-term contracts. This flexibility is especially beneficial for students, who often require housing only during the academic period.

Correction of rental prices

The Housing Act also aims to correct rental prices by limiting annual rent increases to a maximum of 3%. This measure helps prevent sharp and unjustified increases in rental costs, which is especially beneficial for students and their families. By keeping prices more stable and predictable, the law helps reduce financial pressure on students and facilitates more equitable access to adequate housing.

Increased supply of student housing

Another positive aspect of the Housing Act is its potential to increase the supply of student housing. By encouraging landlords to consider temporary rentals and offering tax incentives for low-cost rentals in stressed areas, the law could lead to a significant increase in the availability of affordable housing in areas close to universities and educational institutions. This not only improves housing options for students, but also contributes to boosting the rental market and strengthening the local economy.

Stressed residential market areas in Spain

Stressed housing market areas are a crucial part of the Housing Law in Spain, because they address housing inequalities, protect vulnerable tenants, promote market stability and provide incentives for a more affordable and sustainable housing supply. This not only improves the living conditions of citizens, but also strengthens the real estate sector in the country.

The criteria for declaring a stressed area are as follows

According to the Housing Act, an area is considered stressed residential if it meets certain defined criteria. These criteria include:

  • High financial burden: When the cost of paying the mortgage or rent, added to basic expenses and supplies, represents more than 30% of the average income or the average income of households in that area.
  • Disproportionate price growth: If the purchase or rental price of housing has increased significantly in the last five years, exceeding the increase in the consumer price index of the corresponding autonomous community by at least three percentage points.

The declaration of an area as a stressed area implies the implementation of specific measures aimed at controlling the rental market and protecting tenants against disproportionate increases in rental prices.

Effects on the rental market in stressed areas

The measures taken in stressed residential market areas have several significant effects:

  • Limitation on rent increases: It is established that the initial rent in new rental contracts cannot exceed the last rent in force in the last five years, adjusted annually by the benchmark index. This protects tenants by preventing excessive increases and ensures greater stability in housing costs.
  • Automatic extensions: Tenants can benefit from automatic contract extensions, especially in situations of social or economic vulnerability. This provides additional residential security and avoids abrupt displacement of tenants.
  • Tax incentives: Landlords who reduce the price of rent in stressed areas can access significant tax benefits, which encourages the supply of more affordable housing for students and other vulnerable groups.

Impact of the new Housing Law for families and tenants who want to rent long-term accommodation

The enactment of the new Housing Law in Spain has also raised expectations and concerns for families and tenants seeking to settle in rented housing and whose aim is to stay in these dwellings for the long term.

Benefits for families or tenants wishing to stay in long-term rental housing

The new Housing Law in Spain establishes that landlords can only increase the rental price up to a maximum of 3% per year, unless agreed between the parties or in the absence of a specific reference rate. This has a direct impact on families and tenants seeking long-term stability in their rented accommodation. For households, stability in rental costs is crucial to be able to plan their long-term finances. A maximum increase of 3% per year offers some predictability and protection against significant increases that could jeopardise their ability to stay in the same housing.

On the other hand, limiting annual rent increases can make housing more affordable for households, especially in a market where steep increases could easily outstrip tenants’ financial capabilities.

It also strengthens the protection of tenants in vulnerable situations, extending the extensions of rental contracts and establishing more rigorous procedures for evictions.

Disadvantages for families or tenants wishing to stay in long-term rental housing

However, the same measure of limiting annual rent increases could have a negative effect if it discourages landlords from offering long-term rental contracts. Landlords might prefer shorter contracts or even reconsider offering rental housing if they cannot adjust prices in line with market conditions or maintenance costs.

Limiting rent increases could also lead to higher tenant turnover, as some landlords may prefer to change tenants in order to apply for a new contract with a higher rent, rather than keeping a long-term tenant at a rent that does not reflect market increases.

In addition, surcharges on Real Estate Tax (IBI) for empty homes could put pressure on owners to rent out their properties or face additional costs. This could lead to higher tenant turnover and hinder the residential stability desired by households.

The promotion of temporary renting and strict price regulation could discourage landlords from offering long-term contracts, favouring shorter and more transient rental models. This could limit the options for households seeking stability and continuity in their residence, facing increased tenant turnover and uncertainty about the future availability of suitable housing.

In conclusion, although the new Housing Law seeks to balance the rights of landlords and tenants and ensure fair access to housing, its measures could have an adverse impact on households and tenants who prefer stable and long-term rentals. The limitation on rent increases, IBI surcharges and extended protection against evictions may lead to less availability of stable housing on the market and generate uncertainty in families’ housing decisions in the near future.

This is what we believe the future of the real estate market in Spain will be like after the implementation of the new Housing Law.

The new Housing Law in Spain has established a regulatory framework that defines limits on annual rent increases, offering stability to some types of tenants, such as students or short-term tenants, but has generated some uncertainty in the long-term housing market.

The Housing Law in Spain reflects an effort by the government to protect tenants and promote more equitable access to housing, especially in urban areas where prices have risen considerably in recent years. However, landlords may face challenges in terms of profitability and management of their real estate assets.

Looking ahead to the future of the real estate market in Spain, we are likely to see adjustments and adaptations by both landlords and tenants to the new regulations. It will be crucial to observe how rental prices, the supply of available housing and investment strategies in the real estate sector evolve.

If you are looking for more information on how the Housing Law affects landlords and tenants in Spain, or need relocation services to facilitate your relocation or investment in the real estate market, do not hesitate to contact the Relomar team. We are here to provide you with expert advice and solutions tailored to your specific needs in the context of this new legislation.

Contact us today to find out how we can help you navigate the changes in the Spanish rental market and maximise the opportunities offered by the Housing Law.