Everything you need to know about Spain's new Housing Law in 2023.

Spain's coalition government has reached agreement on the country's Housing Act, which includes significant changes. The new law reduces the conditions that regional or local councils must meet in order to declare areas with a so-called "tight" rental housing market. The Price Increase Index (CPI) will no longer be the benchmark in rental contracts, and the definition of large landlords in such "stressed areas" will be reduced to 5 dwellings, regardless of whether that landlord is an individual or a company. The cap on contract renewals will be 2% this year and will be increased to 3% in 2024, and from 2025 a new rent index will be created that will never exceed the CPI index. This is all you need to know about Spain's new Housing Law in 2023.

What has changed in the Spanish Housing Law?

The end of the CPI index: a new restriction on the renewal of existing leases.

On the one hand, the cap on rental rate increases for lease renewals in Spain, in force in 2023, remains in place and will remain at 2% until December 31. From 2024 it will increase to 3%, and a new rent index will apply from 2025.

In addition, provision is made for tenants to take advantage of an emergency extension of the current contract for one year, up to a maximum of three years.

By December 31, 2024, the Spanish National Institute of Statistics (INE) will define a new benchmark index for the annual change in rental prices to avoid unjustified rate increases.

How an area with a limited supply of rental housing will be recognized

Another significant change to the agreement is the creation of a stressed rental market area or so-called "stressed neighborhoods." The conditions that an area must meet to be recognized as such for three years, with the possibility of annual renewal if circumstances persist, have been reduced.

Now only one of two conditions need be met: housing payments are more than 30% of area household income (plus expenses and utilities), or prices have increased by more than 3 percentage points above the CPI over the past five years.

Expanding the definition of large homeowners

On the other hand, the number of dwellings required for an owner to be recognized as a large owner or large landlord in these stressed areas has been reduced, regardless of whether a natural person or a legal entity is the owner. The changes consist of reducing the number from 10 to 5 premises owned by a single owner in that stressed area, provided that this is justified by the Autonomous Region concerned.

New lease agreements and restrictions that will apply depending on the landlord.

The application of rent control in Spain in "stressed areas" will differ depending on whether the owner is a large or small landlord. For private landlords, indexing will be applied to the previous rent, allowing only the increase that was applied at that time, which is 2% in 2023, 3% in 2024, and a new index that will be applied from 2025. At the same time, large landlords will be subject to a price index that will not exceed the new rent index established by each Autonomous Region.

Renting new housing in areas with limited supply

Another change included in the amendment to the Housing Law concerns the situation when a property is being rented out for the first time. If the property has not been rented out in the last five years, restrictions set by the rental price orientation index will apply.

The owner will pay for the agency services.

The agreement also stipulates that the costs for agency services and other expenses related to the rental of the property will always be paid by the property owner, not the tenant.

The exclusion of the application of housing law in contracts is prohibited.

The condition that allowed for the measures contained in the Law not to be applied in the case of an agreement between the parties will also be removed.

Furthermore, it is prohibited to increase rental fees by introducing new expenses that would require tenants to pay for utilities, garbage collection, or any other non-essential costs that were not previously agreed upon.

Development of rental housing at a subsidized price

The percentage of land allocated for lease at a reduced price is increasing from 30% to 40% for land designated for new construction and from 10% to 20% for unconsolidated urban land (reconstruction of existing buildings).

A mandatory date and time for evictions is provided.

As for evictions, evictions without a previously set date and time will be prohibited. The eviction procedures also include new options for delaying the process for more than two years, and individuals in vulnerable situations are required to resort to extrajudicial settlement procedures.

In addition, Spain's autonomous communities will be able to establish their own mediation mechanisms and alternative housing solutions as they see fit, and compel large landlords carrying out evictions to adhere to their decisions.

For the first time, the possibility of using funds from state housing programs to offer alternative housing for people at risk of eviction will be recognized, through the provision of subsidized social rent, relocating vulnerable individuals, or other similar mechanisms.

What has not changed in the Housing Law of Spain?

Many other legislative measures developed based on the coalition government's agreement remain in effect, for example:

• Tax benefits for small property owners
• Reduction of rent in the announced "tense areas" (90%)
• Renting housing for young people aged 18 to 35 (70%)
• Repair or improvement (60%)
• Stimulating eviction from non-residential housing
• State housing fund