One year and two months after its proposal in February 2022, the new housing act has seen the light in April 2023.
The main news that it will bring to the real estate market focus on matters such as the limitation of rental prices in stressed areas, changes in landlord-tenant relations, aid for access to housing or the regulation of evictions.
We explain one by one:
Declaration of a neighborhood or municipality as a “stressed zone”
One of the main novelties introduced by the new law is that relating to the declaration of neighbourhoods or municipalities as stressed areas. These are areas where rental demand is higher than supply, therefore rental prices tend to rise. For an area to be declared stressed, it must meet one of these two requirements: that its price has increased more than 3 percentage points the value of the CPI in the last 5 years or that the average price of housing exceeds 30% of the average income of the area.
The declaration will depend on each Autonomous Community, being also reviewed by the municipality to which the declared area belongs.
Why is it important to know the areas declared “stressed areas”?
As we will see below, within the rental market it will be important to know if the property is located within a stressed area or not, since if it is, the points of the new law that we will explain below will apply.
The law distinguishes between large holders and small owners, the former, either natural or legal persons, owning more than 5 properties.
I am a landlord, how does it affect me?
The new rental contracts that are signed after the entry into force of the new law will be subject to what it establishes if the property is located within a “stressed zone”. Thus, for new rental contracts concluded by small owners, the rental price may not exceed the sum of the income of the immediately preceding rental contract plus the index imposed by years -2% in 2023, 3% in 2024 and to be defined from 2025. Consequently, for a new rental contract to be concluded in a property within a stressed area in which the previous contract had an income of 1,000 euros per month, the monthly rent of the new one could not exceed 1,030 euros per month.
In case you are a large holder, you must apply the price containment index that is to be defined.
- Decoupling from the CPI for the updating of rental contracts:
This measure is one of the most controversial of this law. It is that, from 2024, the update of the rents of rental contracts will no longer depend as until now on the CPI, but will be set by law at 3%.
As of 2025, the creation of a new specific reference index is foreseen for the updating of the rents of rental contracts that will replace the CPI by which all rents must be updated.
- Obligation to pay the real estate fees by the landlord: From the entry into force of this rule the price of the services of the real estate agency in charge of managing the rental will always be paid by the landlord and never by the tenant.
This practice had been common in some parts of Spain but in other highly demanded as Madrid was the tenant who had to bear the expenses of the real estate assuming a large barrier to entry for the already high rental income.
- Prohibition of “agreements between the parties” contrary to the law: The new law is configured within the imperative law not being possible the waiver of its content by express agreement of the parties stipulated in the contract.
Remember that the current law of urban leases has a part of imperative law and another of dispositive law, the latter being not applicable when there is an express agreement between landlord and tenant.
- Tax benefits for owners: Those owners who have a property located within a “stressed area” may apply incentives translated into tax improvements to encourage them to rent their homes. The benefits for these owners are not confirmed in detail, but in the old draft of the housing law of 2022 the following bonuses were proposed:
- Bonus of 50% in IRPF of the income obtained to all those owners who rent their home;
- Bonus of 70% in IRPF of the income obtained for those owners who rent their home to young people between 18 and 35 years or those new contracts with improvements or rehabilitation;
- Bonus of 90% in IRPF of the income obtained if the property is within a stressed area.
I live on rent, how does it affect me?
The main novelties introduced by the new law for tenants are, as discussed above, the following:
- Prohibition of “agreements between the parties” contrary to the law: The new law is configured within the imperative law not being possible the waiver of its content by express agreement of the parties stipulated in the contract.
Remember that the current law of urban leases has a part of imperative law and another of dispositive law, the latter being not applicable when there is an express agreement between landlord and tenant.
- Obligation to pay the real estate fees by the landlord: From the entry into force of this rule the price of the services of the real estate agency in charge of managing the rental will always be paid by the landlord and never by the tenant.
- Decoupling from the CPI for the updating of rental contracts:
This measure is one of the most controversial of this law. It is that, from 2024, the update of the rents of rental contracts will no longer depend as until now on the CPI, but will be set by law at 3%.
This practice had been common in some parts of Spain but in other highly demanded as Madrid was the tenant who had to bear the expenses of the real estate assuming a large barrier to entry for the already high rental income.
- Prohibition of increasing the rental price with extra expenses: As a new, the prohibition of increasing the rental price by adding new expenses not stipulated in the contract is introduced;
Protective measures against evictions
From the entry into force of the new law, evictions cannot be established without a specific date, that is, a date and time will always be indicated to carry out the eviction.
New extensions are included for the evicted, who will be able to see the procedure extended up to more than two years.
For greater protection of vulnerable people, the use of extrajudicial processes is mandatory.
Powers are granted to the Autonomous Communities to make use of their own mediation mechanisms and housing alternatives.
Funds from state housing plans may be used with a focus on offering housing alternatives for vulnerable people at risk of eviction.
For more information you can contact us at the following link: Contact us – Spanish Companies Incorporation
