Three years after starting talks within the coalition government to craft a rule regulating the rental market in Spain in the form of a housing law, this will finally reach the Chamber of Deputies. And it will do so with stricter lines than those laid out in the bill approved in February last year, after pressure from United We Can, Bildu and ERC in recent months. Three major formations to implement one of the legislature’s star measures.
On Friday, it was the separatist formations that announced an agreement that includes greater interventions on rents and new penalties for landlords. Measures that the Socialist Workers Party refused to sign a few weeks ago, and more specifically, the Ministry of Economy, from the outset opposes the continuation of the maximum ceilings for rent increases currently in force at 2%. Finally, this cap as an amendment to the bill would reach Congress, as well as rent restrictions for both large and small landlords. This is how the rule will reach Congress:
Limits for big and small owners and new contracts
The housing bill stipulated that the rent cap would fall to senior landlords only by price index. But Bildo and ERC gave a new shape to the rule. Rents will also be limited for small landlords in those so-called squeeze areas.
The application, yes, will be different. Limits will be established, depending on the type of contract and property, by indexing the applicable past income of small owners and applying a price containment index to large owners. New contracts entering the market will also be capped, as Bildu and ERC have been asking as a way for landlords not to pay the rental price when entering the market.
Specifically, price reference index limits can be applied to new homes that have not been rented in the past five years, if this is specified in the stressful area declaration.
Redefining Big Fork
The definition of a big fork will also undergo a major change. It will be reduced from ten properties to five in markets justified by communities and town halls has also been stressed.
With the new agreement, declaring an area or neighborhood as stressed will be easier. Now, it can be implemented when local and community authorities can prove that paying for the house represents an effort of more than 30% of household income in the area or that prices have risen by more than 3 percentage points over the consumer price index, in the past five years.
Ceilings on rent increases continue
Pro-independence formations also reached an agreement to perpetuate rent ceilings and cancel the consumer price index as a reference for the annual increase in contracts. A measure in place since April last year with a 2% increase limit as part of the government’s anti-inflationary measures. Now, it has been agreed that this ceiling will be 3% in 2024 “and from now on a new index will be created on these terms.”
The owner will handle agency expenses
Among the most revolutionary points of the amendments to be made to the standard is the matching of agency expenditures. For years, in large cities such as Madrid and Barcelona, it has been the norm for real estate commission to be paid by the vast majority of tenants. ERC and Bildu agreed with Podemos and PSOE that the owner should be the one facing these expenses.
In the same way, other expenses attributable to the landlord such as community expenses, garbage charges, or any other expenses not attributable to the tenant “that were not previously agreed upon.” “This avoids a potential path to defrauding the law in increasing rents under these excuses,” they noted from the ERC.
The possibility will also be enabled for tenants who can prove a case of social or economic vulnerability to obtain an exceptional extension of one year in their housing lease contracts.
