New housing decrees in Spain: measures on renting and buying

The Spanish Government has approved two new royal decree-laws containing 21 housing measures. The legislation affects renting and home purchases, as well as evictions, tourist rental properties, SOCIMIs, investment funds and the construction of affordable housing.

The housing decrees revive the essence of those rejected by Congress last week, although they include some changes. Most of the measures will come into force on 8 October, but will subsequently have to be ratified by the Permanent Deputation of the Congress of Deputies.

The second decree, which changes extensions to rental contracts, is in a different situation. It will not come into force until it secures the backing of the Permanent Deputation. The Spanish Government itself acknowledges that it currently lacks a sufficient majority to guarantee its ratification.

These are the main measures and how they affect tenants, landlords and people looking to buy a home.

Housing decree: rental tax deductions and incentives

The new housing decree introduces tax changes both for tenants and for those who rent out a property:

Rental tax deduction: tenants with a taxable income below €33,007.20 will be able to deduct 10% of the amount paid for their main residence.
Almost €1,000 a year: the Spanish Government estimates that monthly rent of €800 could result in a deduction of close to €1,000.
Incentives for landlords: tax benefits will be introduced for small landlords who rent out properties at affordable prices.
Rent reductions: tax relief could reach 100% in certain cases when a new contract reduces the rent by more than 5% and the established requirements are met.
Young people and stressed housing markets: specific incentives are also envisaged for certain rentals to young people and in areas designated as stressed residential markets.

Loans of up to €50,000 to buy a first home

Another of the main measures in the housing decree aims to make it easier for people who can afford a mortgage but struggle to save enough for the deposit to buy a home:

€10 billion: the funding allocated to the financing facility managed by the Official Credit Institute (ICO).
Up to €50,000: the maximum amount available under the loans.
0% interest: the loans will be interest-free.
First main residence: the financing will be intended for the purchase of a first home.
No age limit: the measure is intergenerational and is not reserved exclusively for young people.
Repayment afterwards: the loan will be repaid after the mortgage has been paid off. The mortgage will have a maximum term of 30 years, followed by a ten-year period to repay the loan.
Price limit: the property will be permanently subject to a maximum resale price. If it is rented out, the rent will also be subject to the corresponding reference index.

Extensions and limits on rent increases

The decrees include several measures aimed at providing greater stability for people living in rented accommodation:

Extension of up to two years: certain contracts may be extended for this period provided tenants are up to date with their payments.
Limits on increases: rent increases will be restricted during these extensions.
Protection for small landlords: the measures also include safeguards to prevent the burden of protecting tenants from falling solely on them.

These measures are accompanied by the second royal decree-law, which proposes a more far-reaching change to the renewal of rental contracts:

Automatic extension: once the statutory term of the contract has expired, new extensions will apply unless either party states that they do not wish to continue.
Notice from the landlord: the notice period increases from four to six months when the landlord does not wish to renew.
Notice from the tenant: this remains at two months.
Compensation: in certain circumstances, a landlord who decides not to renew will have to compensate the tenant.
Exceptions: there are cases in which the landlord will be able to recover the property, such as when they need it for themselves or certain family members.

These latter measures will not come into force until the second decree has been ratified by the Permanent Deputation. The Spanish Government acknowledges that it currently does not have sufficient support to guarantee its approval.

The housing decree regulates seasonal and room rentals

The housing decree also regulates these types of rental to prevent them from being used as a way of circumventing the rules governing long-term residential rentals:

Proven temporary reason: a seasonal rental contract must specify the particular reason why the property is needed temporarily.
Limited duration: specific requirements will apply to the duration of these contracts.
Conversion to a main residence rental: if there is no genuine temporary reason or certain requirements are not met, the contract will become subject to the rules governing rentals of a main residence.
Room rentals: the combined rent for all rooms may not exceed the amount that would apply to renting the entire property.
Stressed housing markets: the applicable price limits must be respected when the property is located in an area designated as a stressed residential market.
Costs: restrictions on passing certain rental-related costs on to tenants will be strengthened.

Protection against evictions

Another section of the new housing decrees extends protection for vulnerable households that have no alternative accommodation:

Protection until 2030: the suspension of certain eviction proceedings will be extended until 31 December 2030.
Vulnerable people: safeguards will be strengthened when those occupying the property have no alternative accommodation.
Funds and large landlords: specific measures will apply in certain proceedings when the property belongs to these entities.
Small landlords: safeguards will be introduced to prevent them from having to bear the consequences of these measures alone.

The Spanish Government argues that protecting vulnerable people must be accompanied by mechanisms that provide security for small landlords.

Limits on certain home purchases

The package also introduces restrictions targeting certain speculative property transactions:

Until 31 December 2030: the restrictions will be temporary.
Purchases below market value: certain acquisitions made at a price below 70% of the property’s market value will be restricted.
Funds and large property owners: the restrictions apply to certain companies, funds and large property owners in the circumstances established by the legislation.
Exceptions: certain cases are excluded, including transactions involving affordable or social housing that meet the established conditions.

Tourist rental properties and SOCIMIs

The decrees also introduce tax changes affecting tourist rental properties and real estate investment companies:

Tourist rental properties: their tax treatment will be changed so that certain accommodation activities are taxed as an economic activity.
Property tax (IBI): local councils will be able to impose surcharges in certain circumstances on properties used for tourist accommodation.
SOCIMIs: their tax benefits will be more closely linked to allocating properties to affordable rental housing.
Special levy: taxation will be tightened on certain profits from residential rentals when the requirements established to encourage affordable prices are not met.

The Spanish Government’s stated aim is for tourist rental properties to “be taxed for what they are: a business” and for SOCIMI tax benefits to be linked to their contribution to affordable rental housing.

€680 million to increase housing supply

The housing decree also includes public funding to increase supply and strengthen the stock of social and affordable housing:

€280 million in guarantees to promote industrialised housing construction.
€400 million to support social housing providers.
Casa 47: the public entity will take over thousands of Social Security properties that could be used for housing.
Protected housing: tax measures will be introduced to encourage the development of permanent protected housing.