The Spanish Government has approved a €10 billion financing facility to provide interest-free loans of up to €50,000 for the purchase of a first main residence. The TU CASA (“Your Home”) programme will be managed by the Official Credit Institute (ICO) and will not be limited to young people.
Prime Minister Pedro Sánchez announced the measure on Tuesday following the Council of Ministers, which approved two new royal decree-laws on housing. The texts restore the essence of those rejected by Congress last week and include a total of 21 measures.
The loan for first-time homebuyers will have a 0% interest rate. Sánchez explained that it will be “intergenerational”, meaning that both young people and older people purchasing their first main residence will be eligible.
How does the €50,000 loan for a first home work?
Beneficiaries will be able to receive up to €50,000 interest-free to purchase their first home. The aim is to help cover the initial outlay required to obtain a mortgage, one of the main obstacles for people who can afford the monthly repayments but do not have sufficient savings.
“€50,000 interest-free through a facility that will be managed by the ICO for the purchase of a first home, and it will be intergenerational”, Sánchez explained.
Pedro Sánchez, Prime Minister of Spain, at the press conference following the Council of Ministers. Photo: PSOE.
Repayment of the loan will begin once the mortgage has been paid off, with the mortgage having a maximum term of 30 years. From that point, the beneficiary will have ten years to repay the financing received.
Homes purchased through this scheme will also be permanently subject to a maximum resale price. If they are subsequently rented out, the rent will be linked to the price index.
Rent deductions and extensions to rental contracts
The two new decrees bring together 21 housing measures. These include a tax deduction for tenants on their income tax returns. According to the example provided by the Government, with an average monthly rent of €800, the deduction would amount to almost €1,000.
The measures also provide for extensions of up to two years to rental contracts for tenants who are up to date with their payments, as well as limits on rent increases.
The package also includes €280 million in guarantees to encourage industrialised housing construction and a further €400 million for social housing providers. The publicly owned company Casa 47 will acquire thousands of properties from the Social Security system to be used for housing.
The measures also limit home purchases by investment funds, link SOCIMI tax benefits to affordable housing and establish that tourist rental properties will be taxed as an economic activity.
The new decrees will have to be ratified
The Council of Ministers has once again approved the two royal decree-laws on housing after the previous versions were rejected by Congress last week. The new texts will have to be ratified within a maximum of 30 days to remain in force.
The calling of a general election for 29 November means that Parliament will be dissolved, so it will be up to the Permanent Deputation of the Congress of Deputies to rule on the decrees during this period. Sánchez has called on parliamentary groups to support the measures.
“It is imperative, it is essential to intervene in the housing market”, the Prime Minister said.
Sánchez also said that the Government would maintain its housing policies until the end of the parliamentary term. “We are going to give everything we have until the very last minute of this term to causes that I believe are worthwhile, and the cause of housing is undoubtedly one of them”, he concluded.
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