An agreement between partners in the Spanish government coalition on the need to revise housing legislation could soon introduce new rules in the rental market, including caps on price increases by landlords and higher taxes for properties vacant.
If the cabinet-approved project on Tuesday gets parliamentary approval, it will add Spain to the list of European countries with rent controls. Soaring rents are a persistent problem in a country where investors and real estate trusts are buying property in Sareb, the ‘bad bank’ created by the government after the bursting of the housing bubble in Spain, and which is designed to help lenders to get rid of their toxic effects. real estate assets. The rent cap in the bill will target this type of real estate owner. A study by the Bank of Spain found that the average cost of rent increased by 50% between 2014 and 2019.
Prime Minister Pedro Sánchez of the Socialist Party (PSOE) and his junior partner Unidas Podemos said the law is also needed in a country where young people cannot afford to leave the family home before the age of 30 on average , compared to 26 in the European Union. Spain’s youth unemployment rate is also among the highest in the EU and stood at 40% at the end of 2020, while a precarious labor market further frustrates young people’s attempts at independence.
The government plans to grant direct housing assistance to people between the ages of 18 and 35 whose income from work does not exceed € 23,725 per year. The monthly check of € 250 would be available for a maximum of two years, for a total of € 6,000 in aid. Transport Minister Raquel Sánchez said on Wednesday that between 40,000 and 50,000 people will benefit from the initiative. There are nearly 600,000 low-income tenants in this age group in Spain, according to the National Statistics Institute (INE).
We will not increase the property tax on vacant homes. It’s an attack on private property
The mayor of Madrid José Luis Martínez Almeida
But the main points of the bill – rent caps for large landlords and higher local taxes for owners of vacant homes – cannot be directly enforced by national law; their application would rather be devolved to regional and municipal authorities. And the main opposition party (PP), which heads five regions of Spain (Andalusia, Madrid, Galicia, Castile and León and Murcia) as well as four major cities (including the Spanish capital) said it does not would not apply the law.
The new legislation also aims to protect subsidized housing from privatization, as some regional and local governments have done in the past. But again, the power on this issue ultimately rests with regional authorities. The Basque Country, for example, has had its own housing law since 2015.
PP president Pablo Casado on Wednesday called the bill “suicidal interventionism” and pledged to bring the case to the Constitutional Court if the bill gets parliamentary approval.
One of the measures envisaged by the project is a surcharge of up to 150% on a local property tax known as Impuesto sobre Bienes Inmuebles (IBI) for vacant properties where the owner has four or more residential units. to his name. Second homes are not affected by the measure, nor those that are listed for sale or rental; the properties are also not used by people who need to travel for professional or educational purposes, or those who are embroiled in legal disputes.
But the mayor of Madrid, José Luis Martínez Almeida of the PP, has already warned that his government will not apply this tax if the legislation is passed. “We will not increase the IBI on vacant homes. It is an attack on private property with very little precedent, and it will be useless because it will not solve the existing problem, ”he said Tuesday.
In any case, the executive is preparing for a long legislative process: in documents sent to Brussels as part of the Covid-19 stimulus fund, the Spanish government estimated that its housing bill could obtain a final approval in the second half of 2022.
What is an “área tensionada”?
Rent control would be provided by tax incentives for individual landlords who rent out their property and rent ceilings for large landlords. But this would only apply in the so-called “áreas tensionadas” areas, literally the areas in a state of tension, that is to say those where the rent has increased by more than five points above the index of consumer price (CPI) over the past five years, and where the average rent represents more than 30% of the average household income in that region. It can be a district, a district, a municipality or even an entire region, in theory. It is up to regional governments to apply for the designation “área tensionada”. An analysis by EL PAÍS based on the available data suggests that 109 municipalities could be classified in this category. Most of them are located in coastal areas and on islands, followed by Madrid.
What will happen to rent in these areas?
Small landlords, who make up the majority of the rental market in Spain, will be offered tax incentives not to increase rents, while large landlords will see rent caps. As for the tenants, at the end of their lease, they have the right to extend it under the same conditions, except for an increase to take into account the annual increase in the CPI.
What is considered a vacant house?
The national bill speaks of owners of four or more buildings (regardless of whether the owner is an individual or a business) who keep one or more of them vacant without just cause. Second homes are not included in the definition, nor are properties currently listed for sale or rental, nor units used by people who have to travel for work or study, or those involved in legal disputes. In any case, the increase in the IBI tax should be implemented by the local council, which can choose whether or not to adopt the measure.