Housing Law in Spain. Important Points

On May 24, 2023, Spain adopted Law 12/2023 "On the Right to Housing" (Ley de vivienda), which came into effect on May 26, 2023, following its publication in the Official State Gazette (BOE).

The Spanish Housing Law introduced significant changes aimed at ensuring citizens’ access to housing. It regulates aspects such as rent control, tenant rights protection, tax incentives for property owners, and measures to address vacant properties. Some provisions of the law, including new tax incentives, came into effect on January 1, 2024.

Key Takeaways from the New Law

The law is aimed at addressing the most controversial issues of the Spanish real estate market, with the main problem being vacant properties. In recent years, more than 3.4 million properties have remained unoccupied. Many apartments are owned by banks or investors and are used solely for speculation rather than habitation. This has led to a housing shortage in certain regions of the country, depriving citizens of opportunities to buy or rent homes. To tackle this issue, the law includes key measures.

Maximum Annual Increase in the Rent Price

Previously, rent increases were tied to the Consumer Price Index (CPI), leading to sharp spikes in rental costs and making the real estate market unpredictable. With the introduction of the new rental laws in Spain, the maximum rent increase was capped at 2% in 2023 and 3% in 2024. Starting in 2025, a new index is planned to be introduced, but the exact percentage for the maximum allowable rent increase has yet to be disclosed.

Limitation of Agency Commissions

Previously, tenants often bore the costs of agency fees and administrative charges, creating financial barriers when signing rental agreements. Under the new housing law in Spain, all expenses related to the work of real estate agents will be the responsibility of the property owner, not the tenant.

Tax Benefits for Homeowners

Property owners who rent out housing at lower rates are eligible for income tax benefits. The deduction rate can reach up to 90% and is granted only for properties located in «stressed zones,» areas with a shortage of rental housing. The new rules for renting property in Spain also provide other tax incentives for landlords under the following conditions:

• In «stressed zones,» landlords who reduce rent by at least 5% compared to the previous rental agreement can receive a discount of up to 90%.
• A 70% discount applies if the property is rented to tenants aged 18 to 35 in the same «stressed zones.»
• Landlords who carry out repairs or renovations on the property before renting it out can receive a 60% discount.
• A basic 50% discount applies to all rental properties, regardless of their location or rental terms.

It is important to note that these tax benefits cannot be combined; landlords can choose only one, depending on the conditions met.

Declaration of Stressed Areas

The law establishes the possibility of rent control in areas classified as "stressed zones". As mentioned earlier, these are areas with a shortage of rental housing. A shortage is defined by conditions where rental and basic living expenses exceed 30% of the average income of residents or property prices have risen by more than 3% over the past five years compared to the Consumer Price Index.

The law restricts landlords from raising rental prices, and if they wish to sign a new contract in «stressed zones,» they are required to offer tenants the same conditions as in the previous agreement for a period of three years. Essentially, the law mandates a freeze on rental rates in such areas.

Protection Against Eviction

Spain’s new eviction law introduces additional protections for tenants in difficult life situations. The eviction of "squatters", including non-compliant tenants, will become even more challenging and lengthy (two years or more) if they are classified as part of the «most vulnerable groups.» In such cases, property owners are required to provide a social housing alternative or collaborate with social welfare authorities.

Definition of Empty Dwelling

If houses or apartments remain vacant without valid justification for more than two years, owners are required to pay an increased property tax (IBI). The surcharge rate can reach up to 150% (instead of the current 50%) and applies to owners who possess at least four properties.

Definition of Large Landlord

The Spanish Housing Law introduces an amendment to the definition of a «large property owner.» Typically, this designation applies to individuals or legal entities owning more than 10 urban properties (excluding garages and storage units) or a total residential area exceeding 1,500 m².

However, according to the amendments, this status can be assigned to individuals or legal entities owning at least five or more properties. The decision to assign this status is made by autonomous communities and applies only to property owners in «stressed zones.»
The status obliges property owners to limit rent increases and provide their tenants with alternative or mandated housing options in the event of eviction.

Consequences

It is worth noting that the law continues to generate mixed reactions and was adopted despite opposition from right-wing forces (VOX). Many of their representatives argue that its provisions are insufficiently clear and will lead to price increases rather than reductions or stabilization.

Furthermore, after the law’s adoption, some autonomous communities where centrist (PP) and right-wing (VOX) coalitions came to power announced their intention not to implement the law’s provisions at the regional level. PP leadership also stated that, if victorious in national elections, they would consider repealing the law.

Despite expectations that the Housing Law in Spain would lower rental prices, the average rent continues to rise. According to Alquiler Seguro, the average rental cost was €906 in 2022, increased to €1002 in 2023, and exceeded €1069 in 2024 (a 6.68% increase compared to 2023).