The Competition and Markets Authority (CNMC in Spanish) has decide to take court action against Madrid’s new regulations on holiday lettings, in what could be a landmark case for the holiday rental business in other Spanish regions.
The CNMC’s complaint is specifically directed against Article 17.3 of the Decree, which makes it illegal to rent to short-stay guests for five days or less. So all stays must be six days or more, making it almost impossible to rent flats legally to tourists in Madrid.
The CNMC argue this limits competition because it restricts the consumer’s ability to choose (removing certain operators who do not fulfill those minimum requirements from the market) or because it increases costs for operators, which will then be reflected in the price consumers pay for accommodation.
The CNMC say this regulation cannot be justified in terms of necessity or proportionality and that it will lead to serious restrictions on competition in the market, as well as detriment to consumers. They want it eliminated.
The region of Madrid introduced holiday let regulations in July last year. According to these regulations, holiday lets may not be rented for less than five days or be a permanent residence. In addition, they should be furnished and have internet access, guarantee access to the general public with no discrimination and have one category only, unlike hotels, for example (classed by stars). Holiday lets can be part of a block of flats or apartments that are residential. They should display a plaque confirming they are licensed by the regional authorities. Prices should be clearly visible at the entrance.
Holiday lets have caused plenty of controversy in Catalonia, the Balearics, and the Canaries, where they attract the ire of the hotel lobby. Part of the problem is also the explosive growth of potals such as Airbnb that connect accommodation supply and demand have grown spectacularly. Furthermore, the rapid growth of holiday lets has caused friction with residents in some cities like Barcelona.
The outcome of this legal challenge will have ramifications for the holiday rental business in other parts of Spain. If Madrid is forced to withdraw the five-day regulation, that will be the first bit of good news for a business that has been under pressure all over Spain for years.