Mark Stücklin
Thirteen months after the draft housing bill went to the Spanish parliament for debate, but just in time for local elections in May, the government has stitched together a parliamentary majority for a housing bill that intervenes heavily in the market, especially the rental market, and protects tenants and squatters at the expense of landlords.
The government has not said much beyond noting an “agreement in principle” with minority parties ERC and Bildu (from the separatist Catalan and Basque left-wing respectively), though government minister Ione Belarra (from the hard-left Podemos party in the ruling coalition) crowed that “this is a great achievement after three years of work, to start guaranteeing housing rights and clamp down on speculators.” In the minds of Podemos, anyone who invests in housing for profit is a wicked speculator.
It was left to the parliamentary spokespersons of ERC and Bildu to explain the new measures they have negotiated in return for their support. Based on their statements today it seems that the final bill to be sent to parliament for approval will contain the following novelties:
- Annual rental increases on all existing tenancy agreements country-wide will be limited to 3% in 2024, up from the 2% “temporary emergency” measure introduced in April 2022 in response to Putin’s invasion of Ukraine and surging inflation. The “temporary” inflation relief for tenants is now permanent, as was to be expected.
- From the start of 2025 all annual rental increases will be determined by a new price index that will always be below the CPI. This effectively means that rents will decrease every year in real terms for ever, or until this clause is revised or repealed.
- At the discretion of autonomous regions, ‘major landlords’ can be reclassified as those companies and individuals owning five or more properties, down from the current number of ten or more properties. Are people who own five rental properties that might have a total value of 500,000€ or less (about the price of one new flat in Barcelona) major landlords? They are now. ‘Major landlords’ are subject to more onerous restrictions and obligations than other landlords.
- ‘Major landlords’ will be limited to a rent-control index when signing new rental contracts in areas classified as having “strained” housing markets.
- Other landlords will have rental prices frozen in “strained” markets, and some fiscal incentives will be offered if they reduce the price of new rental contracts.
- Rental agency costs will be paid by the landlord in future, rather than the tenant as has traditionally been the case.
- Evictions will be made harder, take longer (two years or more), and increase the cost to landlords significantly.
Critics from both sides
Critics say the bill will discourage investment in rental housing, favour sitting tenants at the expense of newcomers, encourage people to stay put (discourage mobility), and reduce the housing options available to the least well-off in the absence of any meaningful level of social housing. Spain has one of the lowest levels of social housing in Europe.
Housing activists are disappointed because they say the bill does not go far enough. They want to see private rental housing all but nationalised (owned and financed by the private sector, but controlled and used by the State).
The housing bill that will now go before parliament for a final vote has nothing to say about increasing the amount of rental properties on the market, or investing in affordable housing, which is the only measure that will improve housing access. As far as this housing bill is concerned, the laws of supply and demand do not apply to Spanish housing.
We will have to wait and see the text of the final bill, and it looks like we won’t have to wait long. The political parties of the hard-left who have promised their support in return for measures that resonate with their voters will want the bill passed in time for local elections at the end of May. The political opposition say this bill is more about motivating the left-wing vote by bashing property owners than solving the housing crisis.
Whatever the final version of Spain’s new ‘Ley de Vivienda’ or ‘Housing law’, it won’t directly affect foreigners buying second-homes in Spain. It will, however, distort the market, in particular the rental market, and make housing even more problematic for a growing number of people. That spells trouble for Spain in future, but in the short run it’s a clear message to foreign and local capital to avoid Spanish housing beyond purely personal needs like buying a home or second-home for personal use.
