Home » Catalonia’s third attempt at rent controls gets off to a rocky start

Catalonia’s third attempt at rent controls gets off to a rocky start

The Catalan government has implemented rent controls in most of Catalonia’s populated areas and capital city Barcelona, causing an immediate collapse in rental housing investment that will only exacerbate housing access problems in the region.

On the 16th of March 2024 Catalonia imposed rent controls in the 140 municipalities where almost all the population lives, using powers devolved under the rubric of the new Housing Law passed in 2023 by the national government in Madrid. Catalonia is the only region in Spain to have used these new powers to implement rent controls. Some regions like Madrid have ruled them out, whilst others are going to wait and see what happens in Catalonia. They won’t have to wait long.

The local press reports that the new regulations have caused an immediate collapse in all rental  housing investment in Catalonia, including social housing. “Apart from projects that were already under construction everything has stopped,” says Miles Leonard, a director of real estate consultants Cushman & Wakefield, quoted in La Vanguardia. So no more affordable rental housing will be built for now. There are also reports of total confusion in the market as the new regulations are badly drafted and might have to be settled in the courts.

Another upshot of Catalonia’s rent controls is a marked drop in the supply of long-term rentals on the market. In the past, 80% or more of homes advertised for rent at property portals like Idealista were offered unfurnished on a long-term basis. But now, from what I can tell, 80% of the 4,766 homes advertised for rent on Idealista today are offered as mid-term rentals (11 months maximum). Just 0.5% of Barcelona is social housing, so if you can’t afford to buy and need to rent a home long-term you currently have just 466 unfurnished homes to choose from in the whole of Barcelona, maybe less.

Third time lucky?

Rent controls have been tried in Catalonia twice before, and both times the results were not encouraging.

The first was under the dictatorship of General Franco. “Spain had rent controls in the XX Century and we well know what happened: They destroyed the rental market,” says Carme Trilla, President of the Habitat 3 foundation that manages 400 affordable rental homes, quoted in La Vanguardia. Read how Spanish dictator Franco crushed the rental market with price controls.

The second attempt was in 2020, when the Catalan government unilaterally imposed rent controls in Barcelona that were struck down as illegal by the Spanish Constitutional Court in March 2022, so they were only in force for 6 quarters between Q3 2020 and Q1 2022. Did they work? Rents did decline at first, but only because Covid reduced housing demand in big cities. Exactly the same thing happened in Madrid, where there were no rent controls, and since then rental prices have risen much faster in Barcelona than Madrid, as illustrated in the chart below. I explain this in more detail in this article about the Catalan government’s call for rent controls.

barcelona rent controls vs madrid with no rent controls

Will they work this time? Only if you look at the price of new rental contracts. Some households will enjoy below market rents, which is what the official figures will show, but many more won’t find anywhere to make a home if they can’t afford to buy. Most private landlords will either switch to mid-term rentals (which are a pain for landlords) or sell up, so it might be a good opportunity for those who can afford to buy if the market is flooded as a result. Two things are for sure: 1) It’ll get harder to rent a home in Catalonia as a consequence of rent controls, and 2) the politicians / activists pushing rent controls will blame this on “speculators” and “greedy landlords”.