A new Spanish law, effective 1 January 2025, introduces a new index to limit rental price increases for housing contracts signed after 26 May 2023.
The Official State Gazette (BOE) has published a new formula for updating rents in housing lease agreements signed on or after 26th May 2023, coming into effect on 1st January 2025. This was mandated by Law 12/2023, the Right to Housing Act, which stipulated that the government must establish a new formula to prevent excessive rent increases by 31st December 2024.
The new formula involves the creation of a new index, which will serve as a limit for rent increases. This index will be available on the National Institute of Statistics (INE) website, with the first figures being published on 2nd January 2025 and then monthly thereafter, similar to the Consumer Price Index (CPI).
When a rent update is due, the following rules will apply:
- The rent will be updated according to the terms agreed upon in the contract.
- However, if the agreed increase is higher than the new index, the index will be applied as a limit.
This means that landlords will not be able to increase rents beyond the limit set by the index, even if the contract allows for a higher increase.
This limit will not apply to contracts signed before 26th May 2023.
This new index, also referred to as the ‘Reference Index for Housing Lease Adjustments’ (Índice de Referencia para la Actualización de Arrendamientos de Vivienda in Spanish, abbreviated as IRAV) is defined as the minimum value among the annual variation rate of the Consumer Price Index (CPI), the annual variation rate of the core CPI, and the adjusted average annual variation rates of both the CPI and the core CPI. These adjusted rates are calculated as the difference between the annual growth rates of the CPI and core CPI for each month and a benchmark parameter that represents medium-term expected inflation, moderated by an adjustment coefficient.
You can check the new Rental Price Index (Índice de Referencia de Arrendamientos de Vivienda) at the INE website here, whilst the Ministry of Housing has created a web page (in Spanish) where you can calculate rental increases under different scenarios published.
