Landlords updating contracts under Spain’s new housing law must apply the revised INE index, which drops slightly from February’s 2.08%, offering tenants a modest reprieve.
Spain’s new rental price reference index, introduced under the 2023 Housing Law, has eased to 1.98% year-on-year this March, down from 2.08% in February, according to figures released by the National Statistics Institute (INE).
The index, designed to prevent excessive rent hikes, applies to lease agreements signed from 25 May 2023 onwards and must be used for annual rent updates. It serves as a cap on rent increases amid a broader effort to stabilise the housing rental market following years of turbulence, including pandemic-era volatility and the price surges linked to the war in Ukraine.
A new tool for lease updates
The INE-developed index is now the official benchmark for revising rents annually in post-May 2023 contracts. Updated monthly, it provides a calculated limit based on a blend of inflation data and long-term expectations. More specifically, the index incorporates:
- General inflation (CPI)
- Core inflation (excluding food and energy)
- Annual growth differences in both these indicators
- A long-term expectations parameter proposed by the General Directorate of Economic Policy
These elements are passed through a moderation filter established by the Ministry of Housing and Urban Agenda and the Ministry of Economic Affairs, taking into account the broader state of the housing rental market.
The ultimate figure used for updating rental contracts is the lowest between the general CPI, core inflation, and the adjusted average annual variation calculated as per the approved methodology.
Legal background and transition rules
This new mechanism fulfils the legal obligation under Spain’s much-debated Housing Law to create a structured, transparent, and restrained approach to annual rent increases. The law stipulates that the INE should define and publish this cap before the end of 2024—and it is now in full effect.
For 2024, the government has already implemented an extraordinary 3% cap on rent updates as a temporary measure to shield tenants from inflationary shocks stemming from geopolitical crises, particularly those related to the war in Ukraine.
Earlier efforts had already introduced limits using a different benchmark—the Competitiveness Guarantee Index (IGC), which was capped at 2% and never allowed to fall below zero. This IGC-based mechanism applied to rent reviews in 2022 and 2023 under emergency inflation-control legislation.
What about pre-law contracts?
For leases signed before 25 May 2023, the update formula depends on existing contractual terms. Most commonly, rent revisions will continue to use the CPI or the IGC, as stipulated in each agreement. Ministry of Housing officials confirmed to Europa Press that landlords must adhere strictly to whatever mechanism is outlined in these older agreements—even if it differs from the new INE index.
Whatever the formula, tenants with older contracts can rest assured that if the IGC is applied, the increase will never exceed 2%.
With the rental affordability crisis still simmering beneath the surface of Spain’s housing market, this updated index is intended as a pressure valve—offering landlords some flexibility, while narrowing the scope for sharp monthly rent hikes. While a 1.98% increase may still sting for some, it’s a far cry from the double-digit jumps seen in previous inflationary waves.
