About the new Spanish Housing Law of 2023

What is the take away of the new Spanish Housing Law of 2023?

Last week the new Spanish Housing Law came into force.  Just a few days ago, on May 25, it was published in the BOE or “Boletín Oficial del Estado”, the State Official Gazette, as Law 12/2023.

If you are a property buyer, existing owner or tenant, we briefly outline below what you need to know. The new law aims to prevent tensions in the rental market and keep access to housing at affordable levels for the most vulnerable groups in society, given the hefty rent price rises and inflation hikes of the last few years.

In addition, the law will provide local authorities with tools to contain or reduce rental prices.

Here is a summary of the most important changes and new stipulations which may affect you:

1. Cap on rental price increases. The current cap on rental price increases is 2% and will be maintained as such until 31 December of this year (2023). For and during 2024, rental price increases will be capped at 3%.  From 2025, a new reference Rent Index will be applied and the current link of rental prices with the CPI (consumer price index) of the INE (National Statistics Institute) will be abandoned, all with the goal to avoid disproportionate increases in rental prices.

Measures with respect to "tension" zones will include (definition of tension zone: see below)

• Possibility of an extraordinary annual extension for the tenant after the contract’s expiration

• For new contracts with new tenants, rental price limitation based on the rent of the previous rental contract

• Ability to apply price limit systems to housing that has not been rented in the last 5 years

2. Reduction in the requirements of being declared “tension zones” (“strained areas”). Tension zones will get further measures to stem the rise in rental prices. Going forward, only one of the following two conditions needs to be met in order to qualify as a tension zone: (a) the payment of housing costs amounts to more than 30% of the income of households in the area or (b ) prices have risen  by more than 3 percentage points above the CPI in the last five years.

3. Agency fees and commissions. Real estate fees and commissions will have to be paid by the landlord (=owner) and not the tenant.

4. Rental contracts must not exclude or eliminate the Housing Act and any clauses to circumvent the Housing Act will be eliminated.
5. Protection against evictions: suspension periods for evictions will be extended and evictions without a predetermined date and time will be prohibited. In case the plaintiff is a “large property holder” and the eviction affects vulnerable persons, the application of a conciliation or mediation procedure must be demonstrated.

6. Reduction in the definition of large property holder and vacant housing. Going forward, a  “large property holder” is defined as any owner who owns 5 or more residential properties in the same declared tension zone.

7. IBI increases: certain municipalities will be allowed to charge owners an additional charge on top of the usual Property Tax (IBI) for houses that have been vacant for more than 2 years, provided that the owner has a minimum of 4 properties.

There has been quite a bit of controversy surrounding the new Law but it is largely owing to all parties on the Left that the Law was able to be passed through parliament. As before, rights of property owners remain on the backfoot.