Latest reforms and measures in the Spanish housing rental market.

Latest reforms and measures in the Spanish housing rental market.

Despite the current COVID-19 crisis, there have been important developments in the Spanish housing rental market which, due to their complexity, have created some confusion in the population. Likewise, in some cases, the subjects even overlap each other, making it even more difficult to understand them.

Since the last reform of the Urban Rentals Law (LAU) there have been several developments in the field of housing rentals at both state and regional level, and even locally, with very similar and in some cases even overlapping issues. This fact has created confusion in landlords and tenants, as well as in many other sectors, so we will make a brief summary of the main novelties:

Last reform of the Urban Rentals Law

In March 2019 the central government approved the latest amendment to the LAU through Royal Decree Law 7/2019 of March 1st. This Royal Decree Law required subsequent ratification by the Congress of Deputies so that its validity would not be limited in time, but would become definitive. Given the political situation at the time, it was not foreseeable that this ratification would take place, since only a few months earlier the Congress of Deputies had not ratified the reform of the LAU which the Government had approved by Royal Decree Law 21/2018 of December 14th. However, the last reform was ratified by Congress and is therefore the one currently in force.

Constitutional complaint

Although the reform was ratified, the main opposition party (Partido Popular) filed a constitutional complaint with the Constitutional Court, arguing that “false and out-of-context” data were used to justify measures aimed at curbing price increases. The Constitutional Court, however, upheld the rule and only declared unconstitutional two additional provisions to the Law that do not change its content, namely the first additional provision on “measures to promote the supply of rental housing” and the third additional provision on “agreements on infrastructure”.

Although they had been repealed, the first of the additional provisions contained a series of measures to be implemented by the Ministry of Development to boost the supply of rental housing. This is an issue that is currently being widely discussed by experts and market operators, as they ask themselves what would be the best measures to alleviate the tension in the housing rental market in order to provide a solution to the constant price increases that make it impossible to own a home for rent?

Rental housing price index system

The second additional provision of Royal Decree Law 7/2019 established the creation of rental housing price index system. This index system would serve to guarantee transparency and knowledge of the evolution of the rental housing market.

To date, this index system already exists at state level and, to create it, the Government used as a basis the tax information contained in the Personal Income Tax (IRPF), complemented with the cadastral data (surface area, use and typology, age, etc.), at the same time as other information, such as data from the regional deposits and the average income values obtained by indirect methods (profitability) provided by the Association of Property Registrars, and the information provided by the General Directorate of Cadastre. For the time being, this is a purely informative tool and does not empower local town halls or autonomous communities to limit income.

This index system has been applauded by both experts and market operators, as it is a tool that guarantees transparency and knowledge of the evolution of the housing rental market. However, experts fear that this index will be used later as a market regulation measure.

Limitation of the rental income in Catalonia

In Catalonia, however, with the entry into force on September 22nd of Law 11/2020 of September 18th on urgent measures to contain income in housing lease agreements and the amendment of Law 18/2007, Law 24/2015 and Law 4/2016 on the protection of the right to housing, the Catalan government has limited income from housing lease agreements precisely through an rental income index drawn up by the Catalan government itself.

It is thus established that the rent for new lease agreements cannot exceed the price per square meter established by the Catalan housing agency’s rental income index. Nor is an increase in rent allowed if it is lower than that established by the index when the property has been rented out at a lower price over the last five years.

The Council for Statutory Guarantees, institution responsible for ensuring that laws are in line with the Constitution and the Catalan Statute, has already stated that it considers the Catalan law to be unconstitutional because it encroaches on state competences. It is awaiting the decision of the Government to appeal the law to the Constitutional Court.

Regulation of new types of tourist accommodation

Likewise, through the recently approved Decree 75/2020 of August 4th on Tourism in Catalonia, the Generalitat has regulated two new types of tourist accommodation, namely, unique accommodation (tree huts, dry stone huts among vineyards, caves, etc.) and shared accommodation (the owner of a house shares it with tourists for the duration of the stay).

However, Barcelona Town Hall has agreed to suspend the granting of the necessary licenses for the rental of tourist rooms in flats (shared accommodation). According to Janet Sanz, deputy mayor of Ecology, Urban Planning, Infrastructure and Mobility of Barcelona, the suspension of the licenses allows the Generalitat to “rectify” the Decree and to design a coordinated proposal between the city town halls and the Generalitat to guarantee the right to housing and to address the housing crisis that has been exacerbated by the coronavirus crisis. This suspension can last for up to two years, which is the period of time that the Town Hall has to draw up and approve an ordinance and an urban plan to regulate this type of housing.

Measures against the “squatter” problema

Finally, another aspect that has long created confusion and social alarm is the problem of illegal housing occupation. In order to speed up police and judicial action (which in some cases can take several months to resolve), the Ministry of Interior has unified the criteria for police action against this type of problem.

This unification of criteria orders the police force to be more precise in drawing up reports to facilitate more rapid evictions and the possibility of making arrests without the need to request judicial measures in cases of flagrante delicto. It is to be hoped that this unification of criteria for police action in practice will achieve the desired end or only remain to a degree that does not have a major impact on legal proceedings.

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Marinel-lo @ Partners