The new Law for the Right to Housing has received its final approval in plenary session of the Senate, after a debate marked by the proximity of the municipal and regional elections on May 28. The regulations have gone ahead in the Upper House without modifications to the text that came from the Congress of Deputies with the votes in favor of the PSOE, ERC, EH Bildu and parties of the Confederal Left (134 votes in favor, 117 against and one abstention).
They have voted against, among others PP, PNV, Junts per Catalunya, Cs, Vox or UPN, who hold different versions that the new norm invades competences, generates legal uncertainty, allows squatting, discourages the placing on the housing market in rental or involving interference with private property.
Among the main measures of the Housing Law, it establishes rent control in those areas that are declared stressed, creates a new reference index to update rents, new tax incentives or the possibility of taxing empty homes.
It will also regulate evictions, aid for access to social and affordable housing, or the creation of a public park for affordable housing. We tell you which measures come into force from their publication in the Official State Gazette (BOE), within a maximum period of 15 days, and which will have to wait for the reports from the CCAA and town halls to control the rise in rental prices, or when will be the first fiscal year with the new deductions.
The measures of the Housing Law that are already in force
Limit to updating rental income
One of the measures that appear in the Housing Law is already in force. This is the cap on the annual increase in the price of rent in the renewal of current housing rental contracts. Since last March 2022, among the economic measures to contain the impact of the war in Ukraine, the Consumer Price Index (CPI) has ceased to be the reference index for updating rents.
Until December 31, 2023, the annual update of the rental contract may not exceed a 2% increase, both for large holders and small owners, unless otherwise agreed between the parties between the private landlord and his tenant.
This cap will increase one point to all contracts throughout 2024, up to a 3% increase and from 2025 a new Rental Index will be applied, which will have to be prepared by the Mitma together with the INE.
Minimum information in housing purchase and rental operations
Among the changes that reach the market immediately after the publication in the BOE of the regulations, those included in article 31 stand out, an article that has set off alarm bells in the real estate business.
This is the article that details the minimum information that must now be offered in housing purchase, sale and rental operations and that includes both information about the properties and their owners, and that must be provided by the intermediaries of the operations if required by the potential buyer or tenant.
Among this information are the economic conditions of the operation (total price and concepts included in it, as well as the financing or payment conditions), the essential characteristics of the home and the building (such as the habitability certificate, the accreditation of the useful and constructed area of the dwelling, the energy efficiency certificate, the services available to the building or its age). But it also includes a controversial point: among the information that the potential tenant can request is the "identification of the seller or landlord and, where appropriate, of the natural or legal person involved, within the framework of a professional or business activity, to intermediation in the operation”. In addition, it contemplates economic sanctions for non-compliance.
IBI surcharge on empty homes
The surcharge on the Real Estate Tax (IBI) also comes into force with immediate effect in the case of homes that have been empty for at least two years, included in the third final provision of the regulations. A surcharge that could reach 150%.
In it, "the surcharge on permanently unoccupied residential properties is modulated in the Property Tax, IBI, which may be applied to those homes that have been empty for more than two years, with a minimum of four homes per owner, except Justified causes of temporary unemployment, assessed by law. Likewise, an increase in the surcharge currently located at 50% of the liquid IBI quota is established up to a maximum of 150%, depending on the duration of unemployment and the number of also unoccupied homes that are owned by the same owner in the municipal area, with the aim of having a greater effect in optimizing the use of the residential building stock and reinforcing the instrument of the Town Halls to deal with situations of unoccupied housing through the taxation".
As specified in the law, "the surcharge, which will be required of the taxpayers of this tax, will accrue on December 31 and will be settled annually by the municipalities, once the vacancy of the property has been verified on that date, together with the administrative act for which it is declared."
Measures related to the protected or “incentivized” housing regime
Other measures of immediate application are those referring to subsidized housing, included in article 16 of the regulations, such as that "subsidized housing will be subject to a regime of permanent public protection with the exceptions that regional regulations may exceptionally provide in in the event that there is justified cause duly motivated for their disqualification or for the establishment of a qualification period with the fixing of the number of years of this, which must be at least 30 years. In addition, its sale or rental will be subject to the prior authorization of the Autonomous Community where the property is located.
The same happens with article 17, which deals with incentivized affordable housing, and establishes that "the public authorities, within the scope of their respective powers,
Incentivized affordable housing is "that privately owned home, including third sector and social economy entities, to whose owner the competent Administration grants benefits of an urban, fiscal, or any other nature, in exchange for allocating them to residence habitual renting at reduced prices, or any other formula for temporary tenure, for people whose income level does not allow them to access housing at market price," the text states.
Payment by electronic means
Another modification of the LAU, in this case of article 17, is the one that establishes that the rental income payments will be paid in general terms through electronic means for the contracts that are signed from now on. With one exception: "when one of the parties lacks a bank account or access to electronic means of payment and at its request, it may be made in cash and in the rented home."
Figure of the great housing fork
The general definition of the concept of "large holder" is understood as the natural or legal person who owns more than 10 urban properties, excluding garages and storage rooms, or a constructed area of more than 1,500 m2, as already stated. in Royal Decree-Law 11/2020, of March 31, on urgent complementary measures in the social and economic sphere to deal with covid-19, limiting in the text of the Law those properties and surfaces that are for residential use .
Although, it is specified that this general definition may be specified in the declaration of stressed residential market environments, being able to reach owners of 5 or more urban properties for residential use that are located in said environments, which are subject to the declaration by of the competent Administration, in this case the autonomous communities.
Real estate management fee expenses
In the regulation of housing lease contracts, different modifications are made to Law 29/1994, of November 24, on Urban Leases. Among them, the obligation that the expenses of real estate management and those of formalization of the contract are borne by the landlord.
Changes in evictions, foreclosures and real estate auctions
The text introduces far-reaching changes in the eviction procedure, foreclosure and in the auction of properties in situations of vulnerability.
Eviction procedure
The main measures are the following:
• In any case, the competent public Administrations will be notified, and therefore without the need for the consent of the interested parties, of the resolution that sets the launch date to verify the situation of vulnerability of those who occupy the dwelling.
• The plaintiff is obliged to indicate whether or not the property constitutes the habitual residence of the occupant, whether or not it is a large homeowner and, in such a case, to prove this circumstance by means of certification from the Property Registry with the relationship of His properties. In the event that the plaintiff is a large homeowner, the burden of proving whether or not the occupant of the home is in a situation of economic vulnerability is imposed on him.
• A claim admissibility requirement is established in cases where the plaintiff is a large homeowner, the home is the habitual home of the occupant and the latter is in a situation of economic vulnerability, consisting of the fact that there has previously been a conciliation procedure or intermediation between the parties, which will be established by the competent Public Administrations.
Public competences
The scope of protection is extended when situations of vulnerability are identified. While in the current wording of the LEC, protection reaches exclusively vulnerable people in eviction proceedings (due to non-payment of rent or expiration of the term) in cases of leasing (ordinary or financial or sharecropping), the reform extends this protection to people Vulnerable people who are intended to be evicted from their habitual residence in procedures (i) for the recovery of a farm, rustic or urban, transferred in precariousness, by the owner, usufructuary or any other person with the right to possess said farm; (ii) who seek summary guardianship of the possession or possession of a thing or right by whoever has been deprived of them or disturbed in their enjoyment; and (iii) urged by the holders of real rights registered in the Property Registry, who demand the effectiveness of those rights against those who oppose them or disturb their exercise, without having a registered title that legitimizes the opposition or disturbance. . Likewise, the concept of vulnerable person is expanded by increasing the income criteria to be qualified as such and it is established that the judge must attend as an additional criterion to establish vulnerability to personal situations, such as the residing of minors.
• A decision system is established by the court on the eventual suspension of the eviction procedure after a weighted and proportional assessment of the specific case as opposed to the automatic suspension by the Lawyer of the Administration of Justice currently provided for.
• The terms for suspension of eviction proceedings are extended to 2 months for natural persons and 4 for legal persons (compared to the current terms of 1 and 3 months).
Foreclosure of mortgaged assets
The regulation also extends the protection of the occupant of the dwelling in a situation of vulnerability in cases of foreclosure of the habitual residence, in the same terms as in eviction proceedings.
• The executing party is obliged to indicate whether or not the property constitutes the habitual residence of the occupant, whether or not it is a large homeowner and, in this case, to prove this circumstance by means of certification from the Property Registry with the relationship of His properties. In the event that the executor is a large homeowner, the burden of proving whether or not the occupant of the home is in a situation of economic vulnerability is imposed.
• It is established as a requisite for the admissibility of the foreclosure claim in cases where the executor is a large homeowner, the home is the habitual home of the occupant and the latter is in a situation of economic vulnerability, that there has previously been a procedure for conciliation or intermediation between the parties, which will be established by the competent Public Administrations.
Real estate auction
Lastly, it extends the protection of the occupant of the home in cases of real estate auction in situations of vulnerability. Thus, in real estate auctions, when the real estate is the habitual residence of the occupant and the owner is a large homeowner or a housing company:
• It must be proven by the performer, if it had not been done previously in the procedure, whether or not the occupant is in a situation of economic vulnerability.
• If the occupant of the dwelling is in a situation of economic vulnerability, the enforcement process cannot be initiated if it is not proven that the executor has submitted to the conciliation or intermediation procedure between the parties established for this purpose by the competent Public Administrations. .
Finally, both in eviction proceedings, such as foreclosure, as well as in the auction of assets, in any judicial resolution that has as its object the signaling of the occupant's release, the exact day and time in which it will take place must be included.
Measures still without effect... at the expense of declaring the stressed areas
An important bulk of the measures that are intended to be applied with the New Housing Law refer to the declaration of stressed residential market areas, which will entail the drafting of a specific plan that will propose the necessary measures to correct the observed imbalances. This declaration may be made by the competent Administrations in the field of housing "for the purpose of guiding public actions in the field of housing in those territorial areas in which there is a special risk of insufficient supply of housing for the population, under conditions that make it affordable for access in the market, establishing some procedural rules for its declaration for the purposes of state legislation”.
How to declare a stressed residential market area
The declaration of stressed residential market areas must be made by the competent Housing Administration in accordance with the following rules:
The declaration must be preceded by a preparatory procedure aimed at obtaining information related to the situation of the residential market in the area, both for sale and for rent, which allows measuring the evolution of the economic effort that households have to make to have access to decent and adequate housing.
It will also imply carrying out a public information process. The preparation of the mandatory report must substantiate the existence of a special risk of insufficient supply of housing for the resident population, including the dynamics of formation of new households, and a specific plan that will propose the necessary measures to correct the imbalances evidenced, What are they:
a) That the average cost of the mortgage or rent in the personal or household budget, plus basic expenses and supplies, exceeds 30% of the average income or average household income.
b) That the purchase or rental price of the home has experienced, in the five years prior to the declaration as a stressed housing market area, an accumulated growth percentage of at least 3% higher than the accumulated growth percentage of the housing price index. consumption (IPC) of the corresponding CCAA.
The resolution of the procedure must be communicated to the General Secretariat of Urban Agenda and Housing of the Ministry of Transport, Mobility and Urban Agenda. On a quarterly basis, the Mitma will approve a resolution that includes the list of stressed residential market areas that have been declared under the procedure
The validity of the declaration of a territorial area as a stressed residential market area will be three years, and may be extended annually, when the circumstances that motivated such declaration subsist and prior justification of the measures and public actions adopted to reverse or improve the situation from the previous statement.
Current contracts in a stressed residential market area
Current contracts in areas that are declared stressed will maintain the caps at a general level, that is, 2% in 2023, 3% in 2024, and from 2025 with the new rental reference index.
Now, in areas with a stressed residential market, the tenant may request an extraordinary extension for annual terms, with a maximum of 3 years, once the initial term of 5 (small owners) or 7 years (large holders) provided for in the LAU has expired. . The landlord will be obliged to accept this extension, unless other terms have been agreed, or communicate the need to occupy the home for themselves or relatives or a new contract is signed with the rent limitations provided for in the Law.
New contracts in a stressed residential market area
The new contracts that are signed in these areas declared stressed will have to meet a series of conditions depending on whether the lessor is a small owner or a large holder:
small owner
The rent agreed upon at the beginning of the new contract may not exceed the last rent of the housing lease that had been in force in the last five years in the same dwelling, once the annual update clause of the rent of the previous contract has been applied, without being able to set new conditions that establish the repercussion to the lessee of quotas or expenses that were not included in the previous contract.
It can only be increased, beyond what is appropriate from the application of the annual update clause of the rent of the previous contract, by a maximum of 10% on the last rent of the rental contract of habitual residence that had been in force in the last five years in the same dwelling, when rehabilitation or improvement works are accredited that result in energy savings or accessibility to the dwelling in the two years prior to the date of the new contract.
It may also be increased up to a maximum of 10% of the rent, plus the update clause, when the lease is signed for a period of 10 or more years, or a right of extension is established that can be used
The validity of the declaration of a territorial area as a stressed residential market area will be three years, and may be extended annually, when the circumstances that motivated such declaration subsist and prior justification of the measures and public actions adopted to reverse or improve the situation from the previous statement.
Current contracts in a stressed residential market area
Current contracts in areas that are declared stressed will maintain the caps at a general level, that is, 2% in 2023, 3% in 2024, and from 2025 with the new rental reference index.
Now, in areas with a stressed residential market, the tenant may request an extraordinary extension for annual terms, with a maximum of 3 years, once the initial term of 5 (small owners) or 7 years (large holders) provided for in the LAU has expired. . The landlord will be obliged to accept this extension, unless other terms have been agreed, or communicate the need to occupy the home for themselves or relatives or a new contract is signed with the rent limitations provided for in the Law.
New contracts in a stressed residential market area
The new contracts that are signed in these areas declared stressed will have to meet a series of conditions depending on whether the lessor is a small owner or a large holder:
small owner
The rent agreed upon at the beginning of the new contract may not exceed the last rent of the housing lease that had been in force in the last five years in the same dwelling, once the annual update clause of the rent of the previous contract has been applied, without being able to set new conditions that establish the repercussion to the lessee of quotas or expenses that were not included in the previous contract.
It can only be increased, beyond what is appropriate from the application of the annual update clause of the rent of the previous contract, by a maximum of 10% on the last rent of the rental contract of habitual residence that had been in force in the last five years in the same dwelling, when rehabilitation or improvement works are accredited that result in energy savings or accessibility to the dwelling in the two years prior to the date of the new contract.
It may also be increased up to a maximum of 10% of the rent, plus the update clause, when the lease is signed for a period of 10 or more years, or a right of extension is established that can be used
voluntarily by the lessee, which allows him to optionally extend the contract under the same terms and conditions for a period of 10 or more years.
Large holders and contracts in new apartments for rent
Notwithstanding the foregoing, in housing lease contracts in which the landlord is a large homeowner in accordance with the definition established in the Law for the Right to Housing, and in which the property is located in a stressed residential market area, the rent agreed at the beginning of the new contract will be limited, where appropriate, by the previous contract or by the maximum limit of the applicable price according to the system of reference price indices, taking into account the conditions and characteristics of the home leased and the building in which it is located.
This same limitation will apply to housing lease contracts in which the property is located in a stressed residential market area on which no current housing lease contract has been in force in the last five years.
Rental expenses in stressed areas
The parties may agree that the general expenses for the adequate maintenance of the property, its services, taxes, charges and responsibilities that are not subject to individualization and that correspond to the leased property or its accessories, are borne by the lessee. But, if the property is located in a stressed market area and did not have this point in the previous contract, it will not be able to affect it in the new contract.
New reference index for the annual renewal of rental contracts
The National Institute of Statistics (INE) will define, before December 31, 2024, a reference index for the annual updating of housing lease contracts that will be set as a reference limit for the purposes of article 18 of Law 29 /1994, of November 24, of Urban Leases in order to avoid disproportionate increases in the rent of the lease contracts.
Tax deductions take effect on January 1, 2024
The new tax reductions for landlords will enter into force on January 1, 2024, therefore their effect on the income statement for said fiscal year, which will be presented in spring 2025.
One of the changes is the general reduction on the net rental yield that landlords can apply in new lease contracts, which goes from the current 60% to 50%.
On the other hand, the regulations include new reductions, incompatible with each other, and that can only be applied by landlords in areas declared as stressed residential markets. These tax incentives are:
a) By 90% when the same landlord formalizes a new lease in an area with a stressed residential market, and the initial rent is reduced by more than 5% in relation to the last rent of the previous lease of the property. same home, once the annual update clause of the previous contract has been applied, if applicable (2% in 2023, or 3% in 2024, or new rental rate from 2025).
b) By 70% when it comes to the incorporation into the housing market for rental in areas with a stressed residential market and they are rented to young people between 18 and 35 years of age in said areas, or when it comes to incentivized affordable housing or protected, leased to the public administration or entities of the third sector or of the social economy that have the status of non-profit entities, or hosted by a public housing program that limits rental income.
c) By 60% when, the requirements of the previous letters are not met, the dwelling is the object of a rehabilitation action in the two years prior to the date of the execution of the lease contract.
These rent discounts will be a reality as long as the properties are located in areas declared as stressed markets in accordance with the provisions of state legislation on housing, and approved by the Ministry of Transport, Mobility and Urban Agenda.
From our Agency, we will give advice and coverage to our clients, as it has always been, and we will try to find the necessary balance so that their investments continue to be profitable for them.