New Housing Law, keys to understanding it

The Council of Ministers will approve the Draft Housing Law throughout 2022. Among the proposed measures that will be included in this draft are a surcharge for a long time in the IBI to empty homes, tax incentives in the Personal Income Tax to small owners, allocate 30% of new construction developments to VPO or limit to income of large holders, proposed for 2024. Society is expectant before the measure of new promotions, although the sector is positioned against it, since it can stop the reactivation of the market.

After the implementation of the Housing Law was approved last October, it was revealed that this text will be composed of numerous measures, among which will be the main measures of the parties that make up the coalition government.

With its publication, the real estate sector reacted by positioning itself against the Law,since its measures will cause the opposite effect on market intervention, legal uncertainty within the affected sectors and an attack on private property that will cause a fall in investments. The Government said that there will be a period of 18 months as a transition from the application of the regulations to implement the limits to the large holders in those areas that the municipalities consider to be stressed areas. This will mean the application of the law between the end of 2023 and the beginning of 2024.

Among the most noteworthy measures of the Draft Law on the Right to Housing are:

Contents [Hide]

  • 1 The rental sector
    • 1.1 What will be the stressed areas of the market
    • 1.2 Rents will be frozen for current tenants
    • 1.3 New rental contracts will be frozen
    • 1.4 Small owners will be tax-incentivized
    • 1.5 What is considered as a large fork
    • 1.6 The rental will be limited with a transition stage of 18 months for its application
  • 2 More relevant actions
    • 2.1 Reactivation of empty buildings
    • 2.2 Public catalogue of properties
    • 2.3 30% of new promotions will be allocated to VPO
    • 2.4 Evictions of vulnerable people

1 The rental sector

1.1 What will be the stressed areas of the market

Within three years, the institutions in charge of the housing sector will be able to declare which areas of the real estate market are stressed, with the possibility of extending it every year if the situation continues. In short, limits will be applied and even the prices of rental income will be frozen.

In order for a district or a locality to be considered a stressed area, they will have to have a cost of payment of the property located in that area greater than 30% of the average net income of family income, regardless of whether it is a rental or a house (including the costs of supplies).

Another requirement will be the increase in the price of purchase or rental of 5% more than the percentage of each autonomy of growth of the CPI in the last 5 years.

1.2 Rents will be frozen for current tenants

In areas that have been declared as stressed areas in the residential market, the contract in force may be extended extraordinarily for a maximum of three years to current tenants on an annual basis.

1.3 New rental contracts will be frozen

In such stressed areas, the rent may be limited to the new rental housing contracts to that of the previous contract, only with the rise in the CPI that corresponds to it. In addition, other additional increases of a maximum of 10% may be added in situations such as contracts signed for a stage of 10 years or more, the rehabilitation of the home or the realization of reforms in the house.

On the other hand, specific tools will be created to reduce or contain rental prices in these areas in order to avoid abusive increases in rent or to increase supply. The reduction of prices will be fiscally incentivized.

1.4 Small owners will be tax-incentivized

With the modulation of the decrease in the net return of the rent of the habitual home, the rent of the habitual home will be encouraged in a fiscal way at more accessible prices.

Within the new contracts, a general deduction of 50% will be applied that may be increased up to 90% in the case of a house in a stressed area:

  • Deduction of 90% to rents of an area considered stressed. This case will be applied in those new contracts signed in a declared stressed area that will experience a reduction of at least 5% on the rent of the previous contract.
  • Deduction of 70% to the rent of homes for young people between 18 and 35 years old. It will be applied for the first time in new contracts for the rental of housing in stressed areas to young people between 18 and 35 years old.
  • 60% deduction for renovations or rehabilitation. It will apply when rehabilitation reforms have been carried out in the last two years.

1.5 What is considered as a great fork

One of the groups most affected by the Draft Housing Law are the large holders. The text considers as a large holder the legal or natural person who has ownership of more than 10 properties without including storage rooms and garages or a constructed land with an area greater than 1,500m2. The competent institutions that declare the stressed areas may implement additional criteria, only to request extra information from the housing parks managed by them.

1.6 The rent will be limited with a transition stage of 18 months for its application

In the event that the owner of a dwelling in a stressed area is a large holder and a legal person, the income of the new contracts will be limited by their previous contract or by the maximum limit that may be applied as stipulated in the system of reference price indices.

From the application of the Law, an 18-month stage will begin to apply the limits to income and implement the new price index. That is why the limits on renting to large landlords will come in 2024, when the current legislature comes to an end, due to the prolongation of the parliamentary procedure throughout 2022.

2 More relevant actions

2.1 Reactivation of empty buildings

The City Councils will be able to enjoy a surcharge of maximum 150%,100% more than currently, in the liquid quota of the Real Estate Tax (IBI) for its exit to the market. This would affect households, whose owners have at least four homes, which have been unoccupied for two years or more without a specific reason.

You can enjoy a 100% surcharge when the unoccupied home has been in that state for three years. In short, an additional 50% may be added in those homes that are owned by owners with two or more floors in the same locality.

2.2 Public catalogue of properties

With no option to dispose of it, the public social housing stock will be permanently protected. This park today reaches 290,000 homes, that is, only 1.6% of homes can access a type of home of the Public Administrations, compared to 10% of this type of housing existing in other states.

Protected housing will be qualified indefinitely. A regime of permanent public protection of protected households that are located on land classified as a reserve will be established, implementing basic conditions at the national level. In the remaining cases, a minimum period of 30 years for disqualification will be offered.

In short, the concept of incentivized affordable housing will be created, with private ownership, but that can enjoy tax, urban or other benefits of any kind as long as it is aimed at renting with price reduction.

2.3 30% of new promotions will be allocated to VPO

Protected housing will be stimulated in rent with price limits. The urban planning legislation will allocate 30% of the urbanized land for this type of property. The compensation due to them shall be fixed when the acquired rights are affected. In short, a minimum percentage of half of 30% of land destined for public protection will be reserved for housing with affordable rent.

2.4 Evictions of vulnerable people

Finally, eviction processes will be improved, something that will affect the usual households of vulnerable housing with the aim of ensuring rapid and effective communication between social services and the judicial sector. These institutions that analyze the situation and in cases of social and/or economic vulnerability will be required to come as soon as possible to attend to people in that situation.

To avoid the helplessness resulting from the eviction, the Social Services will have the capacity to provide housing to those affected. While these measures are being promoted, the deadlines for interrupting launches in cases of vulnerability will be increased from 1 to 2 months when a natural person is the owner, and from 3 to 4 months when it is a legal person. To do this, parameters will be established to declare if it is a case of economic vulnerability.

Compare listings