The impending introduction of rent control in 140 municipalities in Catalonia brings changes to rental housing. This particularly affects new contracts and large property owners.

Affected Areas

The control extends to tense residential market areas, particularly in major cities such as Barcelona, Tarragona, Lleida and Girona, as well as important cities in the greater Barcelona area. Parts of coastal and mountainous regions such as Ripoll, Puigcerdà, Mollerussa, Solsona, Sitges, Castelldefels, Sant Pere de Ribes and Torelló are also included.

What are tense residential market areas?

Areas where the average burden on the personal budget of mortgage or rental costs plus basic costs and utilities exceeds 30% of the average income or average household income. The validity period for declaring an area as a special focus residential market area is three years.

Important changes for landlords and tenants

The main measures of the Law for the Right to Housing (LAU) include the introduction of rent control in areas declared tense, the creation of a new reference index to update rents, new tax incentives or the possibility of taxing vacant apartments. Evictions, assistance for access to social and affordable housing or the creation of a public affordable housing stock are also regulated.

Existing rental agreements

For existing contracts between private individuals, the rent is based on the applicable agreement.  The upper limit of 2% in force in 2023 for the increase in the extension of rental agreements (for large owners as well as for small owners) will rise to 3% in the course of 2024, and a new rent index will apply from 2025. Fixed-term rental contracts (11 months or less) are not yet part of the regulation.

Expanding the definition of large property owners

A landlord is considered a large landlord, the natural or legal person who owns more than 10 urban properties, excluding garages and storage rooms, or a built area of more than 1,500 m2, or 5 or more, in zones declared as a tense market. Those prohibited from setting rental prices above the established rent index.

New rental agreements and applicable cap depending on the landlord

The application of Spanish rental price caps in “tense areas” varies depending on whether you are a small or large landlord.

For a private landlord, indexation is applied to the previously 5 year applicable rent can be applied. Maximum increase of 2 % in 2023, 3% in 2024 and the new index from 2025. It may be increased by up to 10% if renovation or improvement work has been proven that leads to energy savings or accessibility of the apartment or if the rental agreement is concluded for a term of 10 or more years.

For large tenants, on the other hand, a reference price index system comes into force through which limits the maximum price, taking into account the conditions and characteristics of the apartment. The parties may agree that the general maintenance costs of the property, its services, taxes, duties and obligations, which are not subject to individualization are to be borne by the tenant. However, if the property is in a tense market area and this point was not included in the previous contract, it cannot be taken into account in the new contract.

Extraordinary extensions of rental agreements for vulnerable people

The tenant can request an extraordinary extension of one year if he proves that he is in a situation of social and economic hardship and as long as the landlord is a large owner of apartments. For this request for an extraordinary extension, the tenant must have his or her social and economic vulnerability certified on the basis of a report issued last year by the municipal or regional social services.

Real estate agent costs are borne by the owners

The agreement also provides that real estate fees and costs incurred when renting a property will always be paid by the owner of the property and not by the tenant.

IBI surcharge for empty houses

The surcharge on real estate tax (IBI) also comes into force immediately for apartments that have been empty for at least two years, according to the third final provision of the regulation. A surcharge that could rise from the current 50% to up to 150%. In detail it says: “The surcharge for permanently unoccupied residential properties is regulated in the real estate tax (IBI), which can be levied on houses that have been vacant for more than two years, with at least four apartments per owner, except for legitimate reasons for temporary unemployment. “

Tax incentives in income tax return (IRPF) for tension areas

One of the changes is the general reduction in the net rental yield that landlords can claim on new rental agreements from the current 60% to 50%.

Tax incentives:

1. Tax reduction of 90% if the landlord concludes a new rental agreement in a tight housing market area and reduces the initial rent by more than 5% in relation to the last rent.

2. Tax reduction of up to 70% if renting to young people between 18 and 35 years old, to public administration or to third sector entities, public housing program or social economy.

3. Tax reduction of up to 60% if the apartment was subject to renovation work in the two years before the rental agreement was concluded.

Implementation schedule

The regulations apply to contracts that began on March 13, 2024, with specific provisions for specific situations.

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Disclaimer: The percentages and numerical information mentioned in the article are merely informative and orientate information and there is no guarantee that they are accurate or up-to-date, as the applicable legal and tax regulations are subject to constant changes and vary depending on the personal situation of each individual. For current and exact information, please contact your tax advisor. We are happy to put you in touch with a local advisor in Spain.