The new Housing Law includes some important changes in order to make easier the access to housing, especially for young people and vulnerable sectors (protection in evictions), and with the aim of controlling the price increases.
The most outstanding measures of this new Housing Law includes, among others:
- Regulation of rental prices in the most stressed areas.
- Untying the CPI (Consumer Price Index) price from the updating of rental prices.
- Protection against evictions.
- Expansion of the stressed areas.
- Allocate the expenses and fees of the rental contract to the owners.
- Prohibition of agreements contrary to the Housing Law that occur between the parties.
- Prohibition of increasing the rental price with extraordinary expenses.
How does the new Housing Law affect tenants with contracts in force?
Apparently, the new Housing Law affect both current and new rentals contracts. Rent updates for current rental contracts will have to be limited to 3% and will be untied to the CPI.
However, throughout this year, it is expected that rents update will continue to be subject to 2% cap. Regarding the price update system, it is planned to create a new index lower than CPI to be specifically used to update rental prices (this new index is called Price Containment Index).
On the other hand, for the new lease contracts, the rent for flats located in the so-called stressed areas will be capped, although said cap will vary depending on whether the owner is a small or large holder. However, in areas determined to be free, landlords may fix a price subject to what is provided in the new housing law.
A large holder will be considered a natural or legal person who owns 5 or more properties (garages and storage rooms are excluded) or a constructed area larger than 1,500 m2.
In the case of large holders, the rental price may not be higher than the increase registered by the Price Containment Index (there is not information about it).
For small owners, the price of the new contract may not exceed the increase calculated with the rent update index, taking the contract of the previous tenant as reference. Thus, if the current rental contract in 2023 is for 1.000 euros, with a limit of 2%, the new contract may not exceed 1.020 euros. In 2024, with the new limit of 3%, the contract may not be for more than 1.030 euros. In 2025 the new index will be published, so the increase would still be defined.
What has been stated above in relation to renting to large holders or small owners will only have an impact if the property is rented in a stressed area. Outside this area, there will be no difference or price cap applicable when renting to a small or large holder.
With the new Housing Law and the application of those caps in stressed areas, tenants will have the right to check if, in effect, the owner is complying with the legislation and is not raising the rent abusively. If the property is within a stressed area, the tenant may request proof of the price that the previous tenant paid for the rent. In this way, it will be easy to verify if the increase is within the contemplated margins.
If the house is located in a non-stressed area, the owner can increase the rental price, but such increase in rent will be regulated by the Housing Law. For lease contracts already in force during 2023, the 2% limit will continue to exist, while in 2024 this limit will reach 3%.
Small owners may increase the price of the house based on the price of the previous contract and applying the current index. Instead, holders will have to abide by the price containment index, which has not yet been defined.
Expenses to formalize the rental contract
The new Housing Law will also define and modify the rental expenses that tenants will have to assume as from now. Currently tenants pay the costs of formalizing the contract, which include the first month rent, the deposit, the additional guarantee and the real estate commission. From now on, with the approval of this legislation, the owner will be the one who must assume the real estate agent’s commission, corresponding to 10% of the annual rental value.
The information contained in this note should not in itself be considered as specific advice on the matter under discussion, but only as a first approach to the subject matter, and it is therefore advisable that the recipients of this note obtain professional advice on their specific case before taking specific measures or actions.