Heavily criticised new Housing Law in force in Spain

by Lorraine Williamson
housing law

 

MADRID – It took more than 900 days to pass the Housing Law. However, it was finally approved by the Senate on Wednesday. With 134 support, 117 ‘no’ votes and one abstention, the law will come into force today, Friday. 

The new Housing law has been under fire from real estate companies and experts for some time. They all predict different consequences of the entry into force than the government intends with the law. The drafters of the law see that it offers great advantages for young tenants in particular. The law provides a discount of 70% on the rent. This is for homes that are rented out to young people between 18 and 35 years old. Moreover, this discount increases to 60% if the house has been renovated or refurbished in the past two years. Even if none of these conditions are met, renters will still receive a significant 50% discount. 

Also read: What will change in the new Housing Law? 

Protection of Tenants in the Foreground 

Tenants are central to the new regulations. An important amendment stipulates the costs of property management and contracting will now be fully borne by the lessor. This means that tenants looking for an apartment no longer have to pay the usual one month’s rent that is usually requested by real estate agents. It is also prohibited under these new rules to increase rents through new costs. 

Stricter eviction rules 

To protect vulnerable groups, the agreement contains measures aimed at preventing unjust evictions. Evictions without a predetermined date and time will be banned and new grace periods will be included in eviction procedures. In addition, access to out-of-court resolution procedures is made mandatory for vulnerable persons. Alternative housing solutions will also be provided, financed by the funds of the state housing schemes. 

Requirements for evacuating homes 

The new bill will also delay the procedure to start an eviction from home. To reclaim ownership of a property, landlords must first declare whether “the property is the ordinary home of the occupier”. In addition, small landlords must provide a certificate from the Property Registry to justify their status. Meanwhile large landlords must demonstrate whether or not the occupying person is in a situation of vulnerability. 

Increased protection of vulnerable persons 

The new legislation significantly increases protection for vulnerable persons. Currently, the Urban Rent Act states that leases are automatically extended if the tenant so wishes to five years, or seven years in the case of legal entities. Now the new regulations state that the tenant can apply for an additional year, under the same conditions, if he can demonstrate a situation of social and economic vulnerability based on reports from social services. 

Moreover, within a period of 20 years, the government will have to provide a minimum number of homes intended for social policy. This number should be at least 20% of the total number of households in tense areas. This new legislation is a major step forward in protecting tenants and vulnerable groups. 

Criticism of the new Housing Law

A blog in Publico.es discusses some criticisms of the law. The article endorses the need for strict regulation of rents to reduce inequality, citing examples of successful regulation in Catalonia between 2020 and 2022. Yet the current regulation contains loopholes that allow landlords to circumvent price caps. For example, they can use short-term leases or add extra fees to the rent. 

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The article suggests solutions to these problems, such as including short-term rentals in the price regulation and requiring landlords to state past rent in all contracts. Without improving the proposed regulations, the new Housing Act may not reduce rents effectively and may even have negative consequences. 

Experts fear price hike 

Telecinco goes even further and comes with 15 points of criticism from experts consulted at the Economic Observatory of Francisco de Vitoria University. After analysing the law, their criticism focuses on fears that prices will rise due to the scarcity of supply. 

The law does not solve current problems 

The law does limit the rent, but does not solve any of the problems in the rental market. It introduces new barriers that will cause disruptions, transactions will decrease and negatively affect the economy as a whole, creating economic activity and employment. 

The law indirectly and artificially increases tensions in areas, experts say, complicating the process of evictions and indirectly encouraging defaults. It also creates legal uncertainty for landlords, reduces supply and will eventually drive up prices. 

The government should instead focus on creating a regulatory framework that allows the private sector to increase the supply of housing on the market. 

The law will exacerbate the scarcity of rental housing in the market 

The Foundation for Applied Economic Studies (Fedea) states that the law will exacerbate the scarcity of rental properties on the market and increase legal uncertainty among property owners. Fedea argues that efforts to achieve an “effective right to housing” are misguided, according to La Vanguardia, as the law pursues policies that only exacerbate the housing shortage. 

Risks of real estate investments are increasing 

Fedea believes that the measures in the law will reduce the profitability of investments in rental properties or increase their risks. This will reduce the immediate and future availability of rental properties due to their withdrawal from the market and reduced investment in acquiring new properties. 

Also read: New Housing Law Spain: owners pay extra for vacant houses 

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