Housing Act Spain celebrates first anniversary with fewer homes for more money

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Housing Act

The Housing Act was designed to guarantee citizens’ constitutional right to access decent housing. It celebrated its first birthday on May 25. Although the law was intended to limit rents and promote the construction of affordable social housing, the results so far have been disappointing.

A year after the introduction of the law, both purchase and rental prices have risen to historic highs. The average price for a used home is now €2,098 per square metre. In large cities such as Barcelona and Madrid this is even above €4,000 per square metre. Rent prices also show a similar trend, with an average of €13 per square metre and doubling this amount in large cities. The average rental price has increased by 13% on an annual basis.

Resistance from regional governments

The law faces significant resistance from the autonomous regions. Only Catalonia has introduced the reference price index for rental prices with the application for a declaration of tense areas in 271 of the total of 947 municipalities. The remaining regions, especially those ruled by the PP such as Madrid, consider the index “inefficient” and “interventionist”, and fear that its application would lead to higher rents.

Criticism of analysts on the Housing Act

Many real estate analysts have spoken out against the law. Ferran Font, Director of Studies at pisos.com, calls the law “short-lived and difficult to implement”. He noted that the lack of consensus at the introduction of the law already predicted that it would not be applied in most autonomous regions. Francisco Iñareta, spokesman for Idealista, said the law has reduced the supply of rental housing and increased competition among families for housing.

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Positive aspects of the Housing Act

Despite the criticism, experts acknowledge that some of the law’s measures are valuable. The tax incentives for owners who rent out homes at affordable prices are assessed as positive. The aim is to increase the supply of housing in the short term and to stimulate the construction of protected rental housing at limited prices. “A well thought-out mechanism,” said José García Montalvo, professor of Economics at Pompeu Fabra University in Infobae. These incentives include a 90% tax deduction on rental income when the property is in a stressed market and the new contracts include a 5% reduction compared to the previous contract. This measure focuses on small owners with fewer than five properties.

The Viennese model as a solution?

Michaela Kauer, former deputy mayor of Vienna who works in Brussels, is a strong supporter of the Viennese housing model. This model has prioritised affordable housing for more than a hundred years and regulates the prices of nine out of ten homes. Only 10% is freely available on the market. The result of this great protection of the housing sector is that an 80 square metre apartment in Vienna costs only €600 per month. The Viennese city council invests €500 million annually in housing policy. Despite strong government intervention, private capital has not been driven out of the market. Kauer believes that this model is also applicable in Spain, especially in urban centres, provided there is a clear vision of the desired city. With demographic changes in Europe and Spain, she expects that renting will become more important and she advocates a more flexible rental market.

Also read: Dramatic prediction about effects of the new Housing Act in Spain becomes a fact

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