New Housing Act in Spain reduces rental supply

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rental supply
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MADRID – The new Spanish Housing Law seems to deter investors and project developers. According to the Agencia Negociadora del Alquiler (ANA), this leads to a decrease in the supply of rental properties, resulting in rising rents.

The newspaper El Economista wrote at the end of October that the rental supply had fallen by 30% after the Housing Act came into effect. Experts from the National Federation of Real Estate Associations predicted that this reduction would continue for some time. Consequently, they urged the government to change the law and come up with realistic measures instead of band-aids. Demand for rental properties is said to have risen by 11% in five months and prices by an average of 9% in the last six months.

Also read: Decrease in rental supply and increase in prices due to new Housing Act in Spain

True ‘exodus’ among investors

The director general of Agencia Negociadora del Alquiler (ANA), José Ramón Zurdo, speaks of a true ‘exodus’ among developers and investors, who are withdrawing from the residential rental market and seeking refuge in other, more lucrative projects. This trend would further shrink the already tight rental supply in Spain. As a result, it encourages rental prices to shoot through the ceiling, driven by high demand.

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Strict measures

Zurdo strongly criticises what he considers contradictory policies. On the one hand, the need to increase the supply of rental properties is emphasised, while on the other hand, the measures are pushing large owners – the main source of more supply – out of the market.

Mandatory contribution to social housing

In addition, current legislation requires developers to realise 40% of their projects as social housing (20% on non-consolidated urban territory). Half of this must also be intended for affordable rent. All this without adjusting the price modules for sheltered housing, which constitutes an additional stumbling block for the sector.

Price gouging and reduced supply

These measures already seem to be taking their toll: with decreasing supply and unabated high demand, prices for rental properties will inevitably rise.

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