Evictions of vulnerable people suspended until 2030 and extension of rentals: the keys to the decrees

MadridThe definitive texts of the two housing-related decrees approved by the Spanish government this Tuesday have several key points with some essential measures. The first decree law has already been published in the BOE and the second decree will not be published in the Official State Gazette until this Thursday.

Evictions

Some evictions of vulnerable people (which must be proven) without alternative housing are prohibited until 2030. Regarding the suspension of the execution, the latest draft distinguishes between a large investment fund (it is suspended automatically) and an individual. In this second case, first the judge asks the competent administration what alternatives it has. If it does not offer any, the eviction is suspended until an adequate solution is provided. Furthermore, it is expected that the administration will compensate the owner, although the scope of the measure is not concrete.

There are some nuances: the judge can change their mind when reviewing the tenant's situation after one year (whether they continue to be vulnerable or if they have an alternative). Furthermore, if the eviction affects an owner who has one or two properties, their "economic vulnerability" prevails over that of the tenant. Therefore, the eviction can proceed.

If the tenant has a debt, this debt does not disappear. Nor does the eviction execution disappear beyond 2030 (it is only suspended temporarily).

Limit on the annual update

0% freeze on the annual rent adjustment in cases where the contract is above the price index maximum. For other contracts, the annual adjustment is limited to 2% until December 31, 2027, to avoid increases with inflation rates like the current one (4.9% this September).

Extension of contracts

The extraordinary two-year extension for contracts ending before December 31, 2028, is being recovered. A contract extension of up to two years may be requested (to be reviewed annually) provided that rent payments are up to date or the rent has been paid for the 8 months prior to the extension request. The landlord is obligated to accept the extension if no alternative agreement is reached, a new contract is signed, or the need to recover the apartment is communicated (for example, in the event that it is for a family member).

In practice, it implies a freeze on rental conditions (the price) to avoid a rent increase when it is time to renew.

The second decree incorporates the "automatic renewal of rentals." This responds to the demand of the Tenants' Union, as well as left-wing parties, to approve indefinite rental contracts. The Ministry of Housing has appealed to stability and recalled that Casa47 already offers contracts of up to 75 years.

Definition of 'vulture fund'

According to the executive, an end is put to "speculative" purchases of residential buildings by large investors until 2028. Here, the definition of vulture funds will come into play; also that of this practice. Sources from the Ministry of Economy explain that a “balance” has been found. The key will be to see if it is defined based on the operation (how the sale is carried out) or based on its legal form.

Seasonal, tourist, and room rentals

The definition of a seasonal contract is established: its use must be justified and accredited. The ordinary duration may not exceed 11 months. If it is detected that consecutive seasonal contracts are signed, it will be considered a habitual residence.

A 10% VAT on tourist apartments is proposed, their duration is limited to 31 days, town councils are enabled to approve surcharges on the IBI (Property Tax) in stressed areas, and control of digital platforms (Booking or Airbnb) is reinforced with a sanctioning regime.

The regulation of room rentals will be similar to the rule currently being processed in Congress, as explained by the Ministry of Housing. The aim is to prevent a landlord from dividing a property into rooms (renting them individually) to evade a habitual residential contract and, therefore, its protections for the tenant.

Tax relief

Tax incentives are offered to tenants and landlords, but also to people who want to buy. For young tenants, for example, a deduction on personal income tax (IRPF) for their primary residence is proposed if it is declared a stressed area. The deduction is 10% of the rent paid, with a limit on the amount of the income. The deduction decreases based on income (it applies if you earn less than 33,007 euros)

A 0% public loan is being created to help finance the purchase of a first primary residence. It will have maximum limits: 20% of the price or value of the property or 50,000 euros. But it is a first step: now it will have to be developed in a regulation (stating what requirements must be met).

Tax incentives for landlords are offered to mobilize properties: in case of containing rent prices or even lowering them. For example, they will be able to take advantage of strong deductions when paying personal income tax on the positive net rental income they receive. Specifically, it can be a deduction of up to 100% when, in the case of a small landlord, they renew the contract after five years with the same tenant and with a reduction of at least 5% of the previous rent. Also if it is a small landlord (up to 10 properties) and the property is rented for the first time below the maximum established by the reference price index of the Ministry of Housing.

Socimis

The taxation of SOCIMIs on a portion of profits not distributed through dividends is increased to 25%. SOCIMIs that manage offices, warehouses, or shopping centers are excluded. The increase provides for significant deductions if the assets (real estate) are intended for affordable rent or if the profit is reinvested in affordable rental housing.