Evictions, vulture funds or seasonal rental: the keys to the first decree

MadridThe final texts of the two housing 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 The first decree-law has already been published in the BOE and the second decree will not be published in the Official State Gazette (BOE) until this Thursday.

These are the key points of the first text which includes a wide range of measures:

Evictions

Some evictions of vulnerable people (must be accredited) without a housing alternative 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, the judge first asks the competent administration what alternatives it has. If it does not offer any, the eviction is suspended until an adequate solution is provided and the autonomous community will have to compensate the owner.

There are some nuances: the judge may 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 may continue.

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

Limit on annual update

0% freeze on the annual rent update in cases where the contract is above the price index maximum. For the rest of the contracts, the annual update 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 of contracts ending before December 31, 2028, is being recovered. A contract extension of up to two years may be requested (it must be reviewed annually) provided that rent payments are up to date or the rent has been paid for the 8 months prior to the request for the extension. The landlord has the obligation to accept the extension if an alternative agreement is not reached, a new contract is signed, or the need to recover the apartment is communicated (for example, in case it is for a family member).

In practice, it implies a freeze on rental conditions (the price) to avoid a rent increase when it has to be renewed.

In the second decree, the "automatic renewal of leases" is incorporated. This responds to the demand of the Tenants' Union (Sindicat de Llogateres), but also of 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.

Limits on 'vulture funds'

Funds are prevented from buying apartments below 70% of the market price value, but with limitations. Specifically, the text refers to "any entity with or without legal personality that has the acquisition of real estate as its corporate purpose". However, it makes exceptions: if the destination of the housing purchase is to offer it at an affordable or social price for a minimum term of five years; if the purpose is for people who need socio-sanitary care to live there; or if they are to be managed by third-sector entities or for victims of gender-based violence. With this measure, the executive aims to put an end to "speculative" purchases of residential buildings by large investors until 2028 (the moment when the measure expires).

At the same time, public entities are excluded from these limitations, as well as private individuals who adhere to the administration's code of good practice in housing matters, and also if the property is obtained as a result of a judicial or mortgage foreclosure.

Seasonal contract

It defines what is understood by a seasonal contract: its use must be justified and accredited. The ordinary duration may not exceed 11 months. If it is detected that consecutive temporary contracts are signed, it will be considered habitual residence.

Room rental

It also defines what a room rental is: it will be required to demonstrate that there is a real need to have this type of contract and, if that is not the case, the contract automatically becomes one for habitual residence. Furthermore, its price is limited: the rental of all rooms cannot exceed the price that the property as a whole would have according to the reference price index of the Ministry of Housing. It introduces, in any case, a safeguard for Catalonia, which already has this issue regulated: the regional regulations will continue to apply. In short, the aim is to prevent a landlord from being able to divide a property into rooms (renting them individually) to avoid a habitual residential contract and, therefore, its protections for the tenant.

Tourist VAT

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

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 the habitual 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 one earns less than 33,007 euros)

A 0% public loan is created to help finance the purchase of a first habitual home. 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 (to say which requirements must be met).

Tax incentives for landlords are offered to mobilize properties: in case of rent price containment or even reduction. For example, they will be able to benefit from strong deductions when paying personal income tax (IRPF) on the positive net rental income they receive. Specifically, it can be a deduction of up to 100% when, in the case of being 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 homes) 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 undistributed profits through dividends is increased to 25%. SOCIMIs that manage offices, warehouses, or shopping centers are excluded. The increase provides for strong deductions if the assets (real estate) are intended for affordable rent or if the profit is reinvested in affordable rental housing.