Five tips to reduce the euphoria over the rental cap

BarcelonaThe Minister of Housing, the Minister of Territory, and the Mayor of Barcelona appeared this Friday, in what was a show of force by the Socialists, to review the first anniversary of the containment of rental prices, the flagship measure of the housing law passed almost two years ago. Here are five points that temper the euphoria surrounding positive data on prices and new contracts.

1. These are new contract figures, not market-wide figures.

The data announced this Wednesday by the Spanish government, the Generalitat (Catalan government), and Barcelona City Council provide a clear headline: rents are falling in Catalonia, and especially in Barcelona, since the price cap was implemented. In fact, the Generalitat's press release explains it this way: "Since its implementation, there has been a 3.7 percent drop in the average rental price in all municipalities in the areas declared as having a stressed residential market in Catalonia and a 6.4 percent drop in the city of Barcelona." The nuance to keep in mind here is that this reduction only refers to new contracts, and not to an average of all current rentals in the stressed areas.

2. Do you have a current contract? You will not directly benefit from the cap until it expires.

The rental price cap that began to be implemented a year ago in Catalonia, when it initially declared 140 municipalities as stressed areas (later expanded to 271), applies only in these territories and applies to new contracts through two means: on the one hand, it prohibits price increases relative to the third, real estate—and all apartments put on the rental market for the first time in five years must comply with the reference price index. But what consequences does this have for tenants with a current contract? They will see this when their contract expires: it will be then that, if they want to continue living in the same apartment, the owner will have to decide whether to renew it or not, but what they cannot do is increase the price beyond what they were paying. And if they are a large holder, the price could even drop if it is above the reference index.

3. Do you want to enter the rental market? It is still difficult to find an apartment.

While the data is good for tenants, because they're less likely to be evicted, it's not so good for those currently looking for a rental home. Proof of this is found on real estate portals, where the seasonal rental market is currently very high, while in recent months the number of new contracts has been declining, as have expired contracts, leading to a stabilization of the market. This indicates that there is less tenant turnover and, therefore, that it may be more difficult to find an available rental apartment.

In fact, the spokesperson for real estate agents in Catalonia, Carles Sala, expressed his surprise at the "triumphalism" of the administrations, especially given the increasing difficulty for citizens in finding a traditional rental home. "Our agents observe how owners are less likely to assume the risk involved in putting a traditional rental home up for rent," he added. For his part, Tenants' Union spokesperson Enric Aragonès said in a media address that anyone who rents or has looked for an apartment in recent months "will not be able to understand the triumphalist tone." The organization has called a demonstration for April 5th to "put an end to the housing business."

4. The 'traps' that are still alive

"Thanks to the housing law, in Catalonia there are no incentives to change tenants," said the Minister of Housing and Urban Agenda, Isabel Rodríguez, during Wednesday's press conference, referring to the fact that if the price of previous contracts in stressed areas is forced to remain the same, the contracts have not been renewed. These incentives will be even smaller if the seasonal rental registry—which will arrive in June—fulfills its objective and brings order to the main means of circumventing price controls. However, it is also true that, given the rent containment, many owners may still transfer their homes to the market or look for other loopholes, such as collecting part of their rent in cash or including the property tax (IBI) in the new contract, to secure an increase beyond the annual CPI update.

5. Seasonal rentals continue to skyrocket.

Seasonal rentals, for now, continue to grow across the country, but overall they represent less than 15% of new rental contracts signed. Specifically, during 2024, Catalonia registered 4,187 more seasonal contracts compared to the total number of contracts in 2023, a 44.9% increase. However, in the city of Barcelona—the Spanish state market—the number of seasonal rentals increased by 15%. where seasonal rentals grew the most- This increase is 40.8%, a figure below the Catalan average. "It's important to know the duration of temporary contracts to assess their turnover and their relative importance in the housing market. In an apartment, you can have 60 temporary contracts in five years," Òscar Gorgues, manager of the Barcelona Chamber of Urban Property, told ARA.