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Five key points about Spain’s new housing law

Spain’s new housing law or Ley de Viviendas finally comes into force from Thursday May 18th, here's what you need to know about how it will affect you.

Five key points about Spain’s new housing law
Spain's new housing law enters into force on May 18th. Photo: falco / Pixabay

Spain’s long-awaited housing reforms, the Ley de Viviendas finally comes into force. The Spanish government is to approve the new law definitively this Wednesday, May 17th without changes, which will prevent it from having to return to Congress, meaning that it will be up and running in time for the regional elections on May 28th.

It will be published in the Official State Gazette (BOE) the next day and come into force from this Thursday, May 18th.

Here are five key points about the law you should know and how they will affect you, whether you rent a property or you’re a landlord.

Regulation of rental prices

One of the most important features of the new law is that it allows communities and town councils to indicate ‘stressed’ market areas in order to establish limitations on rental prices.

For an area to be considered ‘stressed’, it must meet at least one of two requirements. These are areas that exceed the Consumer Price Index (CPI) of their respective province by five points and areas where families dedicate more than 30 percent of their salary to paying the rent.  

In these ‘stressed areas’, the price limitations on leases will be different depending on whether the owner of the apartment is someone who has more than ten homes – a limit that can be reduced to five if the council so wishes – or if they own less than five. Owners of more than five properties will be obliged to lower prices up to a certain limit that will be established by the Ministry of Transport through an index. 

READ ALSO – MAP: The high-demand areas in Spain where rents will be controlled

Rent control index

Up until now, during the first five years of the rental contract, the landlord had the right to increase the price each year by the same percentage as the CPI, but the new law will also establish a new index that will replace inflation when it comes to limiting the annual increase for rental payments from 2025 onwards.  

In 2022, faced with relentless inflation, the Spanish government approved a law to prevent annual rent increases in line with the CPI during 2022. In doing so, they set a two percent ceiling on increases, which the Spanish Cabinet then subsequently extended and will remain in force throughout 2023.  

In 2024, a ceiling of three percent will apply, whatever the level of inflation. Landlords may not raise the price of their contracts already in force above these percentages.  

READ ALSO: What Spain’s new housing law means for you if you’re a landlord

Agency fees

Anyone who has ever rented an apartment will be aware of agency fees and what an extra financial burden and worry they can be. In Spain, agency fees are usually equal to one month’s rent, sometimes more, and fortunately for renters the new law shifts the onus to pay fees onto owners, not the tenants.

In addition, the law also prohibits increases to fees beyond what is advertised or in the contract, such as forcing tenants to pay expenses for ‘la comunidad‘ community or municipal fees.

READ ALSO: How Spain’s new housing law will affect you if you rent

Tax penalties for empty apartments

The new housing law will offer municipalities the possibility of financially penalising those who keep their properties empty or unoccupied in order to encourage them to go on the market.

This penalty will be levied through a surcharge on the Real Estate Tax (IBI) of up to 150 percent. A property will be considered “permanently unoccupied” when it remains empty “continuously and without justified cause for a period of more than two years”, provided that its owner has four or more houses. 

If the property has been empty for two years, the IBI surcharge may be up to 50 percent or “up to 100 percent of the net tax rate when the vacancy period is greater than three years,” the law states. City councils may increase the surcharges for landlords who own two or more empty properties in the same municipality.

Tax incentives

This is the only part of the law that will not enter into force this from May 18th, but will instead do will do so as of January 1st, 2024. The current system of tax incentives will remain in force throughout the rest of this year.

From 2024 onwards landlords may be able to benefit from the new housing law through several tax incentives. Currently, landlords can deduct 60 percent of the amount they charge the tenant from their personal income tax payment, but this will be reduced to 50 percent in areas that are considered to be ‘stressed’.   

However, depending on the rental prices that landlords in ‘stressed’ areas charge, these deductions can almost double. The tax deductions can go up to 90 percent if the owner lowers the rental price by at least five percent compared to the previous contract; and up to 70 percent if a new home is put on the market and rented to a young person between the ages of 18 and 35 or if it is rented to the public administration.

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PROPERTY

VUT, AT and VV: Why Spain’s holiday let categories matter to owners

Have you ever seen the acronyms VUT, AT and VV when it comes to renting out your apartment short-term to tourists? Confused and want to know what it all means and why it matters for you? Read on to find out.

VUT, AT and VV: Why Spain's holiday let categories matter to owners

VUT stands for Vivienda Uso Turístico or Property for Tourist Use, while AT stands for Apartamento Turístico or Tourist Apartment.

Sometimes tourist apartments are called VVs or Viviendas Vacacionales (Holiday Homes). They have the same rules and classifications as ATs, but are just called by a different name.

These two categories above, although are similar, are actually different and mean different things for both those who want to rent out their properties and those renting them.

The main differences are in the legal requirements, in accordance with the regulations of each region they’re located in.

READ ALSO – UPDATE: Which cities in Spain have new restrictions on tourist rentals?

What are VUTs?

VUTs can be houses, apartments, chalets or individual rooms and they can be rented through agencies or directly from the landlord. They are rented out for days or weeks at a time to tourists, but are rarely rented out for months, because then they would then be considered as tourist apartments (ATs) or long-term lets instead.  

The exact amount of time they can be rented for typically depends on the rules in each different region in Spain. These regional regulations also determine if you need a tourist licence to rent out your property or if you need to register with an agency for example.

They can be someone’s habitual home, which is occasionally rented out on platforms such as Airbnb when they go on holiday for instance. Or a home that is only rented out to tourists during a particular season.

What are ATs?

ATs on the other hand are only for tourist use and are never used as someone’s habitual home as well. In order to be legal, they need to have a tourist licence, register with competent organisations, adhere to quality and security regulations and also provide services such as cleaning and possibly a reception or concierge.

Tourist apartments are governed by Royal Decree 75/1997, which regulates the legal regime for the control of tourist apartment establishments.

Again, each region in Spain has its own laws regarding these types of accommodations. Some places have limits on the number of them allowed, while others have regulations on where they’re allowed.

For example, Seville recently announced it wouldn’t grant any more tourist licences for apartments located in the Old Town neighbourhoods, while Barcelona hasn’t been issuing new ones for years.

Málaga has also introduced new rules that tourist apartments must have separate entrances and some regions only allow them on the first floor of a building.

What are the main differences between ATs and VUTs?

ATs are intended for tourism use, with usually a stay of no more than three months, anywhere above this time and it’s a long-term let.

VUTs as mentioned before are typically rented out for less than 30 days and in some regions, it can only be a maximum of five days.

If you have a VUT, it’s not required for you to provide professional services, like cleaning, although if you rent it out on a platform like Airbnb you will be expected to carry out these duties, even if you do it yourself.

But, remember the classification isn’t always up to you and what you intend to use the property for. For example, in Barcelona a tourist licence is needed for any rentals of fewer than 31 days and the property must be for tourism purposes only, therefore it can only be a AT and not a VUT.

What do I need to know regarding these classifications?

Basically, whether your property is a VUT or an AT, you need to contact your local authorities before you start renting it out to tourists for any length of time and find out what the local rules and regulations are.

If you’re a tourist, then you’ll know that ATs typically have more regulations than VUTs and offer more services, and you can be sure that they’re legal and have a tourist licence too.

If the property is a VUT and just rented out to holidaymakers occasionally, it’s important to find out what services, if any, will be included and if the property is operating legally. You can do this by asking them for their tourist licence number, if one is needed.

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