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How Catalonia will control prices in ‘stressed rental areas’

The region of Catalonia has become the first in Spain to declare so-called 'stressed rental zones' under the country's Housing Law, meaning authorities will now have greater control over how much landlords can charge for rent.

Published: 12 January 2024 11:58 CET

How Catalonia will control prices in 'stressed rental areas'

Catalonia introduced 'stressed zones' to control rental prices. Photo: Enrico Perini / Pexels

Spain’s new housing law, which was introduced last year, included a clause that would allow local housing administrations to declare areas known as ‘stressed rental zones’ and implement action plans to remedy the imbalances in the rental market.

Stressed areas as those that meet one of two pieces of criteria. Areas that exceed the Consumer Price Index (CPI) of their respective province by five points and where families dedicate more than 30 percent of their salary to paying the rent.

In these areas, landlords will be forced to charge rents within a certain range and will also be incentivised to do so through certain ‘bonuses’ which can be offset against tax.

Catalonia will be the first region in Spain to declare a ‘stressed zone’ under the new regulations, where rents are some of the highest in the country, particularly in and around Barcelona.

New measures to be in force from February 2024

The Minister of Territory of the Generalitat of Catalonia, Ester Capella, announced recently that starting in February rental prices will be further regulated in the region.

“In February, the containment of rental prices will come into force in Catalonia,” she stated.

In 2022, the Spanish government set a general two percent ceiling on rent increases across the country which was extended again in 2023. In 2024, this has been increased slightly to three percent.

The introduction of these ‘stressed zones’ allows for even greater control above and beyond these caps, including rent freezes.

Following the agreement reached between the Catalan government and Spain’s Ministry of Housing and Urban Agenda (MIVAU), rent freezes for between one and three years will be introduced in 140 municipalities in the region.

Rent caps set a ceiling on the amounts landlords can increase rental contracts by, while rent freezes stop them from increasing prices completely during a certain amount of time. Rental regulations on the other hand introduce certain parameters that landlords must stick to. For example, from 2025, regulations mean that rental prices will be tied to a newly created index, instead of just having caps.

The Catalan government had been waiting months to implement the new rules but was held up by the fact that the central government still had to publish its reference index for these so-called ‘stressed zones’.

Which areas have been declared ‘stressed zones’ and how will it work?

These zones include Catalonia’s major cities such as Barcelona, Tarragona, Lleida and Girona, as well as the main towns in the Barcelona Metropolitan Area, such as Hospitalet de Llobregat, Terrassa, Badalona, Sabadell, Mataró and Santa Coloma de Gramenet, along with Reus near Tarragona.

The law has already passed through the Catalan parliament, so once it’s implemented in February, rental prices in force in the 140 municipalities will be frozen between one and three years, and new contracts may not exceed the index that is finally approved.

“For us, for the Government of Catalonia, for the Department of Territory, it is very good news, as it is also for the citizens of Catalonia, that income containment is a reality in February,” Capella celebrated.

Not everyone believes this will have positive effects

Although in theory, freezing rents and introducing further controls sounds like a good idea, particularly for tenants, many experts believe that in practice it will lead to further problems.

Francisco Iñareta, the spokesperson for property portal Idealista, explained: “It is not good news, especially for those families who need to rent a home starting next month. Catalonia is precisely the place where these recipes have already been tested and where the results have been contrary to those desired: a significant drop in available supply and price increases, despite being controlled. There is no place where price control has been beneficial for citizens and in all the cities where it has been implemented the consequences have been the same – shortage of housing, enormous difficulties in access, very selective criteria on the part of the owners and the birth of the black market”.

His opinions were also echoed by David Caraballo, general director of Rental Insurance. “This announcement makes us glimpse dramatic consequences for the model of access to housing. We have already witnessed the inefficiency of using indices to limit price historically. We have seen it in Great Britain, in Berlin, in Paris and very recently in Catalonia.”

He also insisted like Iñareta that will produce adverse effects. “Not only has it not been possible to regulate the rental market, but it has been confirmed how it has affected supply, shrinking, and even demand, intensifying it. And prices skyrocketing as a consequence of the gap between the reality of the market and the intervened income,” he explained.

Looking back to 2022

Catalonia already regulated rental prices through a law that was in force until March 2022, but it was overturned by the Constitutional Court and now no longer applies. The approval of the Housing Law means that now the region can introduce further controls to aim to rectify its skyrocketing prices.

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Why regional elections in Catalonia matter to Spain's future

Sunday May 12th will see regional elections in Catalonia at a time when political uncertainty and unpredictability reigns not only in the northern region but across the country. As such, the results could, and likely will, have political ramifications at the national level, perhaps even on the stability of the government itself.

If you follow Spanish politics, you’ll have probably noticed that there’s been quite a lot going on recently. And even if you aren’t a semi-obsessive politico, Spanish politics has been so melodramatic, so unpredictable and (at times) so ridiculous, that in recent months it’s been hard to ignore.

In short: Socialist (PSOE) Prime Minister Pedro Sánchez made a pact with Catalan separatist parties to stay in power after last summer’s general election. Part of this was an amnesty law that granted a legal amnesty to people involved in the failed 2017 referendum independence bid, but it caused outrage across many parts of the country and led to weeks of protests, some of which were violent.

Though Sánchez faced a lot of public ire, Carles Puigdemont, the former President of Catalonia who is a fugitive from Spanish law, takes the brunt of the hatred, particularly from the Spanish right and far-right. Puigdemont is running again in the regional election on May 12th, and has already stated that he will leave politics if he isn’t re-elected.

More recently, Sánchez shocked the country by publishing a highly personal letter on Twitter/X, reportedly released without the advice of his advisors or cabinet colleagues, stating that he was taking five days out to consider his future following repeated attacks against his wife over alleged influence peddling. This came right before the Catalan campaign kicked off and essentially brought politics to a standstill and left the country in limbo.

Sánchez then disappeared from public life, shut himself away in his La Moncloa residence and considered his future, leaving the country in the midst of what felt like a telenovela – a soap opera. On Monday he announced he was staying on and attempted to use the decision as a pivot moment to reinvigorate his government, strengthen Spanish democracy, and to make a stand against what Sánchez describes as the far-right ‘mud machine’.

Others view things differently. While Sánchez supporters see the debacle as a brave affront to right-wing harassment and lawfare tactics used against him, critics have described it as farcical, manipulative, and opposition Partido Popular leader Alberto Núñez Feijóo said that Sánchez had “made a fool of himself” and embarrassed Spain on the global scene.

Many view the move as cynical electioneering, and Sánchez does indeed have a well deserved reputation as a somewhat machiavellian political maneuverer.

But how can Sánchez’s five day mini-sabbatical be electioneering if Spain had elections as recently as last summer? Here’s where the upcoming Catalan elections come in again.

Why regional elections in Catalonia matter to Spain’s future

In short: the results of the Catalan elections have the potential to disrupt the delicate power balance in Madrid.

Some context: in the Catalan regional government, pro-independence parties Esquerra Republicana de Catalunya (ERC), Junts per Catalunya (Puigdemont’s party) and the smaller Candidatura d’Unitat Popular (CUP) have an absolute majority. This allowed separatist parties, namely ERC and Junts, greater political leverage when negotiating the amnesty with Sánchez and the PSOE last year.

Though some, particularly in Junts, would like the amnesty (which is still yet to be approved in the Senate) to go further, the national government has more or less survived since the summer based on this uneasy truce. Depending on the results in Catalonia on May 12th, we may see just how fragile it really is.

Exiled Catalan separatist leader, MEP and founder of the Junts per Catalunya (Together for Catalonia) party Carles Puigdemont gives a speech during a meeting to present his list for the upcoming regional elections in Catalonia, in Elna, southwestern France. (Photo by Matthieu RONDEL / AFP)

What do the polls say? Most seem to have the PSC (the PSOE’s sister party in Catalonia) making big gains and becoming the biggest party in the Generalitat, with leader Salvador Illa becoming President. According to RTVE’s average of polls, the PSC is on course to win 39 seats, six more than in 2021. Junts is projected to be in second place with 32 seats and would thus overtake ERC, which would get 28, a loss of 5 seats, though some polls put ERC in second and Junts third.

However, no poll gives the PSC an absolute majority of 68 seats needed to govern alone. As such, the PSC, should it win, will require the votes of far-left Comuns-Sumar, but also a coalition arrangement with a pro-independence party, most likely ERC.

However, polling from El Nacional, a Catalan newspaper, estimates that undecided voters still make up a third (33.5 percent) of the Catalan electorate, so there will likely be some variation from polling data to the results on election day.

Interestingly, Sánchez’s five day reflection period seems to have actually boosted PSOE polling numbers overall on a national level. According to a flash poll taken following the letter, the PSOE vote intention surged.

But the move has not proven popular with politicians in Catalonia, particularly among the pro-independence parties Sánchez’s government relies on in Madrid. The current President of the Generalitat and ERC candidate Pere Aragonès accused Sánchez of exploiting the “empathy” of the Spanish public “for an exclusively political purpose”, describing the “five day comedy” as “yet another electoral manoeuvre.”

The ERC has even made a complaint to Spain’s electoral authority about Sánchez’s decision and subsequent interview on Spanish state TV, claiming it could have breached electoral rules by favouring the PSOE candidacy in the Catalan election.

Junts general secretary Jordi Turull, meanwhile, has accused Sánchez of “interfering in the Catalan election.”

Remember, these are the parties that prop up the Sánchez government at the national level.

Protesters hold up a banner reading “Pedro (Sánchez), traitor” and “Spain is not for sale” during an anti-amnesty protest in Madrid. (Photo by Pierre-Philippe MARCOU / AFP)

Potential scenarios

So, it’s safe to say that things are tense in Spanish politics. Sánchez has angered a lot of people with his period of reflection — not only his opponents but also those who prop up his government in Congress. Conversely, the move does seem to have increased PSOE support overall ahead of polling day, and the PSC seems to be on course to win in Catalonia.

With no party likely to win an absolute majority, the Catalan results on May 12th will require coalitions, which could in turn have a ripple effect on alliances in Madrid. This is principally because there is a possibility that ERC or Junts could be left out of the Generalitat, which could remove the incentive for one (or even both, in the unlikely event of a PSC absolute majority) pro-independence parties to keep Sánchez in the Moncloa, or at the very least to demand more from him.

The polls suggest the most likely outcome is the PSC winning the elections but needing the support of ERC. At the national level, this could lead to a split in the separatist movement and would leave Junts’ support in Congress up in the air. Junts could theoretically withdraw its support, topple the government, and trigger further general elections.

Another scenario touted by political pundits is that pro-independence parties could again win an absolute majority between them. This would heap further political pressure on Sánchez, who, after already spending a lot of political capital on the amnesty law, would likely be pressured for further concessions from the Generalitat, namely another referendum but also changes to the amnesty law. Separatist parties would point to their victory, against polling predictions, as a mandate for pushing the pro-independence movement further.

Of course, there’s also the (admittedly unlikely) possibility that Junts per Catalunya win an absolute majority and Puigdemont becomes President of the region, something that would set the scene for his return to Spain and send shockwaves through Spanish politics.

Perhaps there is no better indication of how important this election is than the fact that Sánchez’s first public appearance since his ‘will he, won’t he’ resignation stunt was at the Fería de Barcelona.

Whatever happens in Catalonia on May 12th, two things seem certain: firstly, that people from across the country will be tuning in for the results; and secondly, as the last few years have shown, predictions are essentially useless and anything can happen in Spanish politics.

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