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PROPERTY

Spanish property news roundup: New laws, taxes and rental benefits

Spain’s government has proposed a series of major changes to the country's housing laws, from price freezes to €250 rental allowances, big tax hikes on empty homes and more.  

Spain's Prime Minister Pedro Sanchez announced on Tuesday young mid-income workers will get a €250 monthly rental allowance if his government's new housing law is approved. Photo: JOHN THYS / AFP / POOL
Spain's Prime Minister Pedro Sanchez announced on Tuesday young mid-income workers will get a €250 monthly rental allowance if his government's new housing law is approved. Photo: JOHN THYS / AFP / POOL

Spain’s left-wing coalition government of PSOE and Unidas Podemos on Tuesday agreed on the country’s Housing Budget for 2022 and with it big changes to the country’s property laws.

The proposed new legislation still has to be approved by the Spanish Cabinet, with no date set yet, lots of questions still to be answered and so far plenty of opposition from right-wing parties PP and VOX. 

The Bank of Spain has also warned that studies conducted in the US, UK and France have shown that measures such as state rental subsidies end up increasing prices.

But if Pedro Sánchez’s government gains the support of the Basque Nationalist Party (PNV) and the Republican Left of Catalonia (ERC), these new laws signalling increased regulation of Spain’s property market will come into force in the near future. A win for some, a loss for others. 

Here’s a round-up of the main proposed changes to property laws in Spain:

Price freezes with some benefits

Spain’s future housing law has a clause focused on the regulation of rental prices for large property holders, those with more than 10 homes. 

If the measure is approved by the Spanish cabinet, they must by law lower rents based on the reference index drafted for all contracts in property markets that are under pressure. 

Regional governments will be responsible for informing the national government of where rental prices are spiking and if they want to introduce the rent cap.

In addition, smaller property holders who are letting out real estate in neighbourhoods where prices are ballooning will also have to freeze rents.

If they’re willing to draw up a new contract with a lower monthly rent, tax credits of up to 90 percent on their personal rental income (IRPF) could apply to these landlords.

As explained by Spain’s Minister of the Presidency Félix Bolaños, the new law will “freeze and reduce rental prices “, with “a very powerful package of tax credits for property owners to willingly introduce price reductions”.

Tax on empty homes 

Spain’s potential new housing law will include a tax on empty homes through an IBI surcharge of up to 150 percent with some exceptions.

IBI stands for Impuesto sobre Bienes Inmuebles in Spanish, which translates to tax on property goods, but it also goes by the name SUMA.

It’s a local tax which has to be paid once a year by all property owners in Spain, and it serves as a benchmark to calculate all other Spanish property-related taxes.

As the IBI amount is decided by the town hall in which your property is located, there can be differences of hundreds of euros between municipalities, and there’s also likely to be opposition to the proposed new tax on empty homes. 

Madrid’s PP mayor José Luis Martínez-Almeida has already promised that authorities in the capital will introduce all the necessary measures so that people in Madrid “aren’t affected by this unjustified increase of the IBI by Spain’s national government”.

READ ALSO: How to pay less Spanish IBI property tax

A young couple and their two infant children at the window in an occupied building in Sanlucar de Barrameda, near Cadiz. Photo: AFP PHOTO/ CRISTINA QUICLER
According to a September survey by Spanish property engine Fotocasa, 62 percent of under 35s in Spain face financial obstacles when buying or renting a property. Photo: Cristina Quicler/AFP

More public housing 

Thirty percent of new builds will have to be social housing projects meant for rental, Spain’s new housing law states, a decision which still has to be approved by the Spanish cabinet. 

Spain has the lowest amount of social housing in the EU with 290,000 units, only 1.1 percent of all properties in the country. 

To put it into context, 30 percent of homes in the Netherlands are social housing, 24 percent in Austria, 20.9 percent in Denmark, 19 percent in Sweden, 17.6 percent in the United Kingdom, 16.8 percent in France and the EU average is 8 percent. 

€250 monthly rental allowance

Spain’s Prime Minister announced on Tuesday that as part of his government’s wave of proposed changes to housing laws, 18 to 35 year olds who earn below €23,725 gross per year will be able to get a monthly discount of €250 off their rent.

Tenants would be able to claim a maximum of €6,000 in total over a two-year period whilst vulnerable families will receive extra state aid to cover “up to 40 percent” of their monthly rent.

READ MORE: Spain to give young mid-income earners €250 monthly rental allowance

Property price hike in Malaga 

In other property news, Malaga province has seen the biggest real estate price increases of all 50 provinces in Spain over the past year, up 9.2 percent compared to 2020 and 13 percent higher than in 2019. 

The average price of €2,433/sqm makes the coastal province the most expensive in Andalusia and the sixth most expensive in Spain after Guipúzcoa, the Balearic Islands, Madrid, Barcelona and Vizcaya, new figures from Idealista show. 

According to data from Spain’s Ministry of Development from the first quarter of 2021(the latest figures available), the average price of a home in Málaga province is €240,238.

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RENTING IN SPAIN

How to rent a property in Spain without a job contract

When looking to rent in Spain, property owners and estate agents often ask for a 'nómina' and work contract - something that can prove tricky if you're self-employed or not working. Here's how to prove your solvency and secure the rental.

How to rent a property in Spain without a job contract

If you’re looking for a house or apartment to rent in Spain, there can be a multitude of different factors to consider.

The price, the size, the location, the neighbourhood, which floor the flat is, on and whether there’s a lift, whether it’s interior or exterior, how many apartments there are per floor, whether to go private or through an estate agents and, of course, the search itself.

When you’re going on visits, you’ll have to contend not only with owner or agent trying to ‘sell you’ the place, but also explaining the terms and conditions (often referred to as las condiciones or requisitos para entrar).

In Spain, the process can be a little complicated. Often landlords ask for two months deposit upfront, and those that go through an intermediary estate agent tend to ask for two months, plus an extra month (plus VAT, or IVA as it is in Spain) that goes to the agent! It certainly adds up. 

Not only that, but very often in Spain you are expected to prove you will be able to pay your rent every month. And it’s not as simple as you might think. 

Most estate agents or landlords think hat the best way to ascertain this is by you providing proof of an employment contract (contrato laboral) and recent payslips (la nómina) that demonstrate you are paid the same amount every month, and that it’s enough to cover the rent and other expenses.

Here’s where things can start to get tricky for self-employed people (known as autónomos in Spain), who number more than 3 million in Spain.

Regardless of whether your monthly autónomo earnings are high pretty much every month, regardless of how consistent they may be, or even if you have regular clients, the irregular and insecure nature of Spain’s work market have ensured that landlords and realtors take a rigid attitude towards the rules.

This is especially true following the turbulent economic times of recent years as we’ve moved from global pandemic to war in Europe to spiralling inflationary pressures on the global economy.

Landlords want to be sure you can pay the rent. Therefore, they may favour a waiter with a nómina of €1,000 a month over an autónomo who can prove monthly earnings double that for the previous six months. Doesn’t seem fair, right? 

READ MORE: Why you should be raising your rates if you’re self-employed in Spain

Well, that’s often how it can be in Spain. Fortunately, if you find yourself in this situation, there are various ways you can convince potential landlords that you are financially solvent enough to rent their property, with or without a fixed contract

The law

Now, it is not unheard of – in Spain nor anywhere else in the world – for an estate agent or landlord to try and squeeze more money out of you, or to add on some extra charges. In most people’s experience, Spanish estate agents and landlords are no better or worse than anyone else, but it’s worth keeping in mind.

It has been known, however, for some in Spain to try and get an extra month’s deposit by telling potential tenants that they need a nómina by law in order to rent a property in Spain, and that they’re doing you a favour by allowing it.

Simply put, this is not true. According to Spanish law, more specifically, La Ley de Arrendamientos Urbanos (Urban Renting Law), although many landlords require some form of financial insurance, there is absolutely nothing to say a nómina is necessary to rent a property in Spain. A deposit is legally required, but a nómina?

Helpful? Certainly. Legally necessary? Definitely not.

That said, if you explain to the property owner that you’re self-employed, some landlords maybe be willing to make other arrangements to ensure the rent.

Here are some options, and other bits of paperwork that could help:

Aval bancario: Like a bank guarantee, some landlords request tenants without nóminas or work contracts to set up an aval bancario.

You must pay in an agreed amount (often worth the value of two or three months of rent, sometimes more) into a bank account that you’re a customer with.

It’s money that you cannot touch for an agreed period of time and which you pay some interest on, and in the event that you do not pay your rent, the landlord will be able to access said funds.

This is not the cheapest way to rent a property, but it may be one of the more effective ways of convincing a landlord to accept you as a tenant.

If you pay your rent diligently every month and prove that you are reliable, after a year you should speak to your landlord to ask them them to cancel the aval in order to not continue paying interest on it and recover your stored money.

Anuncios de particulares: If you’re using the usual rental search engines like Idealista or Fotocasa, the vast majority of rental adverts are from estate agents (inmobiliarias) who ask for all the proper documentation, including contracts and pay slips, and often the extra month’s rent as a fee.

When you’re making your search, keen an eye out for anuncios particulares , which are private ads direct from landlords.

Sometimes if you deal directly with the owner themselves, they are less strict about rules with regards to nóminas and contracts. Maybe you’ll get really lucky and find a landlord that takes a liking to you and who only asks for one month’s deposit.

Seguro de impago de alquiler: A landlord may be more likely to rent to you even if you don’t have a nómina when they have seguro de impago de alquiler, non-payment rental insurance. It protects the landlord for the duration of the contract and covers the rent and any repairs or legal fees.

IRPF: IRPF is Spain’s personal income tax, and providing your most recent income tax return could help put your potential landlord at ease by proving that what you’ve earned over the last year could cover the cost of the rent.

Seguridad Social: Similarly, providing proof of your social security payment can help prove your financial solvency.

Bank statement: a simple bank statement to show account activity – and that you have enough to pay the rent and deposit, of course – might ease the mind of your landlord as it allows them to see your incomings and any debts you might have.

IVA: Showing your VAT (IVA in Spain) returns could be another tool that, when used in conjunction with other ways of proving your solvency, could convince a landlord to rent to an autónomo.

Pensioner documentation: If you’re retired and you’re looking to rent, any official documents which show how much pension money you receive every month, along with bank statement reflecting savings, should suffice to convince a landlord or estate agent that you’re solvent.

READ ALSO: Renting in Spain: Can my landlord put up my rent due to rising inflation?

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