In May 2023, Spain's Housing Law (Ley de Viviendas) came into effect. It was an ambitious and wide-ranging piece of legislation that sought to regulate rising rental costs, implement price caps in some cases, and also forced landlords to pay agency fees and levied tax penalties on big property owners who maintain empty units, among many other things.
The legislation came in response to long-term concern among Spaniards about the state of the property market, and was portrayed by the government as a piece of flagship policy. However, even then, some on the Spanish right and in the property market were sceptical and warned of unintended consequences.
Well, it seems they may have been right. Experts now warn that the law, if anything, has worsened conditions for renters: new regulations have scared off landlords and pushed them into the tourist market, which has reduced supply and put up prices, in some cases to historical record highs -- exactly the opposite of what the law was intended to do.
So a year on, has the Housing Law worked? What effect, if any, has it had on the market?
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Has Spain’s Housing Law completely failed to control rents?
Even if we consider the Housing Law on its own terms (which, put simply, we can understand as wanting to control rising rents) it seems to have fallen short of its objectives so far. And it's not just political opponents of the government saying this; it's property experts, landlords, and even some renters themselves.
Writing in Idealista, Spain's leading property website, "during its first year in operation," Spain's Housing Law has succeeded in "generating even more doubts and uncertainty among landlords and tenants, which has meant that the supply of regular rental housing is declining compared to the increase in other types of rentals, such as temporary or room rentals, which have been left out of the regulation of this Housing Law."
As a result of the fear of heightened regulation among landlords, many have left the traditional market and turned to tourist rentals, which are far more lucrative.
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José María Alfaro, President of Spain's Federation of Real Estate Associations (FAI) told 20 Minutos that supply decline is caused by "fear" among smaller landlords due to a "lack of legal certainty" which has led to a "progressive and significant flight" of long-term, affordable property from the rental market.
In the last year, the supply of permanent rental properties has fallen by 15 percent, compared to a 56 percent year-on-year increase in tourist rentals, which now account for 11 percent of the total market, according to the latest data from Idealista. Experts say this is due, in part at least, the Housing Law.
The stats in some Spanish cities are pretty staggering. According to a study by Idealista, 30 percent of the rental supply in Barcelona is now tourist accommodation, while in Madrid it stands at 15 percent and in Málaga it accounts for 13 percent of the stock.
Often in Spain these sorts of tourist rentals and Airbnbs are unlicensed, so the true figures are likely higher.
This pushes up demand for the dwindling rental stock. According to figures cited by Spanish daily El Mundo, in 2023 there were on average 17 applicants per property advert in the first quarter of the year. In 2024, there are now 27 interested parties per advert.
Stock down, prices up
On top of that, as The Local has reported previously, Spain's various rental caps, freezes and housing law rules have done little to stop rents rising.
In cities across Spain, prices have skyrocketed. Year-on-year figures showed that rents soared in 2023, particularly in major cities. In Valencia rents went up by 22.1 percent, and in Alicante (18.6 percent), Barcelona (18.1 percent), Málaga (17.9 percent) and Madrid (10. 7 percent).
José Ramón Zurdo, Director General of the Rental Negotiation Agency (ANA), told Idealista that there has been a noticeable change since the Housing Law was passed: "We have noticed that since the Housing Law was passed, the rental supply has decreased considerably, and this has led to an increase in the rents charged by landlords."
FAI figures estimate that the volume of properties on the long-term rental market has fallen by more than 30 percent since the law came into force and, consequently, prices have risen by more than 12 percent on average.
READ ALSO: Spain's rent freezes and housing law fail to prevent price rises
Stressed areas
Another key branch of the Housing Law was the creation of 'stressed' rental zones, which must meet one of two 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 rent.
However, data reveals that 2,298 areas of Spain are considered 'stressed' per the criteria (20.83 percent of the entire country) but for the moment only Catalonia has tried to properly implement them. In practice, one year into the Housing Law, the stressed area tool has only had a material impact on new rental contracts in less than a third of the municipalities across the region.
Regions governed by the right-wing Partido Popular have refused to implement it, describing the idea as a "mistake." Interestingly, neither have any of the Socialist (PSOE) led-regions, which suggests that even the regional parties themselves may think the law (designed and implemented by their party at the national level) at best difficult to implement, and, at worst, a failure.
A failure?
A year is not a long time to judge long-term impacts of legislation. That Catalonia is the only region to really try and implement the policy makes it difficult to draw rounded conclusions, and the problems it's trying to address are deeply rooted, structural issues in the Spanish property market. But the signs aren't great so far.
Judging the law on its own terms, the aim to regulate rents seems to have failed. A more charitable interpretation would be that the law needs time to bed in and take effect, but with increased regulations on landlords, many have turned their properties into tourist accommodation, a growing sector outside the scope of the law -- another key problem with the legislation.
The law seems undoubtedly well intentioned. Spaniards around the country are struggling with rising rental costs, and putting together legislation to try and help them seems sensible.
However, if the unintended consequences deplete housing stock and cause prices to go up, it seems difficult to conclude the Housing Law has been a resounding success so far.
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