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On 1st February, the Government’s cabinet approved the future new Housing Law. This is a law that you should be aware of as a tenant or landlord of a property, which is why at Terra Homes we are going to explain everything you need to know about the new rent law.

Rent regulations

One of the most important changes to come into force is the regulation of rent prices in the case of large landlords, who own over 10 properties.

They will have to reduce their rent prices in accordance with the benchmark index for those contracts in areas which are in high demand. Likewise, each autonomous community will request a declaration of the high rent demand areas from its Executive Body.

High rent demand areas will be considered as those in which 30% of income is spent on rent, or those in which rent has gone up by 5% of the CPI over the last five years.

In this regard, councils will have the power to establish which these areas are for a term of three years, which can be extended by another three if needed. All of this will be based on a price index which will be established within a maximum of 18 months as of the new law coming into force.

High demand area bonuses

Those individuals who own rental properties in high demand areas can also freeze the rent prices, however, if they choose to lower the price of the contract by 5%, they may benefit from tax bonuses of up to 90% on the rent received.

If renting for the first time to those aged between 18 and 35, this bonus may be up to 70%. And, in the case of the property having had energy efficiency or renovation work completed, there will be a 60% bonus.

In the case of those landlords who have signed 10 year contracts, or longer, the prices in these high demand areas will not be frozen, and they may be risen by 10% over the course of the contract term. Tenants may extend contracts by up to three years under the same conditions.

Empty properties, in the tax spotlight

Empty properties will be taxed with a surcharge of up to 150% on their property tax, with a few exceptions. Councils will be in charge of enforcing these measures, which have caused some controversy.

In fact, the mayor of Madrid has assured that in the capital the measures will be coordinated where necessary so that Madrid residents will not have to assume the increase in property tax.

250 euro rent bonus for young people

This measure is for those young people, aged 18 to 35, who are paying rent of up to 300 euros, or up to 450 euros in more expensive areas such as city centres.They will be able to benefit from a 250 euro support payment towards their rent. To qualify for this the applicant’s income cannot be over three times the IPREM (Multiplier Effect on Index of Revenue), which would be 24,318.84 euros in 2022.

On the other hand, to not unduly effect those moving for work reasons, those cases in which individuals change province or autonomous community shall also be considered, in which case they will be provided with paperwork that needs to be completed to continue to receive this support.

There is also a certain flexibility with the requirements in theses cases, in which those with an income of less than four times the IPREM (Multiplier Effect on Index of Revenue) (32,425.12 euros per year) can also receive this support.

Increase in social housing

The new regulations also mean that there will be an obligation to reserve 30% of property developments as protected housing, and half of this percentage will be used for social housing. A series of measures have been established so that property developers will be duly compensated, and that no private investment is lost through payment, land assignment, or the increase of the developers’ 30%.

There is also a measure related to accessible housing to incentivise private ownership, based on which, those landlords who reduce their rents can enjoy certain benefits, both in terms of taxes and other aspects. Finally, the new regulations make it impossible to dispose of social housing. These are the mains points that you should know about the new Housing Law, also known as the rent law. We hope this has been of use for you.