The New Law for the Right to Housing brings with it significant changes that are worth knowing and analyzing. In this article, our objective is to provide you with an objective and complete vision of the changes, advances and new value criteria that this law introduces and the problem of access to housing.
The "New Law for the Right to Housing" (La Nueva Ley para el Derecho a la Vivienda) brings with it significant changes that are worth knowing and analyzing. In this article, our objective is to provide you with an objective and complete vision of the changes, advances and new value criteria that this law introduces to ease the problem of access to housing.
Spain has traditionally been known as a "country of landlords" with a persistent housing deficit, especially in the rental sector. Despite the efforts of recent years, the problem persists today. Factors such as inflation, high unemployment rates and global situations such as the COVID-19 pandemic have worsened this situation.
But the beginning of the housing problem in Spain is much older: the lack of investment private, the concentration of urban growth in already consolidated areas, or the profit of the elites and large landowners have been some constants that have distanced the always sought solution: enlarge and update the Spanish residential stock to the new needs of citizens.
Background to the Housing Law: from interventionism to autonomy
The direct antecedents of the new housing law are found in the history and evolution of the real estate sector in Spain, undergoing different stages in the housing policy in the country. Thus, in the midst of the Restoration (Spanish Bourbon Restoration, 1874-1931) initiatives were promoted to guarantee access to housing, approving in 1881 the law on "Construction of Workers' Neighborhoods" (Construcción de Barriadas Obreras) culminating in 1911 with the so-called constructions of Cheap Houses (Casas Baratas) in various parts of the territory.
Between 1909 and 1929 several attempts to build new neighborhoods would be made through specific laws until in 1931, the Second Republic (1931-1939) created the Social Real Estate Policy Board to initiate a stricter control of the use to which most of them were submitted. But the outbreak of the Spanish Civil War (1936-1939) would put an end to all the projects... And the problem will continue to grow until today.
And what was the problem of social housing in Spain at that time? It was not a problem of overpopulation, it was a problem of urban concentration, of unsanitary conditions. And meanwhile, a large part of the country continued to be fully agricultural, holding in the hands of a few the great part of land that nobody could use. This initial lack of consensus, project and investment will be postponed during the Franco dictatorship (1939-1975) making it impossible to stop and redistribute the flow of growth in the main cities and with it, the redistribution and revaluation of other urban areas, always behind the internal migrations of the country. of those who were looking for a better life.
The establishment of the Franco dictatorship, the Second World War (1939-1945) and the alignment of the regime with the Italian-German bloc caused an international blockade of Spain for more than two decades. This international closure gave rise to a series of interventionist and self-management measures known as “Autarchy”. During this period, the regime introduced its first housing laws, greatly benefiting the country's large landowners. However, it is in this period that the foundations of a new urban control system are laid:
- In 1939 the National Housing Institute (Instituto Nacional de la Vivienda - INV) was created, establishing the first measures and rules for access to subsidized housing, as well as the first official aid for its construction, always with public financing.
- At the end of the 60s, with strong internal migrations and In an unprecedented economic and demographic boom, new initiatives emerged such as Officially Protected Housing (Viviendas de Protección Oficial - VPO), still called that today, and in 1964 the first LAU (Ley de Arrendamientos Urbanos - Urban Leasing Law).
Despite attempts to expand the rental housing stock, the problem persisted. It was from 1978, and already protected by the new Spanish Constitution, when the Law of Officially Protected Housing (Ley de Viviendas de Protección Oficial) was promulgated in 1981 and the competences in the matter of housing were transferred to the Autonomous Communities (CCAA) being to date a territory where each region has full powers to self-manage housing.
With the fall of the regime and the arrival of the 1980s, demographic and economic growth continued, promoting access to the purchase of homes with measures such as the liberalization of mortgage loans. On the other hand, this new model of public management of autonomous housing generated even more differences between regions. And scant control of buying and selling activities at a general level that emerges as a complicated background of the endemic housing crisis.
Direct background of the Housing Right Act 2023 (Ley por el Derecho a la Vivienda de 2023) :
We reached the most recent governments of the 90s and the new century with the same problem as always. There is no balance between promoting new construction and rehabilitation, which seems to be far from being a viable option. Additionally, renting is not currently a preferred option due to rising prices and few benefits the new law appears to provide.
Over the past two decades, Proposals to put an end to the housing problem happen. In fact, the public promotion of housing from the year 2000 to 2011 will not exceed 0.4% of the total housing started in each of those years, being in the period only 1% of the total housing offered. The need to address the structural problem of housing in Spain is evident, now also prioritizing the diversity of options, accessibility and sustainability, in line with the 2030 agenda and government plans.
And it is in the year 2018 that Royal Decree-Law 21/2018, of December 14, is put on the table and that proposes urgent measures to improve access to housing and favor affordable rent, although it will not be able to pass the validation process in the Congress of Deputies. Subsequently, with effect from March 6, 2019, the Royal Decree-Law 7/2019, of March 1, on urgent measures regarding housing and rent is published in the BOE (Boletín Oficial del Estado) thus modifying the LAU (revised in the year of 1994) to regulate the use and application of rental contracts in the urban area.
Its objective is to establish the rules and conditions for the relationship between the landlord and the tenant, and defines the rights, responsibilities and obligations of both parties. However, the lack of a transversal and global approach is evident, the lack of consensus between the agents involved and the search for efficient solutions that benefit both the public and private sectors and favor the collaboration that is required of all forces.
The LAU came into force in 1964 and over the years it has undergone various modifications. One of the most important changes was in 1995, 31 years after it came into force. Later in 2013 the law was also changed significantly. The last change was in March 2019.
How the new housing law intends to redirect the problem of access to housing:
The definition of a large holder (gran tenedor) is modified: Reducing it from 10 to 5 homes in stressed areas. In addition, in stressed areas, limitations are imposed as to the increase in the rental price. The stressed areas will be determined by the Autonomous Communities and the town halls, who must justify this declaration based on indicators such as rental and sale prices, the level of household income and its evolution over time. This declaration has a duration of 3 years and can be renewed annually if necessary. It is estimated that it will be applicable from the year 2024.
In the "large holder" category, the increase in rental income... An increase limit of 3% is established for rents renewed in that year, one percentage point higher than the 2% in force in 2023. 2024, the Consumer Price Index (Índice de Precios al Consumo - IPC) is eliminated as a reference for the annual updating of rents.
The owners will be able to transfer certain housing expenses to the tenant: Such as the taxes of the Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas IRP- IBI) or those related to garbage , as well as other property maintenance costs, as long as there is a mutual agreement between both parties.
Real estate management expenses and associated costs... When the lease is formalized, they will always be the responsibility of the landlord, whether a natural person or a legal entity.
Tax benefits are established in the Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas - IRPF) to encourage a reduction in rental prices. Owners who rent homes in stressed areas and reduce the rental price by a 5% with respect to the previous income, a deduction of up to 90% in personal income tax may be applied on the net rental income.
In the case of unoccupied homes: The Real Estate Tax (Impuesto sobre Bienes Inmuebles - IBI) is increased. However, this measure will depend on the decision of each local government, which may apply different surcharges on the tax depending on the vacant properties that meet the established requirements.
The protocol for evictions and foreclosures is redefined... Establishing new requirements that broaden the vulnerability criteria. A distinction is made between owners who are or are not large holders, and different procedures are established in each case. And this is a point that generates a lot of debate, since the vulnerability of people who cannot pay the rent or the mortgage due to situations of vulnerability (unemployment, serious financial problems, illness) and the illegal (criminal) occupation of a home, making it difficult for the owner to evict and recover the property.
In the framework of measures related to subsidized housing: the permanent classification of land reserved for this purpose is guaranteed, except in duly justified exceptional circumstances. In addition, the possibility of reserving a percentage of buildable land on rural and urbanized land for subsidized housing is established, without exempting certain municipalities: A minimum reserve of 50% is set for subsidized rental housing, and it ensures that the housing promoted in Soils used for housing are subject to a permanent protection regime, with some exceptions. Finally, the figure of "affordable, incentivized housing" is introduced, with benefits for private owners who use it for rent at reduced prices. In addition, public housing parks are regulated, limiting their sale to public and non-profit entities. These measures are added to those already implemented to promote access to housing.
The types of land and properties for social rental are expanded: The new law is included in the package of measures of the Government's Recovery, Transformation and Resilience Plan in the search for a new model of sustainable urban growth and affordable, as well as inclusive. As we said at the beginning, it is important to highlight that renting in Spain has historically been residual, and is still culturally considered as a step prior to buying and investing in second homes, especially in coastal areas of speculation. This contributes to an outdated model of urban growth, focused on consolidated cities instead of new areas to be developed.
The new law is situated within a new model of urban growth: accessible and sustainable
As we have seen, the problem of access to housing is not from yesterday and has a lot to do with the needs of society and the lack of consensus between the parties involved. . At a European level we continue to be at the bottom with only 2.5% of social housing in 2020, with the Netherlands in the top positions with 30%, followed by Austria with 24% and Denmark with 20.9%. With respect to the Autonomous Communities and both in terms of public housing for rent and purchase, Andalusia, the Basque Country and Madrid have the largest number of homes.
However, there is great controversy with this law, powers have been invaded and there are gaps in various points, which causes instability and doubts, especially among private investors. Some quarters feel that the new law puts even more pressure on property owners, which may lead them to consider selling rather than renting. In addition, increasing cases of illegal occupation of houses have been observed, which generates concern and raises the need to provide greater protection to the owners. Difficulties in the energy rehabilitation of buildings/homes, the lack of transparency in certain transactions and the absence of a regulation model for real estate labor practice throughout the country are also mentioned.
At Safire we believe that any change in this regard and in favor of society requires collaboration between the State, the autonomous communities, municipalities and real estate agents because it is together that we can better defend than never the interests and needs of the citizens who live in Spain. It is not only a matter of regulating transactions, but also of addressing taxation, legal protection and defense of the final objectives of the process, providing experience, knowledge and answers. And you, do you think that our needs for buying and renting, selling and real estate investment are being more respected now with the new housing law? Discuss it with us!