Government & Podemos Agree to Allow Town Halls to Regulate Rental Prices

11 October 2018 – Eje Prime

The Government has said yes to public control of the rental market in Spain. The Executive led by Pedro Sánchez (below left) has agreed to the regulation of rental prices by Town Halls, according to explanations provided in a Budget agreement reached on Thursday by the PSOE and Unidos Podemos. The measure is established provided its application is “temporary and exceptional” and is carried out only in those urban areas where there has previously been an “abusive increase” in rents.

Rent has formed the focus of the new Government’s action plan in terms of housing. In parallel to the regulation of prices, the Executive has announced that it will advocate the extension of the minimum term of lease contracts from three years to five, and, in those cases where the owner is a legal entity, the lengthening of the commitment between landlords and tenants to seven years. Moreover, the tacit renewal of contracts will be increased from one year to three, provided the intention to not renew the agreement is communicated by either of the two parties at least six months before it is due to terminate.

In addition, the PSOE and Unidos Podemos have agreed that damage deposits (fianzas) to enter rental flats will be capped at a maximum of two months and that the signing of bank guarantees will no longer be demandable by landlords. In the event that an owner wants to recover his home before the term agreed with the tenant, then that scenario must be formally explained in the contract in force.

More funding for the development of rental housing

The agreement, which will now have to be approved by Congress, includes a measure that supports the development of public housing. In the event that it receives the green light from the chamber, the Government will increase the housing budget for next year to €630 million. In 2020, it will increase that pot further still to €700 million and in 2021, to €1 billion. According to the text, in ten years, Spain will invest between 1% and 1.5% of its Gross Domestic Product (GDP) in public housing.

One of the objectives of the public housing plan is “to avoid “homes” from being sold to vulture funds or sold for a profit”, so as to ensure that “particularly vulnerable people” have the possibility of accessing a rental home.

Original story: Eje Prime

Translation: Carmel Drake

Spain’s New Gov’t to Promote Construction of 20,000 Affordable Homes for Rent

12 July 2018 – El País

The Ministry of Development is preparing an ambitious range of measures to increase the supply of rental homes, put a stop to escalating prices and facilitate access to housing for young people and low-income families. Its proposals include a plan to build 20,000 rental homes, which will be allocated at controlled prices in cities where prices have soared, according to sources speaking to El País. Moreover, the Ministry wants to extend the duration of rental contracts from three to five years, limit damage deposits and stimulate the supply of rental housing with tax incentives and the moderation of rents.

More funding, regulatory changes and a tax reform are the three components of a broad plan through which the Ministry of Development says it wants to give a social twist to the housing policies and whose main lines will be announced in Congress today by their owner, José Luis Ábalos. The objective is to avoid a new housing price bubble from destabilising the economy once again, according to government sources, and, in particular,  to help families with limited resources and young people.

The package includes urgent measures aimed at alleviating the increase in rental prices, which have soared by up to 50% in large cities over the last four years due to the emergence of tourist apartments and the reactivation of the real estate market. The Government is going to launch an inter-ministerial working group tasked with developing a set of urgent policies for housing and rent.

Amongst the initiatives that the Ministry of Development is going to implement is a plan to build 20,000 affordable rental homes over the next four to six years. The State will promote the construction of these 20,000, mostly public, homes (although this has not been finalised and all of the possible formulae are going to be considered because the most important thing is for the homes to be built quickly). The homes will be destined for rent or transfer of use, for an indefinite period, with a limited rent or price, in cities with accredited demand and where rental prices are higher.

Palma de Mallorca, Las Palmas, Barcelona, Valencia, Madrid, Málaga, San Sebastián and Sevilla are the cities that have experienced the largest increases in rental prices over the last four years, which have risen by up to 50% on the islands, according to data from Idealista.

Last year in Spain, work was completed on 48,853 private homes and 4,938 social housing properties, according to data from the Ministry of Development. At the height of the real estate bubble, in 2007, almost 650,000 homes were being constructed per year.

The plan will be carried out in collaboration with autonomous communities and town halls, which will be asked to identify and facilitate the most appropriate plots of land on which these housing developments can be built. The State will involve SEPES, the public land entity, in this program and will contribute its own momentum and financial support. The ICO will also play a role in the design of the policies (…).

Original story: El País (by Elsa García de Blas)

Translation: Carmel Drake