The Spanish government (a left-wing coalition between the Socialist party and Unidas Podemos) has announced plans to implement rent controls across all of Spain.
Rent controls are not new in Europe, with Germany, France, Sweden and Ireland having them and London considering their introduction. Even in the US, the states of Oregon, New York, New Jersey, Maryland and California, and cities such as Washington DC, San Francisco, Los Angeles and Detroit have recently introduced measures to control what landlords can charge their tenants.
The national rules
Details of the new regulations, which have faced opposition from landlords, are yet to be disclosed. According to recent statements by the Ministry of Housing and Transport, the regulations won't be ready for at least four months and the current COVID-19 situation may cause further delays.
The policy of introducing rent controls in Spain was included, at Unidas Podemos’ request, in the coalition government’s December 2019 agreement. According to the deal document disclosed to the press, the aim was to prevent abusive increases, control rents, and ensure stable and secure rentals for tenants.
The measures are grouped around two pillars:
- the creation of reference price indexes;
- regions (comunidades autónomas) and municipalities being entitled to regulate prices in neighbourhoods and areas with especially high prices.
Regional reference prices in Catalonia
In March 2019, the latest amendment to the Spanish Lease Act was passed, which included the creation of a reference price index. A further amendment allows regions to define their own indexes should they wish.
Catalonia has since become the first region to implement rent control measures using the reference prices. However, the Council for Statutory Guarantees (Consejo de Garantías Estatutarias) of the Catalonian Parliament warned that the new regulation on rent control could be unconstitutional. As a result, the People’s Party (Partido Popular) submitted an appeal of unconstitutionality before the Constitutional Court.
However, only the Spanish government, by submitting an appeal of unconstitutionality, could suspend the new regulations automatically (without waiting for the resolution by the Court). And it's very unlikely that the government would submit such an appeal give that it is preparing similar regulations for the whole country.
Broadly speaking, the Catalonia measures aim to prevent the initial rent for a property from exceeding:
- the reference price for a similar property in the same urban area; or
- the rent of the property’s most recent lease agreement (updated according to the competitiveness index), if the property was leased between 22 September 2015 and 22 September 2020.
The rent control measures are limited to residential leases (and amendments affecting terms and/or rent) signed on or after 22 September 2020 (when the new regulations came into force) in an area declared a 'tight housing market' (área con mercado de vivienda tenso). The leased property needs to be used as the tenant's permanent residence.
Certain exclusions apply to leases over social housing units or integrated into public networks with a social purpose, and dwellings with a leased area over 150 square metres.
Sixty-one municipalities have been defined as 'tight housing market' areas in Catalonia, including Barcelona. It is expected that more detailed definitions of tight housing markets will be approved in the short term. The provisional declaration will elapse in September 2021.
The Catalonian and nationwide rent control rules build on existing rules setting out pre-emption rights in favour of public administrations to increase the public housing stock and specific provisional measures passed in response to COVID-19. Current times call for a sharp eye to be kept on new Spanish regulations.