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A Controversial Proposed Rental Law

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he PSOE socialist government led by Pedro Sánchez, the Prime Minister, does not have a majority in parliament and joined forces with the left-wing UD (Unidos Podemos) party. To pass the 2022 budget, the PSOE have had to agree to wide ranging proposals from the UD regarding rented properties. The major proposal relates to companies with more than 10 properties, rented out in “tension” areas where the cost of renting is too much for young people. The ‘catastral’ register, that ties properties to owners, shows 270,000 private individuals or corporate entities in Spain that own more than 10 properties, but not necessarily all dwellings. There are 26,500 in Madrid, 25,500 in Barcelona and 16,000 in Valencia. In coastal areas, Alicante has 13,000 and Málaga has 8,000. In Madrid, 1,700 owners have more than 50 properties, with another 1,600 in Barcelona and 760 in Valencia. The proposal is that many rental contracts in areas of “tension” will be amended below a monetary cap. As yet, the details of how the capped amount will be calculated have not been revealed, but one hint is that this will apply when the rent is more than 30% of the average earnings amount in the area, or has gone up 5% more than the cost-of-living increase since 2016. The government suggests that there are 150,000 properties throughout Spain that will be affected. This does not apply to a private individual who rents out more than 10 properties, only companies. Persons aged 18-35 with low incomes will be given a grant of 250 euros a month for two years to enable them to rent. Their income has to be less than three times an index of employment income known as ‘IPREM’, so persons earning less than 23,700 euros per annum. The Spanish tax authority, the ‘Hacienda’, calculate that there are approximately 5 million people in the age group 18-35 who earn less than twice the minimum wage, which is now 1,126 euros a month, so 13,500

euros per annum. Even with the extra 3,000 euros a year, 30% is not enough to find a rental property, unless a couple or friends rent a property together. To encourage individuals to rent out properties in the areas of tension, the proposals are that there will be a relief from income tax of up to 90% if the owner reduces the existing rent by more than 5%. There is already a 50% reduction in tax that will increase to 60% if the rental property has been recently renovated, and 70% if the renter is aged 18-35.

Another proposal is that if a company or individual has four or more properties, and some are vacant, they will have to pay more ‘IBI’ (council tax). This will not apply to a second home, or one on the market to be sold or rented without any buyer / renter. The suggestion is that the amount might increase by 150%. This idea is fraught with difficulties as it will have to be town halls who make the surcharge and there will have to be a legal definition as to what constitutes a vacant property. Pedro Sánchez hopes that the proposed law will help him to obtain the conditional EU grants. The PP political party in opposition is totally against this, and in the PP-run autonomous communities such as Andalucía, they intend to completely reject them. They state that these changes are not needed, will not be made, and would ultimately push rents up as the pool of rental properties decreases!

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