Restrictions on housing rental prices

Act 12/2023, of May 24, on the right to housing (the "Housing Act"), which came into force on May 26, 2023, imposed price restrictions on new housing rental agreements, which vary according to the location of the property.

Housing located in strained housing market areas ("SHMA")

The implications vary based on whether the lessor is a large property holder.

• If the lessor is not a large property holder, the rent cannot exceed the amount established in the previous agreement, once the annual adjustment clause has been applied, except in certain circumstances that allow for an increase of up to 10%.
• If the lessor is a large property holder (individuals or legal entities owning over 10 properties or a built surface area of over 1,500 m2 of residential property, excluding parking lots and storage spaces), the lower of the following amounts will be applied: (i) the updated amount established in the previous agreement; or (ii) the applicable price set out in the system of reference price indexes (the "Reference Indexes") approved under Resolution of March 14, 2024, of the Secretariat of State for Housing and Urban Agenda, which was recently published in the Official Gazette of the Spanish State and entered into force on March 16, 2024. For more information on the Reference Indexes, visit the Ministry of Housing and Urban Agenda’s website.

The limits set in the Reference Indexes also apply to housing properties that have not been leased for five years, regardless of whether the lessor is a large property holder.

Resolution of March 14, 2024, of the Secretariat of State for Housing and Urban Agenda, which was recently published in the Official Gazette of the Spanish State, identifies 140 municipalities in Catalonia considered SHMA from March 16, 2024. This Resolution has also lowered the threshold set in these 140 municipalities to be considered a large property holder, the definition of which now encompasses individuals and legal entities owning five or more residential properties in these areas. To date, no other autonomous region has asked to be declared a SHMA.

Properties not located in a SHMA

The price containment measures described above do not apply to housing located outside a SHMA. Therefore, the parties may freely agree on the rental amount on entering into new agreements, with the Reference Indexes serving merely for informative purposes.

Finally, it is worth noting that for 2024, the Housing Act has restricted rent adjustments to a 3% increase in the case of existing lease agreements. This cap will apply to all residential properties, regardless of whether they are located in a SHMA. The National Institute of Statistics is expected to publish a reference index by December 31, 2024, that will replace the current Consumer Price Index.