Small homeowners and future tenants, most punished by housing decrees

Academics warn that new housing and rental laws being implemented in Spain are disproportionately affecting the most vulnerable groups, particularly young people and recent immigrants. These measures, approved by the Council of Ministers on October 6th to pave the way for early elections on November 29th, have been criticized for their negative impact on the rental market, especially in terms of supply and the difficulty of selecting tenants.

According to a report by the Fundación de Estudios de Economía Aplicada (Fedea), published yesterday, these laws are likely to exacerbate housing shortages and price increases, which are already evident in the rental market. The report's authors, Fernando Pinto from the University of Royal Saint John and Santiago Calvo from the University of the Hespérides, argue that the approval of these laws "smacks of legislative fraud" as the executive branch has manipulated the distribution of seats to validate the measures.

One of the key findings of the study is that the restriction on rental price increases, set at 2% or 0%, depending on income levels relative to the Ministry of Housing's index, effectively reduces the cost of rentals. However, with inflation projected to exceed 3%, this translates to a real reduction in rental incomes between 1% and 2% for updates and 2.9% to 3.8% for frozen incomes.

Moreover, the new regulations for short-term and room rentals, which automatically convert contracts into permanent rentals if the landlord cannot prove the reason for their duration and cap the rental price at the total cost of the apartment offered, could lead to a reduction in supply. This is particularly detrimental to tenants who typically rely on these types of contracts, including students, displaced workers, and recent immigrants.

The study also highlights deficiencies in the zero-interest loans of up to 50,000 euros for first-time homebuyers, which could offer different benefits than those claimed by the government. These loans could result in a subsidy of approximately 7,000 million euros if the ICO's 10,000 million euro budget is exhausted, posing a significant fiscal burden on the government.

Additionally, the report points out that the tax measures accompanying these laws may have unintended consequences. Rather than incentivizing property owners to lower rental prices, these tax changes could result in additional penalties for owners when reporting their incomes. The authors predict that this could lead to a higher accumulation of contracts in a frozen state, with only a 5% reduction, ultimately lowering the net income of new contracts.

However, this would also come at the cost of increased administrative complexity and potential informal practices, as landlords would be required to provide detailed information about their tenants' incomes and rental locations to ensure compliance.