The new law on housing has already come into effect in Spain, and among its critical points we must highlight the issue of tension areas which can limit the price of rentals. Much has been said about this housing law and its possible consequences on Spanish real estate if rental prices are to be limited. This law is now in force with the name Ley Estatal por el Derecho a la Vivienda (State Law of Housing Rights), but which are its main aspects? What does limiting rental prices imply? Will this law affect everyone equally? In relation to rental prices, being the most mentioned part of this law, it refers to the fact that each autonomous community will be capable of limiting, in tension areas, the rental prices for large property owners that are also corporate entities. Nonetheless, this law can also affect the income of small landlords if the property is located in a tension area, as we will now see. First and foremost, it should be clarified that a large property owner is one who has more than ten urban properties without counting garages or storage rooms, or if an owner has a property of more than 1.500 m2. Regarding these two instances, the autonomous community will be able to limit their rental prices. In order to achieve this, official statistics will be stated. However, they are still pending to get structured and it is calculated that this will take a maximum of 17 months to be ready. Once this is ready, then each autonomous community will be capable of limiting rental prices in those parts that are regarded as tension areas by simply applying the statistics. At this stage, we must say that a tension area is one where the average cost of a mortgage or of rental price plus essential and and basic supplies exceeds 30% of the average income or the median household income. In addition, purchase or rental prices will have increased in five years´ time more than five points above the Consumer Prices Index (CPI) in the automous regions. In this regard, the administration in charge of housing issues of each autonomous community must specify which parts are considered tension areas.

PRICE LIMITATIONS: POSSIBLY NEXT FISCAL YEAR

We have seen that in the tension areas that will suffer a rental price limit this will be applied to large property owners that are also corporate entities (that is to say, enterprises). In the absence of being made public the prices by index of reference, which will enable us to know exactly the scope of these limitations we do, however, know that these will not affect private individuals but with only one exception: those owners that have rental properties in a tension area. If this is the case, once the tenant has completed the rental contract, then this tenant can apply for a three-year extension and still pay the same rental price with the corresponding increase in the Consumer Prices Index (CPI). Likewise, rental prices in new contracts will also be limited taking the previous contract as a reference. When will these rental prices limitations come into force? We have already mentioned that the Government has given a time frame of around 17 months in order to publish the pricing benchmark that must be applied; this means that, presumably, these limitations may be applied next fiscal year. We have already said that each autonomous community will have the power to make use or not to of these price limitations. Currently, the Partido Popular has stated that it has no intention of putting it into practice. At present, PP governs in five Spanish autonomous communities.

BONUSES AND UNOCCUPIED RESIDENCES

On the other hand, this law provides for tax relief with a maximum deduction in personal income tax, regarding rental income, which could reach up to 90% if the price has been lowered 5% in a tension area. In addition, this tax relief could reach 70% if the property is rented to people under the age of 35. Furthermore, if the property has been rehabilitated two years before it has been put on the market for rent, then the tax relief could reach 60%. As for unoccupied residences, the municipalities can penalize owners with an extra charge of between 50% and 150%, depending on each case, in the Municipality Property Tax. Furthermore, those companies that rent more than eight properties during more than three years will obtain a tax relief of 40%. Moreover, 30% of urbanized land must be used for new housing developments focused on social housing, and 50% of them must be destined to social rental. The price of subsidized-housing cannot be disqualified until after, at least, a period of 30 years.