New housing law bans agency fees for tenants

The new housing law is a regulation promoted by the Government with the support of the ERC and EH Bildu that aims to regulate the real estate market and guarantee the right to decent and affordable housing. The law, which is still pending approval in the Courts, introduces several changes and contains measures such as the limitation of rental prices in ‘stressed market’ zones, the creation of affordable housing, the regulations for evictions, and bans agency fees for tenants.

Here are some of the key points that are contained in it:

Tax advantages for ‘small’ owners to encourage lower rental prices.
Small owners, i.e. individuals or small companies (less than 10 properties) that rent their homes below the average market price, will have a 90% discount on personal income tax. In addition, a 60% deduction is established for owners who rent to vulnerable people or those at risk of social exclusion.

More taxes for empty houses.
The new law establishes an IBI surcharge for homes left empty that are owned by legal persons or large holders (more than 10 properties). The surcharge may be up to 50% and will be applied when the home has been unoccupied for more than two years.

Regulation of evictions.
The law prohibits evictions without alternative housing for vulnerable people or those at risk of social exclusion. In addition, the term to suspend evictions for non-payment of rent is extended until December 31st, 2023.

Definition of ‘stressed market’ zone.
The law defines a stressed market area as one where the average rental price exceeds 30% of the weighted average annual gross income per household, or where the average rental price has grown by more than 20% in the last five years.

No agency fees for tenants.
Undoubtedly, this is the most controversial topic and charge that angers tenants throughout the islands. The new regulation states that the tenant will not have to pay any agency fees because it is the owner who has hired the services of the agency, so it is their responsibility. This measure seeks to reduce the costs of access to rental properties for tenants.

Inability to change public housing rating.
The law prohibits public or subsidized housing from changing its rating and becoming ‘free priced’ for at least 30 years. This measure aims to prevent speculators from buying the properties to maintain the public housing stock.

Creation of a social housing fund.
The law creates a social housing fund to facilitate access to decent and adequate housing for people in situations of vulnerability or risk of social exclusion. The fund will be made up of homes donated by financial institutions, public administrations, and other social agents, and will be rented at affordable or relevant prices to the income level of the beneficiaries.

The new housing law is an ambitious regulation that seeks to respond to one of the country's main social and economic problems: access to decent and affordable housing.

However, it has also generated criticism and controversy from some sectors that consider that the law is interventionist, creates legal uncertainty, and lacks sufficient incentives. We will have to wait and see how its parliamentary procedure and its practical application develop to assess its real effects on the real estate market.