Spain approves 21 new housing measures affecting renters, landlords and holiday lets

The Spanish Government has approved a major new package of 21 housing measures that could have significant implications for renters, landlords, first-time buyers and holiday-let owners across Spain, including the Canary Islands.

Two new Royal Decree-Laws were approved by the Council of Ministers this afternoon (Tuesday) as the Government attempts to tackle rising housing costs, increase supply and give tenants greater stability.

For residents in the Canary Islands, one of the headline measures is a new €10 billion financing scheme offering interest-free loans of up to €50,000 to people buying their first home.

The package also includes tax incentives for tenants and small landlords, measures affecting rental-contract extensions, greater protection for vulnerable households, restrictions aimed at large property investors, and changes affecting tourist accommodation.

However, there is an important qualification: the measures have been approved by the Government but still face parliamentary scrutiny and validation.

With Spain's parliament dissolved ahead of the general election, the Royal Decree-Laws must now be considered by the Permanent Deputation of Congress.

Up to €50,000 interest-free towards a first home

One of the most significant measures for prospective buyers is the creation of a new financing scheme called “Tu Casa”, which will be administered through Spain's Official Credit Institute (ICO).

The Government is allocating €10 billion to the scheme.

It will provide interest-free loans of up to €50,000 to people purchasing their first home, with the scheme designed particularly to help buyers who can afford mortgage repayments but struggle to save the large deposit normally required.

Importantly, the Government says the scheme will be intergenerational, rather than being restricted exclusively to young buyers.

Further eligibility criteria and practical details will be important in determining exactly who can access the scheme once it becomes operational.

Changes for renters and landlords

The housing package also introduces measures intended to give tenants greater stability while providing incentives for smaller landlords to offer properties at affordable rents.

Tenants will be able to claim a tax deduction on part of their rental costs, while small landlords will be offered tax incentives when properties are rented at affordable prices.

The Government gave the example of somebody paying €800 per month in rent potentially receiving a tax deduction approaching €1,000.

Another measure would allow qualifying rental contracts to be extended for up to two additional years, provided tenants are up to date with their payments, while limiting increases in rent.

A separate Royal Decree-Law establishes automatic extensions when certain rental contracts expire, subject to specified exceptions.

However, this particular measure has a greater degree of uncertainty.

Prime Minister Pedro Sánchez acknowledged that the Government currently does not have sufficient parliamentary support to guarantee approval of the automatic-extension decree.

The Government says it will therefore not take effect simply upon publication in the Official State Gazette, but would only do so if subsequently validated by the Permanent Deputation.

Holiday Lets also targeted

The package could be particularly relevant in the Canary Islands because it also addresses tourist accommodation and temporary rentals.

The Government says tourist properties should be taxed as businesses, while the wider package seeks to tighten regulation surrounding seasonal rentals and room rentals.

This is particularly significant for the Canary Islands, where the relationship between holiday accommodation and the availability of long-term residential housing has become one of the most contentious political and economic issues of recent years.

The measures approved by Madrid are national legislation and are separate from the Canary Islands' own regulations governing holiday lets.

Property owners in the islands will therefore need to consider both sets of rules where applicable.

Restrictions on large property investors

Another major part of the package is aimed at reducing property speculation.

The Government plans to restrict residential property purchases by certain large investment funds, while tax advantages enjoyed by listed property investment companies, known in Spain as SOCIMIs, will increasingly be linked to providing affordable rental housing.

The Government says the measures are designed to distinguish between ordinary small landlords and large-scale investors.

Protection for vulnerable people facing eviction without alternative accommodation is also included, alongside additional guarantees intended to prevent the financial burden falling on small property owners.

More money to increase housing supply

The package is not limited to regulating existing homes.

The Government has announced €280 million in guarantees to encourage industrialised housing construction, which uses factory-manufactured components to reduce construction times.

A further €400 million is being allocated to organisations providing social housing.

The state-owned housing company Casa 47 is also expected to acquire thousands of properties currently belonging to Spain's Social Security system and make them available to groups struggling to access housing.

What happens next?

For renters, landlords and property owners in the Canary Islands, the crucial point is that Tuesday's announcement does not mean every one of the 21 measures is now permanently established law in its final form.

The two Royal Decree-Laws follow previous housing decrees approved by the Government on 29th September which subsequently failed to secure validation in Congress.

The Government has now reintroduced the measures with modifications and additions.

Because parliament has been dissolved ahead of Spain's general election, the new decrees must be considered by the Permanent Deputation of Congress, which continues performing certain parliamentary functions during the election period.

Some provisions are expected to take effect following publication in the Official State Gazette (BOE), subject to subsequent validation, while the separate automatic rental-contract extension measure will require approval before taking effect.

For anyone in the Canary Islands considering buying their first home, renting a property, operating a holiday let or letting residential property, the next stage will therefore be particularly important.