New year, and a new batch of measures announced (by the government and the opposition) to solve the first problem — according to the CIS — for Spaniards: housing. As in the year that passed, the battle has returned. What has not changed, at least for the better, is the state of housing accessibility. As a first reflection, I align with the view that more consensus, more agreements among the main forces, and more solid and sustained policies over time are needed. While housing remains a political weapon, with measures almost monthly and almost always without a budget (less than 1% of the public budget is devoted to housing policy), housing accessibility will not improve.
“The landlords who rent out their homes have been years suffering from media contempt and the onslaught of public policy”
Landlords who rent out their homes have endured years of media disdain and the onslaught of public policy. The linguistic war they have lost. They are not owners who place homes for rent; they are rentiers, speculators who should have rents regulated. Their rents in stressed areas should be frozen, lease updates should rise less than inflation, it does not matter if they lose purchasing power, because they are rich. Nor does it matter if they are not paid or if their property is occupied, it is better for them to endure it than for any other group. In this sense, as with the lottery, the risk of nonpayment or occupancy is small, it is very unlikely that you will win the top prize, but just as we keep playing, because if you hit the first prize the benefit is enormous, and if you hit a nonpayment or an occupancy, the cost is very large. And that slows things down. Moreover, as the title of a recent interview in El Periódico with the mayor of Mataró, from the PSC, “a doorway to a right cannot be to commit a crime”.
The result is that the owner has dodged the long-term rental market. Low profitability, shrinking and with risks. In addition, they have realized that there are other segments, which were very small before, that have grown, are more profitable, more liquid, and even less risky. The tourist, seasonal, or room rental is not only more profitable, but safer, because the probability of default is lower. The consequence is that the rental market is becoming increasingly scarce. Fewer homes are produced, the housing deficit grows each year (which the Bank of Spain already estimates at 700,000 homes) and the ones that exist flee from that market. This means that where the rental regulations proposed by the Housing Law are not applied, rents continue to rise at double-digit rates, and that where they are applied, there is a spectacular reduction in supply.
In Catalonia, the laboratory of Spanish housing policy, in the first year of the Housing Law’s application, new rental contracts have been reduced by more than 15%. And it already came from a decline while the Catalan rental regulation was in effect. Today almost 40% fewer contracts are signed than those signed in 2019. Partly because contracts last longer (which hides a fear of not finding an alternative). Partly because the supply has left. Where? We have several clues.
“The supply of long-term rentals disappears more where the vulnerable live, who are the big losers of all rental market regulations”
The new seasonal rental statistics from Incasòl show a 64% growth of this type of rentals in Catalonia since 2023. We do not have an official figure for room rentals, but looking at platform advertisements, the ratio of room rental listings to listings for full homes (seasonal or long-term) shows values above one in Madrid and Barcelona, i.e., there are more room advertisements than full apartments. This ratio is especially high (above three) in districts traditionally working-class with comparatively lower rents (such as Sant Andreu or Nou Barris). In other words, the long-term rental supply disappears more where the vulnerable live, who are the big losers of all rental market regulations, since they are the last in line in a scarce market. In Catalonia, seasonal rentals are now also subject to the Housing Law. This week Pedro Sánchez promised strict conditions for a contract to be considered seasonal. He also announced that the total rent for all rooms together cannot exceed the rent for the full housing contract and, in areas declared tense, the rent-control mechanisms contemplated by the Housing Law will be applied.
Again, regulations and impositions on landlords, ignoring that the population segments for seasonal rentals exist, just as for room rentals, and, by regulating them, those flats will not return to the traditional rental market. There will simply be a transfer of rent from the owner to the tenant of that type of rental, which, in many cases, is not precisely vulnerable. Since they are not vulnerable, the owner will prefer to stay in that segment, because the risk of nonpayment is much lower.
Not all news is bad. Pedro Sánchez has just announced 100% IRPF bonuses for landlords who do not raise prices for their tenants anywhere in Spain. There was already a “hint” of this last year, although at that time it called for lowering rents. Although those announcements passed unnoticed, as all the media noise focused on rental regulation, the Housing Law already included bonuses for landlords if they met certain criteria. Generally there was a 60% general bonus for the net yield (the amount left after deducting deductible expenses) of rentals intended as a primary residence for those contracts signed before the Law’s approval. For contracts signed afterward, the deductions range from 50% with conditions. Thus, one can reach up to a maximum bonus of 90% if the dwelling is in a declared tense zone and the landlord has offered a discount of more than 5% compared to the previous price or has brought the property to the market for the first time. In other words, the announcement by Pedro Sánchez is a measure that, although already present in the Housing Law, is now being promoted in two ways: raise the bonus to 100% and without requiring a discount. Simply, if the rent is not increased, you can qualify.
“It’s good news that for those landlords who have not yet decided to leave and who accept rent freezes, they will be rewarded with an IRPF bonus”
Therefore, in a context of so much bad news for landlords, it is good news that those who have not yet decided to leave and who accept rent freezes will be rewarded with the IRPF bonus. It was also the case with the non-payment insurance, though regrettably it applies to very few groups. We need landlords not to leave and for some to return. And to achieve this, we need to once again view the long-term rental market as profitable and legally secure. No matter how well-intentioned they are, measures that protect demand at the expense of supply scare away supply. We need to protect demand starting from an offer that feels legally secure, that makes long-term rental profitable, and we must not foster scarcity. Additionally, these measures must be accompanied by a creation of housing that eliminates the structural deficit and accompanies the creation of homes. A new home, a new housing stock built. And, with a budget, ensure that many of these new homes are publicly owned. Without scarcity there are no enemies: neither immigrants, nor expats, nor tourists, since there is no competition. Without scarcity we do not transfer to the landlord the negligence of public policy. Without scarcity there are no queues and disadvantaged households are not the last. Landlords are simply landlords and housing is not the centerpiece of an electoral cycle. I know, you may say I’m a dreamer…
