The index to limit the price of rent ‘starts moving’ this Friday

Sources of Ministry of Housing and Urban Agenda They announced yesterday that both ministerial resolutions would be published this Friday, after the index has received a total of six allegations, but none have been accepted, and the Generalitat of Catalonia has corrected the statement presented last August in its official bulletin, a “necessary” step to declare the 140 municipalities as stressed areas.

The index is part of a commitment acquired by the Government through the Housing Law approved last May, which states that the Executive could limit rental prices in those areas previously declared as stressed areas through a system of reference price indices.

This reference system, as outlined by the Secretary of State for Housing and Urban Agenda, David Lucas, during its presentation, is a system of price ranges that, for the same home, establishes a maximum and minimum income from of a series of characteristics of the property.

In addition, it is a homogeneous system for all of Spain, with a tax base and that will be updated annually with the latest declaration of the disposable income of the property owner. For this year, use the 2022 return.

The reference price index is mandatory for large holders – individuals or legal entities with more than ten homes or five in the same stressed area, as established by each autonomous community – and for new rental contracts of homes that have not been rented in the last five years and are located in areas that have been declared stressed.

In the rest of the cases, the index will only serve as a reference to know the real value of the rental home, since, in homes already rented, the new rental contract “will be referenced to the previous contract”, that is, it will be will freeze the rent, once the annual update clause is applied, which in 2024 is limited to 3%, so the price can only decrease through negotiation between the landlord and tenant.

However, the price may increase if the home has been improved, if it has energy rehabilitation or if it meets conditions of durability of the lease contract higher than what is contemplated in the Urban Leases Law (LAU), as stated in the Housing Law.

“We have tried to guarantee legal security (…) so that tenants can be taken care of, mainly, but also so that landlords have security,” stressed the ‘number two’ of Housing in the presentation of the index.

Three-year housing and will not apply to the Basque Country or Navarra

The rental limitation will be extended for three years, since this is the period in which the declaration of stressed area will be in force, once officially published.

However, this declaration may be extended annually once the three years have elapsed, but as long as “the circumstances that motivated such declaration subsist and after justification of the measures and public actions adopted to reverse or improve the situation since the previous declaration.” , as explained in the Housing Law.

On the other hand, neither the Basque Country nor Navarra will be able to opt for this system at the moment, since they are communities with different tax regimes, so the Ministry has not been able to have access to the income – the basis of this system – of the owners of these territories. However, Lucas indicated that “work is underway” to develop the index in both communities.

Catalonia, the only Community where it will be applied

However, this rental price control system will only work in those autonomous communities that have been declared stressed areas and, for the moment, the only one that has requested it has been Catalonia, where it will be applied to 140 municipalities in the community.

During a meeting held last January, the Minister of Housing and Urban Agenda, Isabel Rodríguez, and the Regional Minister of Territory of the Generalitat, Ester Capella, agreed that as of February the rent containment law would come into force in the 140 municipalities in Catalonia classified as stressed areas.

Capella affirmed that the Ministry of Housing would approve the index systems that have to be applied and, once this work is completed, the Ministry led by Isabel Rodríguez would publish the report and the declaration of stressed areas of these 140 municipalities, at the same time that it would approve the indices to be applied in these places.

Therefore, with the publication this Friday in the BOE of the processing of the declaration of a stressed area of ​​Catalonia and the reference price index, this community will be able to begin to apply the rental limit in the 140 municipalities declared a stressed area using said index.

Likewise, Lucas assured that other territories, such as Asturias or Navarra, have expressed that they would like to establish the index in their territories, although they have not verbalized it to the Ministry nor have they explicitly requested it.

An index that does not convince

After the presentation of the index, the Federation of Real Estate Associations (FAI) and real estate portals such as Idealista, Fotocasa or Pisos.com have expressed their doubts and their rejection of this reference system to limit rental prices, predicting that it will cause the withdrawal of housing from the rental market and will further increase prices.

In the political bloc, Sumar and Podemos have also expressed their distrust of the index, emphasizing that it will “only” have an effect on the highest prices and will not allow “significant” drops in rental income, while the Minister of Labor and Social Economy, Yolanda Díaz has asked not to stay “halfway” and to “regulate the housing market.”

A critical vision also shared by Councilor Capella, who accused the Government of having a “homogenizing vision of the State” by creating a system of scales to limit rent and not indexes, while ensuring that this measure by the Ministry of Housing will cause an increase in prices.

Regarding the criticisms and accusations, sources from the Ministry of Housing and Urban Agenda have denied that this index is going to increase rental prices and have stressed that the ranking system seeks to ensure that homes “with less value” cannot increase their price at the same time. be compared with higher quality homes in the same area.

“The objective is that no more than 30% of income is allocated to rent,” settled the Secretary of State for Housing, during the presentation of the index.