The new Housing Act 12/2023 (hereinafter the “New Act”) aims to regulate, within the scope of the State’s competences, the basic conditions that guarantee equality in the exercise of rights and in the compliance of constitutional duties relating to housing, in particular, the right to access decent and adequate housing and the enjoyment thereof in affordable conditions. This is set out in its first section.
These objectives are materialised in a series of procedures, all equally controversial, according to the dissenting voices that have been generated in this respect by the passing of this Act.
The main procedures contemplated by the New Act are as follows:
1. Stressed Areas
The New Act broadens the concept of Stressed Areas already provided for in the previous regulations (territorial areas in which there is a special risk of insufficient supply of affordable housing under conditions that allow access to the market), the areas that meet one of the following requirements will be considered Stressed Areas:
- The average burden of the cost of the mortgage or rent on the personal or household budget, plus basics expenses and supplies, exceeds thirty per cent of the average income or the average household income.
- That the purchase or rental price of the property has experienced in the five years prior to the declaration as stressed housing market area, a cumulative growth of at least three percentage points higher than the Consumer Price Index (CPI) of the corresponding Autonomous Community.
The procedures to be observed in these new stressed areas are not contemplated in the New Act, but rather the competent Authorities will develop a specific plan and proposals to rectify the manifested imbalance, thus, in the meantime, creating a legal vacuum.
2. Rent Limitation
Two subsections are added to Section 17 of the Tenancy Act (Ley de arrendamiento urbano, LAU.)
- In the case of tenancy agreements for housing located in stressed residential market areas, the rent agreed, for the same dwelling, at the start of a new tenancy agreement, may not exceed the rent of the last tenancy agreement for an habitual residence that has been in force for the last five years.
- It may only be increased by a maximum of 10% of the last rent of the tenancy agreement for the habitual residence when the circumstances referred to in the aforementioned section have been proven (renovation work, or improvements to the dwelling such as energy savings, accessibility, etc.).
- If the landlord is a large property owner and the dwelling is located in a stressed market area, for such consideration, it will be sufficient (for the purposes of rent limitation) that the landlord owns five urban properties for residential use. The rent limitation shall be governed as follows:
a) the rent agreed at the start of the new tenancy agreements may not exceed the maximum limit of the price applicable according to a system of a benchmark price indices.
b) the same limitation shall apply to tenancy agreements where the property is located in a stressed residential market area and on which no tenancy agreements have been in force for the last five years.
3. Imposition that the costs for property management and tenancy agreements execution are to be borne by the landlord (Section 20 of the Tenancy Act, LAU)
4. Extraordinary limitation on annual rent reviews in dwelling tenancy agreements
From January 2024, rent reviews will no longer be linked to the CPI, a new index for rental reviews, still to be defined, will be approved.
Accordingly, it is foreseen a provisional regime in the New Act based on the date the tenancy agreement is due for annual review.
5. Extraordinary extension of the duration of tenancy agreements, discretionary for the tenant, compulsory if the landlord is a large property owner
The New Act allows, upon request of the tenant, an extraordinary extension of the tenancy agreement terms for a maximum period of one year, during which the terms and conditions contemplated on the current tenancy agreement will apply.
Requirements: the tenant must provide evidence of a situation of social and financial vulnerability, certified by a report issued within the last year by social services.
In the case of a landlord who is a large property owner, the landlord is obliged to accept the extraordinary extension, this requirement does not apply if the landlord is not considered a large property owner.
6. Eviction Procedures
The procedures contemplated include the revision of the following:
- Improvements to ensure effective communications between the judiciary and social services to ensure prompt attention to individuals in vulnerable situations.
- Housing solutions to those affected and, until these solutions arrive, extensions of the deadlines for the adjournment of evictions.
- Should the claimant be a large property owner, and the eviction claim concerns vulnerable individuals, participation in a process of conciliation or mediation must be proven.
7. Which tenancy agreements are affected by the procedures contemplated in the New Act?
This is regulated by the fourth Provisional Regulation which states that tenancy agreements subject to Act 29/1994, of 24 November on dwelling tenancy agreements, entered into prior to the entry in force of this Act, will continue to be governed by the provisions of the legal system that was applicable to them, without prejudice to the parties agreeing otherwise.
By means of the procedures outlined here, the government intends to comply with the duty laid down in section 47 of the Spanish Constitution, which is incumbent on all public authorities without exception, within the framework of their constitutional powers, in the exercise of the protection of the right to access and enjoyment of decent and adequate housing. However, it remains to be seen whether these procedures will effectively contribute to access to housing, or whether, on the contrary, they will lead to a decrease in the supply of rented properties and, therefore, to greater pressure on housing prices.
