More than 15% of the population lives as a renter in Spain. The increase in prices, the difficulty in adding a sufficient amount to pay the down payment for an apartment, as well as the difficult process to obtain financing through a bank loan, make this alternative increasingly common among citizens.
Now, the rental market is also in a complex situation. The notable increase in prices, greater than the increase in labor income, has shown the economic vulnerability of households that rent. The latter, with incomes generally below the average, allocate a high percentage of their income to housing-related payments, in many cases exceeding 40%. Furthermore, demand is much higher than supply, which makes the competitiveness of this market very high.
Thus, those who are renting, glimpse a scenario that is at least opaque. On the one hand, the supply is low and the price is high. But not only that, there is also the fear of those who want to stay in their current apartment, but do not know if their landlord is going to raise the rent.
In this context, with the real estate market constantly changing and government policies adapting to current economic needs, it is crucial to understand the new limits established for rentals and their implementation. Starting in 2024, housing rental contracts will no longer be updated by the CPI, according to the new Housing Law. In 2025, these contracts will be adjusted according to a new update index, described in the BOE as “more stable than the CPI and also lower.”
In 2024, two scenarios may occur. On the one hand, if an agreement is established with the tenant, the rent can be increased according to the percentage that both parties consider appropriate. If a consensus is not reached, the increase in rent may not exceed 3%.
For example, if a rental contract is signed in June 2023 for a monthly rent of 1,000 euros, Upon completion of the first year in May 2024, the owner may apply the CPI percentage of the previous month to update the price. In this case, with a CPI of 3.6% in May, the rent would increase by 36 euros, resulting in a new monthly payment of 1,036 euros.
If an agreement is not reached, the maximum increase allowed for the same example of 1,000 euros per month would be 3%, which represents an increase of 30 euros per month. Thus, the updated price would be 1,030 euros.
Until December 31, 2024, all rental contracts that are renewed will be subject to a 3% price increase limit, imposed by the Government. For contracts that are updated according to the IGC, the annual variation of the index on the date of each review will be applied, taking as reference the month corresponding to the last index published on the date the contract was updated.
As of January 1, 2025, a new index for updating rental prices will come into force, the objective of which will be to update all rentals. This new index is expected to be more stable and show lower growth than the Consumer Price Index (CPI).
The Housing Law, published in the Official State Gazette (BOE), includes in its first final provision the introduction of a new additional provision in the Urban Leases Law. This provision assigns the National Institute of Statistics (INE) the task of defining, before the end of 2024, a new reference index for the annual update of housing lease contracts, in order to prevent disproportionate increases in updates. annual rents.
Although the operation of the new index is still uncertain, it is expected that it will be similar to the update of income with the current CPI.
