Spain's rental market and shortcomings of the new housing law

October 24, 2023 | Reading time: 5 min

Spain's failing rental market

shortcomings of the new housing law

Even before the implementation of this law, substantial criticisms were already labeling it as controversial.

It was a promising commitment: a new housing law that would curb the rising rental prices in Spain and guarantee affordable housing for everyone.

However, now, five months after the implementation of this law, we are confronted with a bleak reality. Instead of the promised improvements in the rental market, rental prices in as many as 21 Spanish cities have reached record highs. Additionally, the supply of rental properties is declining at an alarming rate.

Soaring rental prices

One of the primary objectives of the new housing law was to control rental prices. However, it is clear that this objective has not been met. Data shows that rental prices increased by a substantial 9.3% on a year-on-year basis in the third quarter of the year. The average now stands at €11.8 per square meter, a sum that is unaffordable for many families.

This increase is not limited to just a few cities. In fact, 34 capital cities now have higher rental prices than before the introduction of the new law. Experts have deemed this law as "inappropriate" and "counterproductive," and their concerns seem to be justified. In 21 of these cities, rental prices have even reached historic peaks.

When we examine the price development over the last three months, we see an increase of 0.3%. However, in Spain's major cities, rental prices continue to rise sharply. Barcelona, Madrid, Alicante, Valencia, and Málaga all have annual increases in double digits, with Valencia leading the way with a 22.1% rise.

The situation is particularly dire in Barcelona, where renters are paying €20 per square meter, followed by Madrid and San Sebastián. These price levels are unsustainable for many.

Decrease in supply

One of the predicted adverse effects of the new housing law was a decrease in supply. Landlords would become more hesitant to offer their properties in the rental market due to fear of government action. This has resulted in a shift towards sales or tourist rentals.

Data confirms this concern. The supply of regular rental properties has decreased by as much as 30.57% since the law's implementation. This means that families and vulnerable groups are finding it increasingly difficult to access affordable rental housing.

Francisco Iñareta, spokesperson for Idealista, notes that landlords are now inclined to choose tenants who offer more legal security and protection against default. This exacerbates the issues in the rental market and creates an unequal situation.

An uncertain future

It appears that the rental market in Spain is struggling with the consequences of the new housing law. Prices continue to rise, supply is diminishing, and families are facing unaffordable rental rates. This situation is not only an economic problem but also a social one.

José María Alfaro, the president of the Federation of National Real Estate Associations, emphasizes that indicators point to the continuation of this trend in the coming months. He calls for long-term solutions that are not dependent on election calendars or partisan politics. The situation in Spain's rental market is urgent and requires attention from policymakers to ensure affordable and accessible housing for all citizens. The failure of the new housing law reminds us that good intentions do not always lead to the desired results and that urgent action is needed to address this crisis.