Are rental prices frozen? Will you pay more if you buy a house on the beach? And for the one you already have? From how many houses are you considered a super real estate investor? These are just four questions raised by the draft of the new Housing Law 2021 that still needs to be definitively approved. And they are not the only ones!
If we add to this the fact that each autonomous community may or may not apply some of the changes to the housing law, we have a mess that is easy to get confused about. But don't worry, that's what we're here for!
In this article we are going to explain everything you need to know about the upcoming new Housing Law so you don't get lost. From who is considered to be a major property owner to what a stressed area is, and how public rentals are in new housing developments. Shall we begin?
The big holders in the 2021 Housing Law
One of the driving forces of the future law, if approved without changes, is the distinction between large property owners and individuals who only have a rented house. The Government understands that the two cannot be treated in the same way and clearly establishes who belongs to which segment.
Thus, a large property owner is considered to be an owner with more than 10 properties (not including garages and storage rooms) or with fewer properties but with a constructed area of more than 1,500 square metres. This definition affects both natural persons (individuals) and legal entities (entrepreneurs, self-employed persons and companies).
Being considered a great owner will have a series of important drawbacks that you will now see more clearly.
Tense areas appear
Another of the most important innovations is the creation of tight rental zones, where rental prices can be limited.
The new Housing Law 2021 determines that an area will be under stress when the cost of the mortgage or rent plus household expenses exceeds 30% of the average income of households in the area. Neighbourhoods or areas where the rental price has risen by more than 5% of the CPI in the last 5 years will also fall into this category.
And what happens if an area is declared to be under pressure? Well, the Government will intervene in rental prices and look for ways to reduce them, both consensual and obligatory.
For large landlords, this will mean that they will have to adapt the rental price to the benchmark index for that area and limit what they charge to the price of the previous contract when it comes time to renew.
Tenants, for their part, may request that the contract price be maintained and that the amount of their monthly payment only be increased based on the CPI.
The law provides for some exceptions to this general rule. For example, rent may be increased by up to 10% for improvements to the home or for long-term contracts.
Which properties have rental price caps?
As you have just seen, the limit on rental prices will affect stressed areas and the properties rented by large property owners. To control the price of other rentals, tax advantages are established for small property owners. Let's take a look at them!
Tax advantages for small flat owners
For those who own less than 10 homes, the law has prepared a series of tax incentives so that they do not raise the price of rent. Specifically, a tax credit of up to 90% is proposed in the income tax return for those who lower the rent. Thus, what they stop earning on one side they receive on the other.
These are the three bonuses that are proposed:
- 50% bonus if the rental price is reduced by at least 5% compared to the previous contract (or at any time).
- 70% discount for renting the property to young people between 18 and 35 years old for the first time or if it is a new contract with improvements or rehabilitation.
- 90% bonus for reducing the rental price in a stressed area.
There will also be changes regarding public rentals in new housing developments. This does not directly affect you as a property owner or tenant, but it is a far-reaching measure. With the new law, new construction developments will have to reserve 30% of housing for the public rental stock, of which half will be for social rental.
Tax increase on empty houses
This increase will be implemented through the Property Tax. Who is affected by the increase in the IBI for having an empty property? Properties that remain empty for more than two years and only for owners with more than four properties in the same municipality.
The law will allow for a 150% surcharge to be included in the IBI for this type of housing. In any case, this measure will depend on what each city council decides to do, because this is a municipal tax.
Youth bonus for rent
The new Housing Act includes in its current wording a grant for young people who want to rent. This youth housing grant will provide an income of 250 euros per month for two years for young people between 18 and 35 years old with incomes below 23,725 euros.
Other measures in the new law include the regulation of eviction processes, the creation of a social housing fund and the prohibition of changing the classification of public housing.
And how does all this affect you? If you are thinking of buying a home as an investment, you should consider the regulations and the same for the purchase of a second home. In this regard, remember that there are special mortgages for second homes.
If you buy to rent, a good renovation will help you to better adjust the rental price. There are special mortgages for renovations and also green mortgages with better conditions for the most efficient houses.
If you live in a rental, you will need to keep this in mind.