Law 12/2023, of May 24, for the right to housing (Ley para el Derecho de acceso a la Vivienda).

Comprehensive Overview of Law 12/2023: The Right to Housing in Spain

Law 12/2023, of May 24, for the Right to Housing (Ley para el Derecho de Acceso a la Vivienda), Click here to see the law , marks a significant shift in Spain’s approach to housing regulation.

This law, which came into force on May 26, 2023, after being published in the Official State Gazette (BOE), introduces extensive changes aimed at ensuring the right to housing as enshrined in the Spanish Constitution.

Despite facing considerable criticism from various stakeholders in the real estate sector, this law brings forth new regulations on evictions, the taxation of vacant homes, rent controls, and introduces new tax incentives for property owners.

General Aspects of the Law

The Law for the Right to Housing represents the first comprehensive state regulation focused on the right to housing since the approval of the Spanish Constitution. Its implementation marks a milestone in the regulation of housing in Spain, addressing a wide range of issues from eviction procedures to the responsibilities of large property owners.

A significant aspect of the law is its interventionist nature, which has sparked controversy. It represents a clear intervention by the Central Government into areas traditionally managed by Spain’s Autonomous Communities (CCAA). Historically, housing and urban development have been under the jurisdiction of these regional governments. However, this law establishes a framework that imposes specific rules and guidelines that must be adhered to by the Autonomous Communities, thereby centralizing certain aspects of housing regulation.

Furthermore, the law also intervenes in the private sector, particularly in the relationships between private individuals concerning property rights and contractual agreements. It imposes limitations and conditions that affect how individuals can exercise their rights to property and contract, reflecting a broader role of public authorities in ensuring the constitutional right to housing.

Objectives of the Law

The primary objectives of “Law 12/2023” include:

1. Regulating Citizens’ Rights and Duties

The law defines the rights and responsibilities of individuals in relation to housing, ensuring that all citizens have access to decent and adequate living conditions.

2. Facilitating Access to Housing

The law seeks to make housing more accessible, particularly for individuals and families facing economic difficulties. It aims to guarantee that homes are functional, safe, and meet basic living standards.

3. State Housing Planning and Programming

The law sets the groundwork for national housing planning, including the creation and management of public housing stock.

4. Legal Regime for Public Housing

It regulates the management and allocation of public housing, ensuring that these resources are used effectively to meet the needs of the population.

5. Promoting Diverse Housing Typologies

The law encourages the development of various types of housing to cater to different forms of living arrangements and social needs.

6. Enhancing Protection in Housing Transactions

The law introduces measures to improve the transparency and security of housing purchase and rental transactions, protecting the rights of buyers, tenants, and property owners.

For example, introduce the obligation from the vendors to supply ALL the necessary legal and administrative of the property for sale as: 

• Certificate of Habitation
• Certificate to confirm that the property is free of penalties and fines
• Confirmation that the property has passed construction inspections
• Copies of the Community of owners acts and agreeemnts, and normative

Key Measures Introduced by the Law

Law 12/2023 introduces several measures that have immediate and long-term implications for the Spanish housing market. These include:

1. Obligation to Provide Housing Data

Property owners and intermediaries are now required to provide comprehensive data about properties and their owners. This measure aims to increase transparency in housing transactions and ensure that all parties have access to essential information.

2. New Reference Index for Rent Updates

A significant change is the creation of a new reference index that will replace the Consumer Price Index (CPI) in calculating rent increases. This measure seeks to stabilize rental prices and protect tenants from sudden and significant rent hikes.

3. Taxation of Empty Homes

The law introduces the possibility of taxing vacant homes to encourage their occupation and reduce the number of unused properties. This measure is part of a broader effort to address housing shortages and ensure that existing housing stock is utilized effectively.

While these measures take effect immediately, other provisions, such as rent caps and the designation of “stressed” rental areas, will depend on the actions of the Autonomous Communities and may require additional procedures and conditions.

In-Force Measures

Some of the measures of the Housing Law that are already in effect include:

1. Limit on Rent Increases

Since March 2022, the CPI has ceased to be the standard reference for rent updates. Until December 31, 2023, rent increases for existing contracts cannot exceed 2% annually. In 2024, this limit will increase to 3%. Starting in 2025, a new Rental Index will be introduced by the Spanish government, which will serve as the reference for future rent adjustments.

2. Mandatory Information in Housing Transactions

Real estate intermediaries must now provide detailed information about properties and their owners during purchase and rental transactions. This includes economic conditions, occupancy licenses, or certificates of habitation, the essential characteristics of the property, and the identification of the seller or landlord. Non-compliance with these requirements can result in financial penalties.

3. Extraordinary Extensions of Rental Contracts

The law introduces mandatory one-year extensions for rental contracts when tenants can demonstrate a situation of social and economic vulnerability. This extension is particularly significant when the landlord is classified as a large homeowner.

4. IBI Surcharge for Vacant Homes

The law allows municipalities to impose a surcharge on the Real Estate Tax (IBI) for homes that remain unoccupied for more than two years. This surcharge can reach up to 150% and applies to property owners with at least four residential properties, except in cases where there are justified reasons for the vacancy.

These measures are designed to regulate the housing market, control rent prices, improve transparency in transactions, and encourage the occupation of vacant properties.

Protected and Incentivized Housing

The law also addresses “Protected Housing” (Vivienda Protegida) and “Incentivized Affordable Housing“. Protected housing is subject to a permanent public protection regime, with exceptions allowed only under specific circumstances. The sale or rental of these properties requires prior authorization from the corresponding Autonomous Community.

In terms of incentivized affordable housing, public authorities are empowered to promote the availability of such housing and apply price limits to ensure accessibility for economically disadvantaged individuals. These measures are intended to increase the supply of affordable housing and support those in need.

Electronic Payments and Large Homeowners

The law brings an end to the practice of paying rent in cash, requiring that rental payments be made through electronic means, except in cases where one of the parties lacks access to such methods. This shift aims to increase transparency and reduce the potential for disputes over payment.

The law also defines the figure of the “Large Homeowner“, identifying them as individuals or entities owning more than ten urban properties or a built area exceeding 1,500 square meters for residential use. This definition can be adapted by the Autonomous Communities in areas declared as stressed residential markets, potentially including owners of five or more properties in those areas.

Responsibility for Real Estate Agency Fees

Under the new law, the responsibility for paying real estate agency fees falls on the landlord. This change is intended to reduce the financial burden on tenants and ensure that landlords bear the costs associated with renting out their properties.

Enhanced Protection Against Evictions

The law introduces significant changes to eviction procedures, foreclosures, and real estate auctions, particularly in situations involving vulnerable tenants. These changes include:

1. Extended Protection for Vulnerable Tenants

The law extends protection to tenants in vulnerable situations, ensuring that eviction and foreclosure proceedings take into account the tenant’s circumstances.

2. Suspension of Eviction Proceedings

A suspension period of two months for natural persons and four months for legal entities is established for eviction proceedings, providing tenants with additional time to find alternative housing or resolve their financial difficulties.

3. Additional Requirements for Large Homeowners

The law imposes additional requirements for eviction claims brought by large homeowners, particularly when the property in question is the primary residence of a vulnerable tenant.

4. Mediation and Conciliation

In cases where the tenant is in a vulnerable situation, the law requires a conciliation or mediation process to be followed before eviction proceedings can proceed.

These measures are designed to provide greater protection to tenants in vulnerable situations and ensure that eviction processes are carried out fairly and humanely.

Declaration of Stressed Residential Market Areas

The “Housing Law”also introduces the concept of “Stressed Residential Market Areas“. These areas are identified based on specific criteria, such as high demand for housing, rising rent prices, and a lack of affordable housing options. Once an area is declared as stressed, a series of measures can be implemented to address the imbalances in the housing market, including:

1. Rent Controls in Stressed Areas

In areas declared under stress, existing rent increase limits (2% in 2023, 3% in 2024) will remain in place. Starting in 2025, a new Rental Index will be introduced to cap rent increases.

2. Extraordinary Contract Extensions

Tenants in stressed areas may request an extraordinary extension of their rental contract for up to three years after the initial term ends, provided certain conditions are met. Landlords must accept this extension unless otherwise agreed or if the property is needed for personal use.

3. Specific Conditions for New Contracts

New rental contracts in stressed areas will have specific conditions depending on whether the landlord is a small owner or a large homeowner. For small owners, the rent may not exceed the last rent of the previous contract, with a possible 10% increase in specific cases. For large homeowners, rent will be capped according to previous contracts or by the maximum price limit set by reference indices.

4. Responsibility for Maintenance Costs

In stressed areas, landlords and tenants may agree that general maintenance costs are the tenant’s responsibility. However, if such a clause was not included in the previous contract, it cannot be added to the new one.

Tax Incentives

Law 12/2023 introduces several tax incentives aimed at encouraging landlords to offer affordable housing in stressed areas. These incentives, effective from January 1, 2024, include:

1. 90% Reduction in Net Rental Yield

Landlords who reduce rents by more than 5% in stressed areas can benefit from a 90% reduction in net rental yield for tax purposes.

2. 70% Reduction for Specific Cases

A 70% reduction is available for first-time rentals in stressed areas where the tenant is between 18 and 35 years old, or where the property is rented to a public administration or non-profit entity for social housing purposes.

3. 60% Reduction for Rehabilitated Properties

Properties that have undergone rehabilitation within the last two years may qualify for a 60% reduction in net rental yield.

4. 50% Reduction in Other Cases

A general 50% reduction applies in other cases, providing tax relief to landlords who comply with the law’s requirements.

These tax incentives are designed to encourage landlords to participate in the provision of affordable housing and support the overall goals of the Housing Law.

IBI Surcharge for Unoccupied Properties

The law allows municipalities to impose a surcharge on the Real Estate Tax (IBI) for properties that remain unoccupied for more than two years without justified cause. This surcharge can reach up to 50% of the net tax amount and may increase to 100% if the property remains unoccupied for more than three years. The surcharge is intended to discourage property owners from leaving homes vacant and to incentivize the use of existing housing stock.

Soil Reserve

The law mandates that adequate and sufficient land be allocated for productive uses and residential development, with a portion reserved for housing subject to public protection regimes. This requirement ensures that land is available for affordable housing development, promoting social cohesion and addressing the need for diverse housing options.

The law specifies that at least 40% of the residential buildable area in new urbanization actions and 20% in urbanized land undergoing reform or renewal must be reserved for public protection housing. This measure aims to ensure a balanced distribution of affordable housing and to prevent social segregation in urban areas.

Conclusion: The Impact of Law 12/2023 on the Spanish Housing Market

Law 12/2023 represents a comprehensive and far-reaching reform of the Spanish housing market. Its provisions address a wide range of issues, from rent controls and tenant protections to the promotion of affordable housing and the taxation of vacant properties. While the law has sparked controversy, particularly among real estate professionals and property owners, it also marks a significant step toward ensuring the right to housing for all citizens.

As the law continues to be implemented, its impact on the housing market will become clearer. The introduction of new regulations, tax incentives, and protections for vulnerable tenants is likely to reshape the dynamics of the Spanish real estate market, with implications for both landlords and tenants.

For those involved in the housing sector, whether as property owners, investors, or tenants, understanding the provisions of Law 12/2023 and its implications will be essential in navigating the evolving landscape of Spanish housing. As the first state law to regulate the constitutional right to housing, it sets a precedent that will likely influence future legislation and policy developments in Spain.