All the pitfalls of the new housing law in Spain

Since February 2022, a draft of a new “Housing Law” (Ley de Vivienda), prepared by the current government of the country, has been under consideration and discussion in the Spanish Parliament, which in every possible way insists on its adoption. However, if this happens, it will have a very immediate and largely negative impact on the Spanish property market, which is recovering at a record pace from the Covid-19 pandemic.

Many of the provisions of this law, drafted by the Ministry of Transport and Urban Development (MITMA), in no way meet the housing needs of ordinary Spaniards, not to mention investors and developers. Many families still cannot afford to buy a home in Spain, and if this law is adopted, their dream will remain “the dream of a hungry Chinese” – especially since property prices in Spain have been growing steadily since the spring of 2021 – as well as mortgage rates, and the purchasing power of the population is falling at a rate never seen before.

One way or another, the “Housing Law” in the version approved by the Council of Ministers of Spain, even after its adoption, may be considered unconstitutional – just as was the case with the announcement of the “high alert regime” (Estado de alarma) in March 2020 of the year. The main complaints against it as of today are the change in the basic definition of property rights as such and the intrusion of the central government into the competence and exclusive powers of autonomous communities.

The problems begin with the lack of clarity of such definitions as “housing”, “temporary residence”, “residence”, “social housing” and especially “empty housing”. In the latter case, the owners of such properties are expected to be fined in the amount of 50-150% of the annual property tax (IBI). True, this applies only to those of them who own four or more residential properties, and they have been empty for at least two years.

Large owners – individuals or legal entities who own more than 10 residential premises (excluding garages and storage rooms) or a built-up area of ​​more than 1,500 sq.m. will be most unlucky. Their empty properties can simply… be expropriated with payment of compensation 1.5-2 times lower than the market value, as happened in the Balearic Islands.

All "underwater rocks" new housing law in Spain

Another controversial provision of the new law is the provision of “affordable housing” for young people and people with limited financial resources. What kind of housing will be considered “affordable” is unknown, since neither its type, nor location, nor any technical characteristics are specified. There is a risk that the larger and more luxurious the house, the better located it is, and the more services it has (security, swimming pool, tennis courts, gym, children’s playgrounds), the more it costs, the more “unaffordable” it will be considered . How its “availability” will be ensured in this case is not explained.

The decision to introduce control over rental prices by creating so-called “stress zones” in which there is a shortage of cheap properties and preference is given to tourists (for example, Barcelona, ​​the Balearics) also raises many questions. What is meant by the term “zone” – a city, its individual districts, streets, or the entire province – is not specified. It is planned that in these places landlords will not be able to set rental prices above 30% of the average monthly net income of the population living there. Representatives of many parties and social movements see this as an attack on private property rights and freedom of enterprise, which will negatively affect the entire real estate sector.

An unpleasant surprise awaits developers, who will be required to allocate 30% of the housing stock for state housing and social rent – again at prices set by the state. Such a decision will certainly scare off almost all investors, which, given the shortage of new buildings (at least 100 housing units must be built annually to meet demand), could lead to catastrophic consequences. Considering that the definition of “the most vulnerable segments of the population” includes not only families with children experiencing economic difficulties due to the crisis, but also illegal immigrants, as well as frankly marginal elements, the prospect of such a neighborhood is unlikely to please potential buyers.

By the way, the bill does not offer any solution to one of the biggest problems of Spanish society – the eviction of “okupas” (invaders of other people’s homes). If in Germany, France, Italy and other EU countries the police force uninvited guests onto the street within 24-72 hours, then in Spain this process most often lasts for years, and during this entire time the owners are forced to pay all utility costs.

Almost all parties represented in the Spanish parliament, with the exception of the ruling coalition (socialists from PSOE and communists from Unidas Podemos) have already announced that they will not approve the law in its current form and have prepared their amendments, but the likelihood of its adoption still remains quite high high.

Source link