With just under two weeks since its entry into force, the new Housing Law continues to sow doubts among property owners. As of January 1, 2024, the tax incentives for property rentals, as established in the Law. With this new regulation, the right to decent housing has changed for owners and tenants. Likewise, the objective of this new regulation is to mitigate the problems of access to housing faced by the most vulnerable groups, through the rental price cap and the creation of public housing.
The new Housing Law seeks to protect the vulnerable tenants and regulate non-payment of rent, modifying Law 1/2000 of January 7. Its main objective is guarantee the rights of tenants in vulnerable situationsestablishing rules to regulate evictions and providing assistance for Access to social and affordable housing. In addition, the creation of a set of public housing at more affordable prices is expected.
With the entry into force of the new Law, it is understandable that many owners have doubts about how to raise the rental price, stress zone declaration either who should pay the real estate fees.
Measures of the Housing Law that affect owners
As we have already mentioned, this regulation affects both tenants and homeowners. Regarding property owners, these are the measures that harm them the most with the new Housing Law:
- stressed area
- Rental price ceiling
- Tax incentives
How does a stressed area affect the owners?
With the new law, owners who have more than 5 homes for rent, lower the price of rents in the areas with the highest demand. It is important to note that it should define which areas will be considered as stressedwhich is the responsibility of the Autonomous Communities and town halls.
To consider a stressed area, the law establishes that two circumstances occur, without it being necessary that they occur at the same time. The norm focuses on the financial burden that falls on the owner in paying the mortgage and the tenant in paying the rent, as well as in the price increase of the home in the last five years.
In specific terms, the regulation establishes that an area is considered stressed if the average price of housing exceeds 30% of personal or household budget. To determine if this situation is fulfilled, the total expense to be paid for the home is taken into account, including basic expenses and supplies, in relation to the average income or the average income of the household.
How much can my tenant’s rent go up in 2023?
It is common for many owners to have doubts about how to notify tenants of a rent increase. The new Housing Law seeks to reduce the price of privately owned real estate through fiscal and urban planning measures. Annual increase is limited of current rental contracts at 3% until 2024 and, starting in 2025, a new reference index will be used instead of the CPI to annually update the contracts and avoid disproportionate increases in rent.
Likewise, in order to increase the rental price of a property, landlords must notify tenants one month in advance before the end of the first year of contract. According to him Article 18 of the Urban Leasing Law“during the term of the contract, the rent may only be updated by the landlord or the lessee on the date that each year of the contract is completed, in the terms agreed upon by the parties. In the absence of an express agreement, no rent update will be applied to the contracts”.
Complying with the dates is crucial, since if the tenant does not comply with the provisions of the Urban Leasing Law, he will not have the ability to increase the rental price of the property.
Tax incentives in personal income tax What can the owner of a rented apartment deduct?
According to the new Housing Law, owners who lower the rental price in stressed areas and sign new leases beginning January 1, 2024, will receive a 90% reduction in personal income tax on net income. In the event that it is a dwelling intended for rent in a stressed area and it is rent to young people between the ages of 18 and 35a 70% deduction on the net return will be allowed as part of the market entry.
When do tenants start paying real estate expenses?
Among the novelties of the new Housing Law, it stands out “the introduction of an extraordinary one-year extension at the end of the contract, which may be requested in accredited situations of social and economic vulnerability when the landlord is a large homeowner, as well as he Establishment of the obligation that real estate management expenses and those of formalization of the contract are borne by the landlord“. From May 26, the owner will be responsible for assuming the expenses generated for the real estate service provided.