20% Tax on Second Rentals: Who Would Foot the Bill?

20% Tax on Second Rentals to Fund Pensions

A 20% tax on each rental property starting from the second one. The money would go entirely to pensions. The idea, proposed by one participant as an exercise in solidarity rather than a legislative project, has an example that summarizes it, according to its proponent: someone renting an apartment in central Madrid for 2,000 euros would pay 400 euros a month to the tax authorities. Two stated goals: to reduce pressure on public debt with soaring interest rates and to discourage "the cancer of property accumulation," in the words of the proposer. The underlying issue, of course, is who ends up paying.

How Much Must Rents Rise to Cover a 20% Tax?

This is where the uncomfortable arithmetic begins. If the landlord wants to maintain the same net income, it's not enough to pass on 20%: they need to raise rents by 25% so that the 20% tax applies to the new amount. "A 25% increase, so that it becomes 20% of the new 100%", summarizes one of the participants. The result, argues another, is that the tenant pays the tax, and the state collects the revenue without a single new property being built. Nothing new under the sun.

Who Really Pays the Special Investor Tax?

For another participant, landlords hold the power. With a tight rental supply, passing on the cost is, in their view, a matter of weeks. The landlord remains "society's villain getting rich" even if, according to them, they are just passing on the bill. And a further point highlights a collateral effect on properties that are exempt: those who own one and see the second one become more expensive will raise the price of the first to compensate. The incentive is twisted.

The Small Investor vs. the Fund That Always Wins

The scenario drawn by another contributor doesn't end well for individuals. The owner of two or three properties is bled dry, lacking the resources to litigate and ending up selling to a fund to avoid further trouble. The fund, with lawyers who were judges and prosecutors, challenges the measure and waits. Meanwhile, a figure circulating in the debate underscores the antiestéticar: since 2018, the percentage of homes owned by large funds has more than doubled, at the expense of individuals.

The Design Flaw: Funds Already Pay Less

Here lies the technical loophole, according to critics of the measure. If the goal is to curb concentration, the tax targets the weakest link: according to this reasoning, companies renting hundreds or thousands of properties enjoy tax privileges that an individual with two rentals does not. "It would be better to repeal those, not widen the gap even further", points out one of the replies. This perspective argues that those with less are taxed more, while those with more are left untouched, meaning the tax, as it stands, could accelerate what it claims to combat.

The French Precedent and the State as the Primary Beneficiary

The external mirror, according to another participant, offers little optimism: in France, extraordinary taxes already amount to about 20% of a salaried employee's gross income. And some add a suspicion: the state is the primary beneficiary of rising prices, as it takes its cut from every sale – sometimes a fifth of the profit – and from every rental. For them, taxing housing is not just about revenue; it's about participating in the business.

This leaves the stalemate described by critics of the idea. If the tax is passed on, the tenant pays. If it cannot be passed on, the small owner ends up selling to the large one. And if individuals are taxed while funds are exempted, concentration accelerates instead of slowing down. With this dilemma, the measure that promised solidarity ends up looking like a tax on the weakest link in the chain.