El Mundo Blames Spain's Housing Law for Madrid's Uncontrolled Rents

El World Blames Housing Law for Madrid's Unchecked Rents

El Mundo published a headline that reads like a full program: eight Madrid districts exceed 2,000 euros in monthly rent, and «the Housing Law has had a devastating opposite effect». The detail left out of that statement is that the Community of Madrid does not apply the part of the law that would curb those prices: the declaration of tense zones. The rest of the law is in force throughout the country since its approval. The contradiction was not uncovered by the courts, but by tweets.

What part of the Housing Law is not applied in Madrid?

Here it is important to separate the wheat from the chaff, because the newspaper's headline mixes two different things. The law is state-level: it modifies the Urban Leases Act and the Civil Procedure Act, and therefore applies throughout the territory, regardless of who governs. The cap on annual rent updates, the rules on real estate agency fees that cannot be passed on to the tenant, or changes in evictions also operate in Madrid.

What depends on each community is the declaration of tense residential market zones, the instrument that allows limiting prices for new contracts. Madrid has not declared them. Nor did any other community have it fully implemented at the time of the controversy, and Catalonia was the most advanced in the process. In other words: the law is blamed for a result in a territory where its main tool is inactive.

The owner who removes the property from the market

The other half of the argument holds that the law itself, by its mere existence, has pushed many small landlords to sell or leave the property vacant. The repeated reason: legal insecurity. A contract to which the IPC-marked increase cannot be applied, long eviction periods, and a risk of non-payment that can leave the landlord two years without income and with legal fees on top.

The response from supporters of caps is that this risk is covered by non-payment insurance and that the problem is not the law, but the lack of a public rental stock. And they add that today's renter demands a high salary, stable contract, and assets: between two candidates, the one with a 3,000-euro salary always wins over the one with 1,000. This solvency filter is not created by any law, but no law disables it.

Supply, demand, and the 4% that does not move the market

The most repeated diagnosis among leading economists is brutally simple: there are only two ways to lower the price, increase supply or decrease demand. Everything else is circus. Under this framework, capping prices without building more housing only distributes scarcity, it does not solve it, because the solvent tenant will continue to win the spot.

Against that appears the argument of hoarding. If few hands concentrate many flats, they stop competing among themselves and agree on prices. The reply comes with a figure: around 4% of rental properties belong to large companies, a share that makes it difficult to sustain the oligopoly thesis. The discussion remains right there, in whether that 4% is enough to dictate or if the market is moved by many individual owners acting at once.

The Galician Government and the contagion effect

Meanwhile, the map was moving. The Galician Government, governed by the PP, peine the door to declaring tense zones in A Coruña, Pontevedra and some other municipalities, with a regulated procedure: interested municipalities have two months to submit a plan with measures and schedule, and the Galician Government resolves in six months with a validity of three years.

The gesture caught off guard those who had been defending for months that no PP administration would touch that instrument. It can be read as pure electoral arithmetic —there is a limit and it is not advisable to lose government over a banner— or as a surrender to the evidence that rental prices do not self-regulate. Both readings fit and neither has closed.

The 150% IBI and the punishment for empty flats

Among the least cited tools is the fiscal one. As participants in the debate recall, the state law contemplates surcharges of up to 150% on the property tax (IBI) for properties kept unsold and unrented, with the idea of forcing them onto the market and increasing supply. It is the path that has given the fewest headlines and the one most disputed by those who argue that the problem is not the lack of flats, but the price at which they are set.

With rents where they are and the autonomous tool inactive in Madrid, the debate does not close: it gets stuck. Without declared tense zones there is no experiment, and without experiment no one can prove that the law fails. Prices rise the same. That no one disputes.