Rent index: flats up to 207% above price cap

State rent index cuts prices by up to 60%

The reference rent price index has not by itself reduced any rent: it has put in writing what the market overcharges. With average adjustments of 60% in areas declared stressed, the table from the Ministry of Housing and Urban Agenda serves to decide where prices can be intervened and, incidentally, exposes the gap between what the index considers reasonable and what the landlord asks.

The cases circulated alongside the publication sounded outrageous. At Travessera de les Corts 251, Barcelona, the index places rent between 903 and 1,387 euros; the listing asks 2,508, 80% more. At Alcalá 385, 62 square metres in Madrid, the range goes from 619 to 812 euros and the market asks 1,290, 58% above. And in Valencia, a fifth-floor flat of 92 square metres, the range is 349 to 536 euros while the listing asks 1,650: a 207% difference.

Three cities, three cases and the same pattern. The question many asked upon seeing the table was not how it is calculated, but who is going to accept charging half.

What the index cuts and how it is calculated

In the discussion it was taken for granted that the index works with two broad variables: square metres and area. It does not take into account the state of the property, whether the kitchen is from 1975 or 2021, or whether the building has a lift or is falling apart. From that come ranges like the one for Rambla Catalunya 20, 50 square metres, which a simulation shared in the thread places between 650 and 1,050 euros per month. A mess for anyone who knows the area, according to those same calculations.

With those rules, the average adjustment is 60% downward in the designated areas. The practical consequence is that the official reference and the market price have become completely decoupled: we are not talking about a 10% discrepancy, we are talking about the landlord asking double or triple what the table considers reasonable.

There was a detail repeated in the thread: for small landlords, who were said to be the vast majority of the rental stock, the index is informative. That is, it does not oblige them to do anything by itself. Another matter is what each administration decides to do later with that reference.

Who is bound by the rent price index?

In practice, and as of the date of this discussion, it binds little and few. Effective application depends on each autonomous community declaring its stressed areas, and the only one that had asked to activate it was Catalonia, with around 150 municipalities designated. Neither Madrid nor most territories showed any intention of moving in that direction; in the Madrid case, some pointed out that the regional president announced that her plan was going in exactly the opposite direction.

The design of the regulation does not help clarity either. According to the reading made of the rule, the focus is on large holders, while individual landlords are left out. That leaves an uneven map: in some neighbourhoods there is a cap, in the next one there is not, and the tenant looking for a flat has no way of knowing which regime applies before signing.

The most repeated criticism from the intervention side itself points to that: a law that is applied at the will of each regional government, in specific localities and only to certain landlords, can hardly move an entire market. The reasonable doubt is not whether the price was high, but whether this specific instrument has the strength to bring it down.

The escape route: rooms and seasonal rentals

If the price for a whole dwelling is capped, the market looks for the gap. And the gap already has a name: renting by rooms, contract by contract, so the cap per dwelling no longer applies and the final price can rise above what was charged before. That is what various analyses argue: the formula becomes widespread and bypasses the limit without breaking the letter of the law.

The second way out is seasonal and tourist rentals. With an index that marks half the real market price, some anticipate that a good part of the long-term supply will migrate to shorter, less protected and more profitable formulas. The result would be the opposite of what is sought: fewer flats available to live in all year and sustained prices for those that remain.

There is an additional derivative that affects the medium term. If buying to rent no longer adds up, part of the money that today buys to rent may go to buying to speculate on resale, with the consequent push to the price of owned housing. It is the effect that some already describe as a transfer from one market to another.

The costs the index ignores

A calculation circulating in the discussion puts a figure on the real maintenance of a home: 2 euros per square metre per month, compared to the 0.5 deducted from the official table. The difference, in an average flat, is not small change: it is what separates a property that is maintained from one that degrades year after year.

To that we must add the community fees. As was recalled in the thread, community expenses can be passed on to the tenant without breaking the Urban Leases Act, which opens the door for the monthly bill to include cleaning, cameras, water pumps or painting the entrance hall. On paper it is not rent; in the bank account of the person living there, it is.

The reply to that argument is simple: those who occupy the house also enjoy those improvements. With capped prices, renting is cheaper than buying, and the extra expense passed to the tenant does not offset the savings of the full rent. Both sides have a point and neither moves the other.

Does rent control lower housing prices?

There is no agreement, and the discrepancy is not political, it is mechanical. The most repeated argument is that of supply: if renting stops being profitable, fewer landlords rent, and with fewer homes on the market the remaining prices rise. With that logic, the only way out would be to increase supply massively, something no one with decision-making power seems willing to do.

Hence the most radical proposal running through the issue: liberalise land and allow anyone to build their own house, alone or in a cooperative. The construction cost handled in these conversations is around 1,000 euros per square metre with luxury finishes, which leaves the problem outside bricks and inside land management and licences.

On the other side is the observation that prices have got out of hand all over Spain, not just in urban centres, and that letting the market do its thing has not worked for years. Those who defend the index do so as the lesser evil: something must be done, and sustained abuse over a decade does not correct itself. Critics point out that the small landlord is the only one who ends up paying for the experiment, while large operators always find a way to dodge it.

There is a point on which almost all positions unwittingly agree: the problem is not that housing is badly measured in a table, but that there are not enough homes where people need to live. And no index fixes that.

The European precedent and what comes next

While here we discuss whether the cap is informative or binding, elsewhere they have chosen to sustancia ilegal down where there was closed housing: in Wallonia, Belgium, as brought to the thread, leaving a property empty is an offence, with fines from 500 up to 12,500 euros. The message is the same as here, with the instrument changed: it is not enough to set prices, you have to bring empty properties onto the market.

With the index just published and hardly any real application, it would be reckless to consider the matter closed. What is likely, with what is on the table, is that in the municipalities where it is activated the effect will be limited and uneven, and that elsewhere everything will remain the same. If at some point it is generalised, the price adjustment will come accompanied by less supply, more room rentals and more seasonal contracts. Anyone who thinks the story ends here has never looked at a price table that nobody agrees with.