Spain Housing Decree: Rent Extensions to 2028 and ICO Loans

Draft housing decree extends rent contracts until 2028

The draft the Government is finalizing does not impose a direct rent cut; instead, it shifts timelines and fiscal incentives. It includes contract extensions until the end of 2028, suspension of evictions for vulnerable tenants, and a battery of tax breaks for property owners. These three levers move very different things, leaving price reduction to incentives rather than mandates.

However, the text remains under negotiation and may change. The dispute is not just about which measures are included, but who defines vulnerability, who is excluded, and whether Congress will ultimately approve it.

Measures included in the housing decree draft

A long package is on the table. Rent contract extensions go until the end of 2028. Eviction suspensions for vulnerable tenants without alternative housing are reviewable every 12 months, with a maximum of 3 years. Owners with two or fewer properties would be exempt from this suspension, and public compensation is foreseen for unpaid rents and expenses when suspension applies.

For young people, ICO loans at 0% interest are added: covering up to 20% of the home price or 50,000 euros. Seasonal rentals enter regulation, and tourist accommodations face 21% VAT. The tax menu for owners ranges from less to more: up to 100% IRPF reduction if rent drops by more than 5% or is set below the reference index, 95% if renting to under-35s in tensioned zones, 85% for tenants up to 35, and 50% if prices remain stable upon tenant change. Young tenants in tensioned zones earning under 33,007 euros could deduct up to 10% of rent. All this, they insist, is in the negotiation phase.

Who is vulnerable and who decides?

The point nobody closes is vulnerability. The draft suspends evictions for vulnerable tenants but does not detail what constitutes vulnerability, how it is verified, or who signs the report. According to circulating criticisms, social services and certifying entities would fill this gap, concentrating distrust: their criteria are argued to lack objectivity, potentially covering dubious situations.

The other line, explicitly written, is exclusion: owners with two or fewer homes are out. On paper, this safeguards small landlords. Read inversely, it means if small owners lose safety nets, they stop renting, shrinking the available stock. Public compensation for defaults appears as a counterweight, though without a fixed figure.

Up to 100% IRPF incentives: Landlords decide with calculator

The tax menu is the most sellable part of the draft and also the easiest to twist:

• Up to 100% IRPF reduction if rent drops more than 5% or is set below the reference index in certain cases.
• Up to 95% for renting to under-35s in tensioned zones.
• 85% for rentals to youth up to 35.
• 50% if price is maintained upon changing tenants.

The full breakdown explains why incentives target specific tenant profiles. Designing age-based incentives risks market response by age: a landlord with two candidates—one aged 28, one 45—needs no explanation. As warned in debates, renting to those between 35 and 65 may become the least profitable option. This is a participant forecast, not a fact.

ICO loans at 0% and the ghost of 2008

ICO loans at 0% close the circle. Optimists see an entry door to the mortgage market for those unable to reach it. Pessimists see the usual pattern: cheap public money with state guarantees. If credit is free and sellers set prices, demand pushes prices up. This mirrors comparisons with the cycle preceding the 2008 crisis.

Decree-law, competencies, and a fragile timeline

A procedural detail weighs more than any measure. Analyses suggest the vehicle is a royal decree-law requiring Congressional validation. Parliamentary allies have objections ready: some call market intervention communism, others argue it invades regional competencies. Without approved budgets and open negotiations, the text might last barely a month. This is a calculation, not a certainty.

Noise exists beyond Congress. Madrid housing protests have left traces of internal reproaches among those believing protest formats strengthen opponents versus those seeing legitimacy battles.

Given these pieces, debate suggests the text likely won't pass validation in its current form. Until late 2028, there is time to find out.