Spain to classify tourist rentals as economic activity

Government to define tourist rentals as economic activity

The Ministry of Housing and Urban Agenda is working on regulatory changes so that tourist apartments cease to be a tax haven and become what Minister Isabel Rodríguez says they are: an economic activity. The measure, announced in the Senate, trinc two Supreme Court rulings that already upheld homeowner associations' right to ban this business. The stated goal is to curb the differential profitability that pushes residents out of city centers. According to owners, the side effect will be a direct hit to their bottom line.

The minister was explicit: tourist flats are "tormenting cities" because their profitability far exceeds that of residential rentals. Her question from the podium—"Who takes care of those cities? Who worries about the park or the garden?"—summarizes the Executive's mindset. It is not a sarracena crusade, but a matter of urban agenda. The inter-ministerial group created late last year between Housing and Industry seeks to maximize the State's competitive margin, aware that autonomous communities and municipalities have the final say on the ground.

What changes if tourist rental is an economic activity?

The change is not cosmetic. If tourist rental is consolidated as an economic activity, the homeowners' association can prohibit it in its bylaws. The Supreme Court already endorsed this in two Civil Chamber rulings: rental for tourist use is an economic activity and, therefore, can be banned in communities that expressly forbid carrying out economic activities in homes. The practical consequence is that many tourist flats will have to move to ground floors or commercial premises where the activity is permitted.

The trickle of upcoming fiscal obligations is the other front. Owners operating through digital platforms have been required to report to the Tax Agency (Hacienda) since 2019, but the new framework would add layers: registration as self-employed, quarterly VAT, quarterly income tax (IRPF), and corresponding social security contributions. A calculation circulating among owners estimates that, after taxes and management costs, the net profit of a tourist flat may remain at half of gross revenues. The account, broken down item by item, leaves a margin that many consider insufficient to compensate for daily management work.

The argument of unfair competition against hotels

The hotel industry has long pointed to regulatory asymmetry: a hotel pays licenses, insurance, payroll, and taxes; a tourist flat, in many cases, operated with the laxity of a private residence. The new approach would level the playing field. Some argue this will return the tourism monopoly to hotel chains, eliminating small owners and leaving the market in the hands of large funds. The thesis is not far-fetched: investment funds already operate with corporate structures that allow them to optimize their tax burden, something an individual cannot replicate.

On the opposite side, proponents of the measure argue that tourist rental has become the main economic focus of some cities, displacing residential housing and pushing out neighbors. The touristification of urban centers has left neighborhoods without bakeries, schools, or neighbors who take care of the park. The minister summarized it with an uncomfortable question: "Who complains about the container or the cleaning?".

The real impact on the housing market

The measure alone will not solve the housing problem. In Madrid, for example, it is estimated that for every registered tourist flat there are twenty empty flats. The problem is not just vacation rentals, but the legal uncertainty of residential leasing. Owners who have suffered eviction proceedings or non-payments prefer to leave the flat empty or dedicate it to tourism, where payment is guaranteed and turnover is fast. The decree prohibiting evictions of vulnerable families has withdrawn more flats from the market than tourist ones, according to sources within the Ministry of Housing itself.

The consequence is an increasingly narrow residential market, where good tenants access flats through contacts rather than ads. Flats do not reach publication: when a reliable tenant leaves, they bring in the next one. The rest, those without networks, are left out. The law, paradoxically, protects the vulnerable but expels from the market those who cannot demonstrate solvency.

How much is already paid for a tourist flat?

Owners maintain that most already declare their income and pay taxes. Platforms have been required to report to the Tax Agency since 2019, and many autonomous communities require a registration number to advertise. In the Basque Country, for example, there can only be one tourist flat per building entrance and it must be located on the ground or first floor. Platforms demand the registration number and inspections verify that minimum habitability conditions are met. It is not the Wild West that some describe.

Fraud exists, but it is pocket change for public coffers compared to the total volume of the business. The real battle is not fiscal, but regulatory. It is about deciding whether tourist rental is a business like any other or a disguised residential use. And that decision, ultimately, will be made by the courts.

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The Supreme Court has already said it is an economic activity. The Government wants the law to say it too. Owners warn that if the numbers no longer add up, many flats will return to residential rental or simply remain empty. The question no one answers is whether that will make housing cheaper or just change hands in the business.