Spain to regulate room rentals evading housing law

Government prepares regulation for room rentals

The 3% cap on rent increases has a back door that the Executive no longer denies. Room rentals have been growing for years outside the Urban Leases Act (LAU), and the Ministry of Housing has formed a working group to study the issue. The Right to Housing Law, approved almost a year ago after more than two years of negotiation between PSOE and Unidas Podemos, did not explicitly mention this formula: it framed it in the fifth additional provision, that working group for improving the regulation of contracts for uses other than residential.

What escapes the Housing Law with room rentals

Room contracts are not covered by the LAU. They rely on the Civil Code, as if renting any other object, and through this route they evade obligations to the tenant and limits on price increases included in the law: 3% in 2024 if there is no agreement between the parties. The Secretary of State for Housing, David Lucas, announced the creation of the table in December, and the department places regulation in the medium term, according to sources close to the minister reported by La Información.

The Ministry wants to first measure the real impact of this modality on rising rental prices, especially in tense zones. It admits having indications that it contributes to raising prices in cities hosting more university students or workers who only stay a few months in the territory.

Why a room contract is not a home rental

Here lies the legal knot. In 2019, the High Court of Justice of Madrid sided with owners: it understood that renting a room does not guarantee "the development of the tenant's domestic life with privacy and services considered indispensable today" and that, consequently, it did not have to be signed under the LAU, even though in practice there is no difference in the use of facilities.

Tenant associations argue that these contracts constitute a fraud of law, because they avoid the rule regulating the minimum square meters a dwelling must have or the obligation to deposit the security bond in the regional housing institute. And they place the start of the problem in 2017, aggravated later, because the landlord can renew the agreement every few months with the corresponding price update.

How much it costs to rent a room in Madrid, Barcelona or Ibiza

On portals, prices range from absurd to insulting. The recurring spectrum:

• Madrid: between 200 euros for a weekend and 2,000 euros in the most central area.
• Barcelona: the cheapest hover around 300 euros and approach 2,000 per month in Gràcia.
• Ibiza: the minimum exceeds 600 euros.
• Seville, Salamanca or Zaragoza: some options from 150 euros.

The same range repeats in Valencia, Palma de Mallorca or Bilbao. Málaga, Valladolid or Santa Cruz de Tenerife share the lower threshold and barely register a couple of listings above 1,000 euros for a room.

Housing working group: no date and outside the legislative plan

Regulation is not in the 2024 Legislative Plan. It will be addressed, according to the official account, once the first year of the legislature is passed and the legal margin granted by regional and local competencies is measured. Like short-term tourist rentals—for which there is another table with Industry and Tourism—the file advances without a calendar. It also did not enter the coalition agreement, despite being a priority for the formation led by Íñigo Errejón under the umbrella of Sumar and Más Madrid.

The program of the platform led by Yolanda Díaz promised "limitations on tourist, room, and seasonal rentals so they do not become an option that circumvents the application of the Housing Law." In Congress, EH Bildu brought a non-legislative proposition to declare a housing emergency and equate these contracts to full-home leases: PNV, Junts, PP, and Vox voted against.

Regulate more or let the market adjust

Two currents clash. One argues that closing loopholes is the only way for room rentals to stop evading the law and straining the market; against this weighs the argument that each added norm cuts available supply and, with it, makes what remains more expensive.

There appears the uncomfortable data. With the promise of mobilizing empty housing and large holders to offer affordable rents, the evolution of rental prices accumulates a rise of 22.11% since 2019. The response to that gap is political, and the exits handled on the owner's side pass through selling, leaving the flat closed, or charging via another route. Some calculate that not renting or not selling within two years triggers a 150% increase in IBI (property tax); others respond that those who rent a room are often people on the verge of homelessness rather than investors.

It remains to be seen what part of the supply survives when the last loophole is closed and who occupies the rooms advertised today. If the norm arrives, will prices drop or will the product simply disappear?