Limiting rent increases to 2% is a bad idea but it is not recovering the old ...

emonseo21

The Government has achieved the necessary support to approve the General State Budgets And among the measures agreed upon (in this case with Bildu) is the extension of the limitation on the increase in rents to % until December , .

This measure was supposed to be exceptional, due to the high levels of inflation that we had seen, since the majority of contracts refer to the official CPI when establishing the annual increase. Some suggest that this measure, which was established temporarily and we already see that it is on its way to being permanent, is to recover the old rental contracts , which did so much damage to rentals in Spain. Let's see if it's true.


Old rent rentals
In , the Urban Leases Law (LAU) was approved, which established very pro-tenant rental regulations. A rule under which some contracts are still governed and which, effectively (it is not very clear whether intentionally or not) destroyed the rental market in Spain. These contracts signed under said law are called old income contracts .

Limiting rental price increases could be counterproductive
ON THE SALMON BLOG
Limiting rental price increases could be counterproductive
On the one hand, it was practically impossible to increase the rental price. But on the other hand, the extensions of the contracts were unlimited if the tenant wanted it, he could even subrogate the con  India Email List  tract to others in certain circumstances (spouses, children...).



The truth is that this structure, the fact that the Law was not modified until and the high inflation of the s did a lot of damage to the rental market. The owners saw how the rents deteriorated year after year and they were not able to cover expenses. The homes couldn't be sold either because no one wanted to take care of the tenants. In short, Spain went from being a country with a normal level of rentals to a country of owners.

Everything seemed to change in the real estate crisis
However, apart from the successive changes in the LAU, which became more neutral, what skyrocketed rental prices in Spain was the real estate crisis that began in - . There, many people were left without the possibility of buying due to high prices, but the disadvantage of owning a home with a mortgage was also seen when the price of assets decreases.

No, Yolanda, price control has never worked and it will not work now
ON THE SALMON BLOG
No, Yolanda, price control has never worked and it will not work now
Spain finally returned to normality compared to other countries, with a market for both property and rental and not exclusively property. However, the increase in demand for rental housing put pressure on some areas in price and this has led to the return of populist measures to stop it, such as price control or the establishment of a cap on the rental income update .

Are we going back to the old rent?
Going back to the beginning, is the Government's measure a return to the old rent? The truth is that no. Some experts indicate yes, but there is a fundamental difference between what is now and the LAU of


The difference is that the current LAU does not extend contracts indefinitely. They are still limited to five years. That is, during the first five years of the contract the increases are limited to % (as long as extensions continue to be approved), but after five years a new rent can be set or the tenants can be evicted (either to find new ones, sell it or make use of it).