Parliament passes law capping rents

Majority of lawmakers back groundbreaking bill cheered by housing rights activists

Aparments for rent in Girona (by Xavier Pi)
Aparments for rent in Girona (by Xavier Pi) / ACN

ACN | Barcelona

September 9, 2020 08:25 PM

The Catalan parliament has passed a law regulating rent prices in Barcelona and other major towns, a groundbreaking moment for housing rights activists that have long called for public intervention in the real estate market.

The bill targets areas in which the housing market is considered to be in a "tense situation," which will effectively affect 60 cities and towns of more than 20,000 inhabitants, encompassing 70% of Catalonia’s population.

"We believe this is a very important step for thousands of families who urgently need this regulation," said Jaime Palomera, a spokesperson for the Sindicat de Llogateres tenants’ union, one of the activist groups that has pushed for the measure. 

In a move to secure the support of Junts per Catalunya (JxCat), one of Catalonia’s two ruling parties, the Sindicat de Llogateres tenants’ union and other political groups pushing for the bills’ approval agreed to include an exemption for homeowners with a monthly income of less than €2,000, as well as the possibility of adapting rent prices if and when apartments are refurbishment. 

How the regulation works

Housing markets will qualify as "tense" when a town cannot provide enough affordable housing. More specifically, the law will affect municipalities where rent prices have increased above the Catalan average, where rent surpasses 30% of a household’s average income, and where rent prices have surpassed the inflation rate by at least 3% in the five years prior.

The Catalan government has set a reference price for each area that will limit rent prices. Additionally, homeowners will not be able to increase the rent when negotiating a new contract if the apartment has already been rented out in the previous 5 years.

Concerns among some experts

"The consequences that rent limits generally have in the long term are a decrease in the supply of apartments," says Juan Carlos Igueras, a professor at EAE Business School who warns that the regulation of rent prices could backfire and harm the housing market.

Marc Realp, from the ACCO Catalan Competition Authority, believes that Catalan authorities should focus instead on providing more public housing, "in shortage for many years," as well as diverting demand to other Catalan towns by improving transport infrastructure and creating alternative economic hubs.

Law to be challenged

The conservative People’s Party has announced that it will challenge the law in Spain’s Constitutional Court, a move that could soon force the groundbreaking regulation to a halt.

The parties that voted against the regulation, including Ciutadans (Cs), the main opposition party, as well as the Socialists, ruling in Spain, warn that the law contravenes the Spanish constitution and will eventually be thwarted in court.