2% cap on rent increases, no layoffs: Spain's measures to withstand war effects

€16bn package to cope with Ukraine conflict, with temporary legislation also including 15% rise of basic minimum income

An estate agent advertises properties for rent and sale in Catalonia
An estate agent advertises properties for rent and sale in Catalonia / Sílvia Junyent Dalmau

Guifré Jordan | Barcelona

March 29, 2022 03:16 PM

Tenants will see their new or updated rental contracts increase by at most 2% regardless of the inflation rate. 

This is one of the measures announced by the Spanish government on Tuesday, as well as a restriction affecting layoffs and measures to avoid a surge in electricity bill fees, as part of a €16bn subsidies package in order to cope with the effects of the war in Ukraine that also include a 20-cent discount per liter of fuel for all drivers

Around €6bn will go towards economic aid and tax cuts, while the other €10bn will be given out as loans.

The three Spanish vice presidents outlined measures, such as the cap on rent hikes in the event of a new contract or the renewal of an existing one.

In Spain, landlords have the right to raise the rent according to the Consumer Price Index (CPI) – yet, given the current inflation rate of above 7%, Madrid wants to avoid significant rent hikes.

Instead, both parties will have to agree on the updated price, and if there is no deal, the increase will be limited to 2%. This maximum of 2% will be compulsory for big landowners. Yet, this will only affect contracts that need an update or renovation by June 30, when the package of measures announced on Tuesday expires.

"The Spanish government wants to protect those who are renting and need a fundamental right, housing," said work minister and vice president Yolanda Díaz. "Sometimes paying rent is not only a hurdle, but it is impossible."

Avoiding layoffs

She also explained that the same measure to avoid layoffs applied during the pandemic will be implemented until June to cope with the effects of the war.

"In the event of a crisis, when some social protection mechanisms are available, employers must not sack people," said Díaz, adding that the new labor market regulation includes a furlough plan to prevent job losses.  

The minister also explained that if a company that has received economic aid lays employees off, it will have to pay all the subsidies back.

The Catalan government will announce its own package of measures to withstand war effects on April 5, after assessing the legislation introduced by the EU and Spain.