Spain Cracks Down on Holiday Rentals and Tackles Housing Shortages

In a significant move to address the escalating housing crisis and soaring rents, Spanish Prime Minister Pedro Sánchez has announced a series of stringent measures targeting the holiday rental market. This initiative is part of a broader strategy to ensure affordable housing and combat fraud in the rental sector.

Tax Increases on Holiday Rentals

Speaking at an economic forum on the future of affordable housing in Madrid on January 13, 2025, Prime Minister Sánchez outlined plans to raise taxes on holiday rentals. The proposal aims to align the tax rates of these rentals with those of businesses, such as hotels, which currently pay a reduced 10% value-added tax (VAT). Sánchez emphasized that it is unfair for individuals with multiple short-term rental properties to pay less tax than hotels or workers.

Combatting Fraud and Illegal Rentals

The Spanish government is also intensifying its efforts to combat fraud in the short-term rental industry. In December 2023, the Spanish Consumer Rights Ministry launched an investigation into Airbnb for failing to remove thousands of illegal short-term rental listings from its platform. Airbnb faces potential fines of up to €100,000 or four to six times the profit made from these illegal listings. The platform has promised to appeal the investigation, arguing that it complies with local regulations and that the ministry lacks the authority to enforce these rules.

New Regulations and Tax Measures

As part of the new regulations, landlords in high-rent areas who maintain their rents in line with an official price index will be granted a 100% exemption from tax on that income. Additionally, the government plans to impose a tax of up to 100% on the value of properties bought by non-resident foreigners from outside the European Union, a measure described as "unprecedented" by Sánchez.

Impact on Local Economies and Job Market

The new regulations on short-term rentals have sparked concerns about their economic impact. A report by Oxford Economics suggests that these regulations could put 30 billion euros at risk, equivalent to 2% of Spain's GDP, and potentially affect 400,000 jobs. However, the government believes these measures are necessary to address the housing shortages and rising rents that have become a significant challenge across Spanish cities.

Local and National Initiatives

Several Spanish cities have already taken steps to restrict or ban short-term rentals. For example, Malaga's city council has prohibited short-term rental registrations in 43 neighborhoods, while Barcelona plans to ban all short-term rentals by 2029. Alicante has approved a two-year ban on new licenses for short-term rentals.

Affordable Housing Initiatives

To counterbalance the impact of these measures, the Spanish government is committed to increasing the supply of affordable housing. At the 'Housing, the fifth pillar of the welfare state' forum, Sánchez announced 12 new measures aimed at strengthening the right to affordable housing. These include the transfer of over 3,300 homes and nearly 2 million square meters of residential land to the newly created Public Housing Company, which will be used to build thousands of subsidized housing units. The government also plans to launch a new strategic project, PERTE de Viviendas, to promote innovation in the construction sector and build houses more quickly and at lower costs.

Public Guarantees and Tax Exemptions

The government is introducing a system of public guarantees to protect both owners and tenants involved in affordable rentals, a system that has been successfully tested in France. Additionally, a program will be launched for the refurbishment of empty dwellings for affordable rental, with grants for those who renovate flats to make them affordable for at least five years. Homeowners who rent their homes according to the Reference Price Index will be eligible for a 100% personal income tax exemption.

As Spain navigates these significant changes, expats and locals alike will need to adapt to the new regulatory landscape. The government's commitment to affordable housing and fair taxation aims to address the long-standing issues of housing shortages and rising rents, but it also poses challenges for those involved in the short-term rental market.