What we know about Spain's planned crackdown on short-term let owners

Spain's Council of Ministers announced recently that it will approve a new package of measures aimed at curbing house prices and tackling fraud in the rental market.

In order to do so, the thrust of the package is to better regulate short-term rentals.

The Local broke down one of the headline measures — how Spain may slap 21 percent VAT on tourist lets, for example — here.

The VAT hike is just one measure affecting short-term let owners in Spain.

Among the other initiatives being prepared by the government are the stricter regulation of seasonal and room-by-room rentals and new tax incentives for landlords who reduce their rental prices.

READ ALSO: Spain may slap 21 percent VAT on tourist lets as part of new housing crisis plan

Although the final text has not yet been published so concrete details are still unclear, government sources cited in the Spanish press have indicated that the decree is intended to become a "major parliamentary agreement" on housing.

Government spokesperson Elma Saiz chose not to give any details about the new decree when speaking to the press beyond stating that it will be "an ambitious piece of legislation” and that the full content is still being negotiated.

If passed in its current form, it will be a law with a big impact on thousands of small landlords, self-employed individuals and businesses operating in the rental market in Spain.

The measure is aimed at increasing the supply of affordable housing in Spain, something many in the country say is caused by an increase in short-term tourist rental accommodation.

A bill of two halves

The package will reportedly be divided into two main parts.

The first will focus on curbing rent rises and combating the fraudulent use of certain types of tenancy agreements.

The second will seek to increase the supply of affordable housing and amend the taxation of certain properties used for tourist accommodation, something very relevant for landlords.

VAT hike

Currently, owners of tourist apartments in Spain pay 0 percent VAT if they do not provide hotel services and 10 percent if they provide hotel services such as reception and regular cleaning.

This package reportedly proposes increasing the VAT rate on tourist accommodation to 21 percent.

An end to rental loopholes

Among the main measures announced are specific regulations governing seasonal lets and room-by-room lets, two arrangements used by thousands of landlords and self-employed people in Spain who let accommodation to students, temporary workers or people requiring accommodation for limited periods.

Spain's housing law 2023 left a vacuum in the regulation of this type of accommodation, which was left outside the price limits in so-called 'stressed' areas, the mandatory extensions and the reinforced protection to which the usual housing rentals must be subject.

The Spanish government believes that some of these contracts — often for up to 11 months only — are used to circumvent the regulations governing letting rules on primary residences.

It therefore aims to establish a specific framework to clearly distinguish between cases where there is a genuine temporary need and those where a contract is being used to disguise a residential tenancy.

Anti-fraud

Furthermore, the government also wants to bolster anti-fraud measures by making it compulsory for tenancy agreements to be drawn up in writing and by retaining the option to grant exceptional extensions in certain circumstances.

Tax incentives

It also proposes introducing new personal income tax reliefs for landlords who reduce their rent, with the aim of encouraging a greater supply of affordable housing.

In the past, the government proposed a 100 percent personal income tax bonus on earnings for landlords who renewed the contracts of their tenants without raising the price.

However, it is unknown if this approach will be the same as the one proposed past year.

Rental extension

Another possible feature of the bill that could affect property owners and small businesses owners is the proposed rental extensions.

The bill could also include a possible extension of rental agreements, a measure which was approved three months ago by the government via decree, but then rejected in Congress by the PP, Vox, and Junts parties.