On September 22nd, 2020, Catalan Law 11/2020, of September 18th, on urgent measures to contain income in rental contracts and amending Law 18/2007 of Law 24, came into force. / 2015 and Law 4/2016 on the protection of the right for housing (Law 11/2020 of September 18).
The objective set out in the regulation’s statement is to improve access to decent and affordable housing through public policies.
For this purpose, the price for renting an apartment in Catalonia has to be regulated and a rent security system is introduced, which mitigates and limits the rental price by three factors:
- the qualification of certain areas of Catalonia as “market areas of strained living”;
- the reference index for the rental price and;
- the reference price of the contract.
The declaration of a municipality or part of a municipality as an area with a tight housing market requires, that the income limitation system applies in the area affected by the declaration.
The Generalitat of Catalonia is responsible for handing in this declaration, with the exception of the City of Barcelona. Here it is the responsibility of the City Hall of Barcelona, and in the Barcelona Metropolitan Area, of the Council of the Barcelona Metropolitan Area. However, due to the emergency situation in regard to housing (due to the economic impact of the Covid-19 pandemic), the law applies directly to communities that have seen an increase of more than 20% between 2014 and 2019, or their population exceeds 20,000 (in addition to Barcelona, Girona, Lleida and Tarragona, another 56 municipalities are affected). It is a transitional measure with a maximum duration of one year, which becomes ineffective for these municipalities once a new declaration is formalised.
The rents limit is implemented by applying the benchmark index of apartment rental prices. In particular, the index indicates the average euro / m2 of renting a house in a given location or area, and a price range that is higher and lower than this average.
The reference price of the contract is determined according to the index mentioned above, without taking into account the upper and lower price ranges. In exceptional cases, the reference price may deviate from the index due to special assumptions.
The main measures in which the new regime is established in Law 11/2020 of September 18 are listed below:
- Concerns rental agreements for permanent residence of the tenant located in an area that has been classified as a tight housing market.
- Contracts that were concluded before the rule came into force are excluded. Contract extensions to which the new law applies are an exception.
- The initial rent cannot exceed the reference price for renting an apartment with similar characteristics in the same urban area.
- The initial rent must not exceed the rent specified in the last rental agreement if the property in question was rented in the last 5 years before the law came into force.
- The landlord can propose an increase in the initial rent compared to the reference price if he has carried out work in the last year that improves habitability, safety, etc.
- The parties can agree to an increase or decrease in the value determined by the index with a maximum deviation of 5% if at least 3 of the following characteristics match: elevator, parking lot, furnished house, heating or cooling system, common areas of common use (garden or Roof terrace), swimming pool, concierge service and special views.
- For new homes or those resulting from a major renovation process, and for 5 years after receiving the final certificate ofconstruction (certificado final de obra), the initial rent cannot exceed the maximum margin of the reference index (unless government subsidies have been received) . This regime will come into force in 3 years, i.e. on September 22, 2023.
- If the landlord carries out improvement work in the house, he can increase the rent after the statutory minimum term of the contract has expired, without being subject to the limits set out in the ordinance.
Regarding the system of sanctions, the regulation amends Catalan Law 18/2007 of December 28th on the right to housing and, in the classification of violations, introduces those related to non-compliance with the obligations of the income protection system. It should be noted that these new measures need to be complemented by other recently approved standards. At the state level, the Royal Legislative Decree 17/2019 of 23 December on urgent measures to improve access to housing, which also introduced measures to alleviate economic difficulties in accessing housing.
We will see whether the set of rules (if it is not declared unconstitutional by the TC) has practical effects (increasing housing rents at affordable prices) or, on the contrary, as pointed out by various experts, has the opposite effect.
