Spanish landlords will pay tenants one year's rent if they decide not to renew tenancy agreement without justifiable reason

The 96-page decree includes measures to prevent the eviction of vulnerable people until 31 December 2030 if they have no alternative accommodation, extending the so-called social shield. Public authorities will have to compensate private landlords financially for the suspension of evictions, a measure Catalan's Junts and the Basque Country's PNV parties requested this week.

It also restricts purchases by so-called vulture funds for two years if they pay less than 70% of a property's assessed market value. The measure also applies to the purchase of entire buildings, although investors can avoid the restriction if they use the properties for social housing.

Government sources told SUR that the second decree, which introduces urgent measures to strengthen the stability of contracts for people's main homes, will appear in the BOE (official state gazette) on Thursday.

However, Cadena Ser reported its contents early on Wednesday. Among the main new provisions, the decree states that, as a general rule, once a rental contract reaches five years, it will automatically renew for a further five years. If the landlord does not want to renew it, they must give the tenant six months' notice and pay compensation equivalent to 12 months' rent for a similar property, unless they need the home for themselves or a family member.

Given the importance of the measures, the government has asked Congreso to hold an extraordinary meeting this Friday so they can immediately ratify both decrees.

Housing Minister Isabel Rodríguez described the legislation on Tuesday as a cross-cutting response to the housing crisis and called on parliamentary groups to act with "a sense of perspective and generosity".

The measure extends the so-called social shield until 31 December 2030, with the aim of preventing the eviction of vulnerable people who have no alternative accommodation. Public authorities will have to compensate private landlords financially when they suspend an eviction.

The government views housing as "a good with a social function that must be protected by public authorities". Rodríguez described Maricarmen's eviction as a "collective failure" that must not happen again.

The decree specifically targets companies and funds that buy properties for speculative purposes, which the government considers incompatible with housing's social function.

It restricts these entities, whether they have legal personality or not, from buying homes until 31 December 2028 if they pay less than 70% of the property's market valuation. The measure also covers the purchase of entire buildings, although investors can avoid the restriction if they use them for social housing.

Tenants with existing rental contracts will be able to request an extraordinary extension and a limit on rent increases until 31 December 2027. To qualify, they must have kept up with their rent payments and have done so for the previous eight months.

Landlords must accept the extension unless the two sides agree different terms or the landlord can demonstrate a genuine need to recover the property for themselves or a family member.

As for rent increases, landlords cannot raise the rent at all when the current rent already exceeds the maximum price allowed under the reference-price index system. In other cases, the parties can agree an increase, but if they fail to reach a new agreement, the increase cannot exceed 2%.

The legislation changes the tax regime for listed real estate investment companies, known as SOCIMIs, to steer their investment towards the development of affordable residential housing.

The decree raises the tax rate on SOCIMI profits from residential rents from 15% to 25%. The rate can fall by 50%, or even up to 100%, depending on the number of homes the company offers at affordable rents.

Through this change, the government aims to use taxation to influence where property investment goes, ensuring that capital helps increase the supply of affordable rental housing rather than encouraging speculation.

The plan explicitly brings short-term rentals and room-by-room lets within the regulatory framework to tackle fraud.

The decree requires these rental agreements to state clearly the reason for the tenant's temporary stay. The parties can agree the duration freely, but it cannot exceed 12 months "without valid justification". If the tenancy continues beyond that period without a valid reason, the authorities will treat it as a main-home rental contract.

The government says the measure aims to prevent landlords from shifting properties into these types of contracts to circumvent the legal protections that apply to ordinary residential rentals.

To prevent the continued loss of homes from the long-term residential market, the decree introduces a new 10% IVA tax charge on tourist properties that can be rented for periods of less than one month.

Town halls will also be able to impose an IBI surcharge of up to 50% on residential properties used for tourist accommodation. They can raise the surcharge to 100% for owners with four or more properties used for this purpose.

The measure comes alongside Rodríguez's call for regional governments to close properties that people use illegally for tourist accommodation.

The initiative introduces a 10% income-tax deduction on rent paid for a main home by tenants who spend between 50% and 60% of their income on rent.

It will apply to taxpayers with an annual taxable income below 33,007.20 euros. According to estimates from the tax agency, the measure could benefit around 1.6 million households and generate savings equivalent to roughly one month's rent.

The government will introduce specific tax incentives for private landlords who keep their properties on the residential rental market at affordable prices without engaging in speculative practices.

The general 50% tax deduction for landlords will remain in place, while the deduction can rise to 100% if they cut their tenant's rent by more than 5%. At the other end of the scale, the deduction could fall to 15% if the landlord increases the rent by more than 20%.

These incentives target landlords willing to offer rents that remain compatible with market conditions and form part of the system of tax benefits established under the housing law.

The new financial instrument targets households with stable employment and incomes who lack the savings needed to secure a mortgage and buy their first home.

Through the 'Tu Casa' scheme, the government will provide loans worth up to 20% of the property's value, capped at 50,000 euros, to supplement private financing.

The loans will run for up to ten years and carry a 0% interest rate, allowing buyers to cover the amount they need to complete the purchase. The government says the scheme addresses gaps identified in previous guarantee programmes.

The legislation aims to strengthen the supply of public housing by consolidating the so-called Casa 47 model, which Rodríguez describes as the most effective long-term tool.

The government will also activate outstanding administrative mechanisms within the central government to continue adding properties to the national public housing stock.

The decree cuts IVA on publicly developed and protected housing to the super-reduced rate of 4%.

The government hopes the tax incentive will encourage the construction of affordable homes and gradually increase the supply of public housing.

Unlike the first decree, the government drafted the second text with less room for prior negotiation.

Even so, the government has called on Congreso to act responsibly and support the urgent ratification of both measures at Friday's extraordinary meeting, with the aim of turning them into effective solutions to the housing crisis.

The second royal decree introduces automatic extensions for rental contracts, with safeguards for specific circumstances, in an effort to give tenants greater stability and reduce uncertainty over their contracts.

The general rule will require a rental contract to renew for a further five years once its initial five-year term expires.

If the landlord does not want to renew the contract, they must give the tenant six months' notice and pay compensation equivalent to 12 months' rent for a similar property. The exception applies when the landlord needs the home for themselves or one of their family members.

The proposal draws on European models and the philosophy behind the public Casa 47 system, under which rental contracts can run for up to 75 years.

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