What are the main criticisms of Spain’s proposed housing law?
Millions in Spain are calling for housing reform and the government has responded with two sweeping reform bills. Ahead of the crunch vote in the Spanish Congress on Friday, The Local looks into the main criticisms of the measures.
The Spanish government recently pre-approved several new measures aimed at helping to solve the current housing crisis, from a ban on vulture funds to a moratorium on evictions until 2030.
Spain’s governing parties PSOE and Sumar finally came to an agreement on Tuesday and the Cabinet approved the raft of reforms in two separate decrees.
Although the government has attempted housing reform before and failed, the approval comes amid public pressure following the case of Maricarmen, the 87-year-old woman evicted from her home in the capital of Madrid.
While celebrated by left-wing parties and housing activists, the proposed reforms have ruffled feathers on the Spanish right and caused concern among landlords, estate agents and bankers.
Here are some of the main criticisms.
READ ALSO: LISTED – Spain pre-approves six housing crisis measures
Landlords can be fined for kicking out tenants
One of the headline measures that has garnered criticism among homeowners and landlords associations is the new fine system introduced on landlords.
The second housing decree, which includes an indefinite extension of tenancy agreements, will force landlords to pay the tenant compensation equivalent to at least 12 months’ rent if they decide to terminate the tenancy.
When a landlord does not want to extend the contract, he will be obliged to pay the tenant “an amount equivalent, at least, to the amount of twelve monthly rent of a house of similar characteristics to the leased one,” according to a draft.
That amount is calculated on the state rental price reference system – not on the rent of the current contract, which may have been frozen for years – and under no circumstances can it be less than one monthly payment for each year of residence of the tenant.
Predictably, the idea has outraged homeowners and landlords groups, who claim the bills together put landlords not only out of pocket but in a position of legal uncertainty.
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Bank of Spain warns against ‘unintended consequences’ for house building
The Bank of Spain has warned of possible “unintended consequences” of the proposals. The central bank’s governor, José Luis Escrivá, warns that the construction sector lacks the capacity to meet existing demand.
Escrivá also pointed out that introducing “mitigation” measures included in the bill to curb demand could end up having “unintended consequences” on the supply side.
In simple terms, he fears that the measures could discourage construction and worsen the housing crisis.
READ ALSO: ‘Every interested party is to blame’: Your views on Spain’s housing crisis
Property sites say it won’t solve rental housing shortage
Similarly, Spain’s leading property websites have also warned that the housing decrees fail to address Spain’s underlying structural shortage of properties that has long plagued the residential market and pushed up prices.
The measures will, they say, worsen the market situation.
Idealista’s spokesperson, Francisco Iñareta, said in a statement that “any policies and measures not aimed at increasing the supply of rental properties will fail and will only deepen the crisis we are currently facing; the supply will disappear from the market, condemning the future of thousands of tenants who are looking for, and will continue to look for, rental accommodation but will not find it”.
Legal experts say splitting the bill in two could be unconstitutional
Then there are the legal and constitutional arguments against the proposed housing decrees. If viable, the legislation could be interrupted or challenged.
Homeowners’ association Asval, which of course has an interest in seeing the housing reforms voted down, claims that the regulatory texts in themselves “violate constitutional principles”.
An unnamed lawyer from the Spanish parliament told El Independiente that “royal decree-laws must have a single purpose. They cannot be split up or their publication in the Official State Gazette withheld.”
Matilde Cuena Casas, professor of Civil Law at the Complutense University of Madrid, believes that the wording of the second decree, promoted by far-left coalition partner Sumar, effectively abolishes “the concept of contractual expiry”.
“The landlord formally retains the right not to renew, but the exercise of that right comes at a financial cost,” she added.
The lack of parliamentary support
Debates about tenant compensation and rent freezes and automatic extensions are all good and well, but if the government can’t pass the legislation in Congress, it’s simply political rhetoric.
Spain’s left-wing coalition government depends on the votes of other parties in Congress, and, like with other previously proposed legislation, it might not have the votes to even pass its housing decrease.
Regional parties prop up the Sánchez government, notably Junts per Catalunya and the Basque Nationalist Party (PNV). For centre-right separatists Junts, much of their concern comes from what impact the legislation could have on small property owners.
Both parties will be key to the legislation when it’s debated on Friday in an extraordinary plenary session of Congress. They have so far suggested they will vote it down.
The government, despite suggestions that it’s feeling surprisingly optimistic about the vote, decided to split the bill into two decrees exactly because it fears the first may well be voted down.
READ ALSO: Spain’s PM ‘reasonably optimistic’ new housing laws will be approved
