Limitation on the Increase of Active Leases

Since March 2022, rent increases in Spain have been temporarily limited to the Competitiveness Guarantee Index, which cannot exceed 2%, instead of following the CPI.
This measure was designed to curb inflation and remains in force until the end of 2023.

The new Housing Law grants the National Statistics Institute (INE) the authority to create a new reference index, replacing the CPI as the benchmark for rent updates.

Furthermore, when the lessor is considered a large tenant, rent increases cannot exceed 3% of the current lease value.
For non-large tenants, the increase will depend on the agreement between the parties, but may not surpass 3% in the absence of such agreement.

(For more details, consult the official Urban Lease Law (Ley de Arrendamientos Urbanos)).

Limitation on the Price of New Contracts

When signing a new lease, the impact varies depending on whether the lessor is a large holder or not.

If the lessor is not a large tenant, the rent may not exceed that of the previous contract, after applying the annual update clause.
However, it may increase by up to 10% in certain cases, such as:

• When rehabilitation or energy-saving improvements have been made within the last two years.

• When accessibility improvements have been carried out during the same period.

• When the agreed term of the lease is ten years or more.

In these cases, the tenant may not be charged fees or expenses that were not included in the previous lease.

If the lessor is a large tenant, the new contract’s rent cannot exceed the maximum limit established by the future reference price index system, which will be published by the government.
This regulation will apply to contracts signed after the law enters into force, once the index system has been officially approved.

Definition of “Large Tenant”

The Draft Bill defines large holders as individuals or entities owning more than ten residential properties or more than 1,500 m² of built-up area for residential use, excluding garages and storage rooms.

However, in areas designated as stressed residential markets, regional governments may reduce this threshold to five properties or more.
This flexibility allows autonomous communities to adapt the measure to local housing pressures.

Summary and Expected Impact

The amendment to the Urban Leasing Law, also known as the Housing Law, introduces significant restrictions on rental price increases.
Effective from May 28, 2023, these changes aim to stabilise the rental market and improve housing affordability in Spain.

The reform limits active rent increases to 3% and replaces the CPI with a new reference index managed by the INE.
For new leases, the restrictions vary depending on the landlord’s status, with additional flexibility for energy-efficient or long-term contracts.

Ultimately, this law seeks a balance between landlords and tenants, promoting a more sustainable and accessible housing market.
Its real impact will depend on how regional authorities implement these measures in each territory.