The Socialist Parliamentary Group (PSOE) has introduced a bill aimed at promoting affordable rental housing. Among its key measures are raising VAT on tourist flats to 21% to reflect their economic activity and increasing taxes on REITs and vacant properties.
Housing and Urban Agenda Minister Isabel Rodríguez announced these details at a press conference, explaining that the fiscal package fulfils part of the government’s early-year commitments outlined by Prime Minister Pedro Sánchez in a set of 12 measures to improve housing accessibility.
Regarding the timing of the measures, the Minister of Housing stated that the PSOE plans to use the “first available opportunity” within the Congress of Deputies’ legislative agenda, aiming for the first half of June.
“This is not the time for half-measures or mere regulations; sometimes prohibition is necessary. This is not about superficial fixes – we need to act decisively,” Rodríguez emphasised.
She also clarified that the proposal is being submitted solely by the PSOE, not the coalition government, to prioritise its swift implementation. The party is actively working to secure the necessary support in Congress to advance these measures.
Taxation of REITs at 25% if they do not allocate their homes to affordable rentals
Taxation on real estate investment trusts (REITs)will be revised, increasing from 15% to 25%, except for housing designated for affordable rental, which will retain the 15% rate. This aims to encourage the provision of affordable rental properties.
Two reduction scenarios are proposed to mitigate the 25% increase: a 50% reduction for entities allocating over 60% of their housing stock to affordable rentals, and a full exemption for those that allocate more than 60% to affordable rentals and reinvest their profits in affordable housing within three years.
Affordable rental housing is defined as properties with rental income below the Ministry of Housing’s Price Index or not exceeding €26,400 per year, provided they meet one of two criteria: they must serve the need for permanent subsidised housing, or the rent must not exceed 30% of the tenant household’s income.
Tourist flats will pay 21% VAT
One of the key measures in this bill to promote affordable housing rentals is the increase of VAT on tourist flats to 21%, ensuring they are taxed as a genuine economic activity.
Following a meeting with PSOE representatives, Housing Minister Isabel Rodríguez stressed that this initiative fulfils the entire package of measures announced by Prime Minister Pedro Sánchez last January. She urged parliamentary groups to support the bill, affirming that the Socialists "will actively work on these measures."
Rodríguez acknowledged that while her department has already introduced steps to encourage affordable housing, "the government’s efforts also require a solid legal framework."
Highlighting that the housing situation in Spain "is critical" and demands "decisive action," including the proposed fiscal measures to combat "speculation," the minister once again called on Madrid City Council to ban the 15,000 illegal tourist flats operating in the capital.
New tax to discourage home purchases by non-residents
The bill, which requires majority approval in the Lower House and subsequent amendments, introduces a new state tax aimed at discouraging property purchases by non-EU citizens and non-resident foreigners through the property transfer tax.
This new tax will not be passed on to the autonomous communities to “avoid double taxation,” according to the PSOE.
It will apply to real estate purchases across Spain (excluding the Basque Country and Navarre), covering all properties except real estate security rights, but will only affect individuals and companies that are not residents within the European Union.
The proposal excludes business owners and professionals carrying out their activities, unless their activity is exempt from VAT, in which case, they would be liable for this new tax.
Capital gains update
The proposed law also includes an update to the tables for the Increase in Value of Urban Land (plusvalía), in line with recent rulings from the Constitutional Court concerning the municipal capital gains tax.
Other measures in the proposed law:
Extension of rental tax relief to areas not declared under stress
The proposal also includes extending the net rental income relief in personal income tax (IRPF), potentially up to 100%, to areas not officially declared as under stress.
This deduction will apply to landlords who rent their properties below the reference prices set by the State Housing Rental Price Reference System.
Higher tax on vacant homes to boost the rental market
Taxation on vacant properties will be increased to encourage their rental. Currently, rates range from 1.1% to 2%, but the new proposal introduces greater progressivity with additional tax brackets, which will be updated in coordination with the Ministry of Finance.
Additionally, city councils are urged to "complement" this measure by imposing a surcharge on vacant homes through the property tax (IBI) to mobilise these empty properties and second homes, aiming to increase rental supply.
Regulation of the New State Housing Company
The proposal includes regulations for transferring state land and assets to the New State Housing Company, formerly known as Sepes, to allocate them to affordable housing initiatives. It also amends the Law on Public Administration Assets to secure the long-term availability of public housing, thereby ensuring its affordability.
Expand tax deductions for energy rehabilitation works
It also involves amending the Personal Income Tax Act to extend, until 2025, the tax relief available for energy-efficient renovation works, and to broaden its accessibility and scope.
Amendment to the Public Sector Contracts Law
Promote public-private collaboration in housing construction to tackle the housing shortage. These contracts will have a maximum duration of 80 years.
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