Seasonal rentals in Spain: why the government wants more regulation

The government aims to amend Article 3 of the Urban Leasing Law (LAU) concerning seasonal rentals. The proposed changes would require landlords to demonstrate and justify the specific circumstances for formalising a seasonal rental contract. Additionally, introducing a Digital Single Window for Leases is planned to streamline rental processes.

The regulation is intended to provide greater legal certainty and protections for traditional rentals while discouraging their conversion into temporary rental agreements. But will these measures effectively increase the supply of rental properties and drive down prices? Here’s what the experts have to say.

The shortage of rental housing in Spain makes finding a home increasingly difficult and continues to drive up prices. Rent costs are a significant concern, with Spaniards spending an average of 36% of their income on rent. This figure rises sharply in cities like Barcelona (46%), Palma (45%), and Málaga (42%).

So, will amending Article 3 of the Urban Leasing Act lead to lower prices and increased supply? Experts consulted by idealista/news argue that the government’s measures must address a broader range of issues to be effective.

"While the government has set a goal of increasing the supply in the rental market for habitual residential housing, it must first implement measures to enhance landlords’ legal security concerning tenants, which has been eroded in recent years," says Manuela Julia Martínez, president of the Professional Association of Property Managers of Madrid.

Some experts even warn that the proposed changes to the regulation of seasonal rentals could have the opposite effect – further reducing the supply of rental apartments.

“Moreover, since seasonal contracts cover a wide variety of situations, restricting or conditioning them to a specific duration based solely on tenant needs could exclude many properties from this market, potentially driving prices even higher,” explains Manuela Julia Martínez.

Juan Ramón Méndez Martos, a lawyer specialising in holiday and temporary rentals, shares a similar view. “For any measure to have a meaningful impact, it must be accompanied by broader reforms within the sector. Numerous issues in the housing rental market need attention – from taxation and providing courts with resources to handle cases of non-payment, to addressing land use and construction challenges. There is also an urgent need to ensure legal security in a sector that generates significant economic activity in Spain and concerns something as fundamental as housing,” he states.

Even though the Government's proposals have not yet become a reality, seasonal rentals have been increasing for some time to the detriment of traditional rentals.

Why is the number of short-term rentals increasing compared to long-term rentals?

“Primarily, this is due to the higher profitability of seasonal contracts compared to long-term rental agreements and the lack of legal security that continues to characterise the rental market. Additionally, the absence of stricter regulations, particularly concerning contract duration and rental amounts, encourages the prevalence of temporary agreements,” explains the president of the Professional Association of Property Managers of Madrid.

“The relationship between rental price caps under the Housing Law and the rise in temporary rentals is a complex issue. Seasonal rentals initially emerged as a more affordable alternative to hotels and have persisted due to their profitability for property owners,” says Dolores Sande, Customer Experience Manager at Globexs, a company specialising in seasonal rentals.

Solutions to the rental housing shortage problem

“The core issue lies in the housing shortage and the lack of affordable properties available for rent or purchase for much of the population. I believe it is crucial to stimulate housing production, with the state taking a more active role through both direct intervention and market participation to address the problem. However, achieving this requires the involvement of local councils and communities, which often fail to recognise developable land and construction as valuable sources of income,” says Jesús Leal Maldonado, Professor of Sociology at the Complutense University of Madrid, specialising in Urban Sociology, Urban Planning and Population.

Dolores Sande suggests several initiatives or ideas that, in her opinion, could contribute to increasing the supply of rental properties.

1. Tax incentives for owners

• Tax deductions: Offering tax benefits to owners who rent out their properties.
• Property tax reduction: Alleviating the tax burden for those who rent their homes by encouraging property owners to offer their properties on the rental market.

2. Building affordable housing

• Construction subsidies: Governments could provide grants or loans to property developers to build rental housing, especially at affordable prices.
• Public-private cooperation: Partnerships between governments and private companies to develop rental housing projects.

3. Improving rental regulation

• Stability for tenants and landlords: Regulating the rental market to protect both tenants and landlords, which can encourage more people to rent out their homes.
• Rent control: Although controversial, in some cases, a control or limitation on price increases could be established to avoid excessive speculation and make more owners see the appeal of renting rather than selling.

4. Renovating vacant homes

• Incentives for renovation: Creating programmes to finance renovating vacant homes, making it easier for them to become habitable and put on the rental market.
• Fines for vacant properties: Imposing fees or penalties on owners of vacant properties for long periods of time to encourage them to rent.

5. Promoting public housing rentals

• Increasing the public housing supply: Governments could construct or acquire properties designated exclusively for rental, ensuring they are efficiently managed to cater to low-income sectors.
• Restructuring existing public housing: Making better use of public housing resources, ensuring that they are acceptable for rental.

6. Facilitating access to financing for developers

• Soft loans: Offering loans with low interest rates to builders who develop housing specifically intended for rental.
• Promoting "build to rent": Supporting business models that focus on building properties for the sole purpose of being rented, rather than sold.

7. Relaxing urban planning regulations

• Rezoning: Adjusting urban planning regulations to facilitate the construction of residential buildings in areas where it was traditionally not permitted.
• Converting other uses: Allowing unused offices or shops to be converted into rental housing.

8. Promote new rental models

• Co-housing: Encouraging alternative forms of housing, such as cohousing or the creation of community housing, where several people share common spaces but have private areas.
• Long-term rental with guarantees: Promoting long-term rental models with guaranteed rents for owners and stability for tenants.