Regulating tourist flats in Spain will not improve supply or lower prices

The Spanish government has declared war on holiday rentals and is preparing a raft of measures to regulate tourist flats. On 3 July, Isabel Rodríguez, Minister of Housing and Urban Agenda, declared that they were already working to tighten regulations on this type of rental and to change the law as a matter of urgency. 

Moreover, Sumar will ask PSOE to include a tax package in the 2025 General State Budget (PGE) that considers increasing taxes on tourist flats. The proposal is to tax them with a general VAT of 21%, which would make them less profitable compared to permanent rentals.

Measures to regulate tourist rentals in Spain

Among the measures being considered by the working group led by Isabel Rodríguez, which focuses on regulating tourist flats, is amending the Horizontal Property Law (LPH), allowing homeowners' associations to veto holiday homes and creating a single platform for registering tourist rental properties. 

This registry will include properties rented through platforms such as Airbnb and Booking. Moreover, the government plans to limit temporary rentals, setting a limit on their duration and requiring justification of the reason for the rental.

However, implementing these measures remains uncertain, as specific details are still unknown. One of the government's plan's objectives is to improve access to housing and increase the rental supply. Only time will tell whether this strategy will be effective. It is worth noting that, since the government intervened in the renting of permanent housing, the available supply of rental housing has decreased.

In this article, we compile the reactions and views on the government's measures from different housing experts and players in the holiday rental sector.

Reactions to the new regulation of tourist flat

"Until we know the details, we cannot give an opinion. There are no specific details. We are responsible and therefore we cannot comment anything about measures that we do not know about. Since our sector is affected, we are convinced that the Ministry will inform us of the details and we will then have the opportunity to assess the measures' effectiveness," Asier Pereda, vice president and head of regulatory affairs at FEVITUR (Spanish Federation of Associations of Tourist Homes and Flats), told idealista/news.

"We are eager to convey our urban, labour or fiscal proposals to the minister, as we believe that their results are fully aligned with the government's objectives. Since October, we have been trying to present these proposals and it has been difficult to get a space in the agenda of the minister or any of her ministerial units. We hope to be able to do so soon, as time is ticking. Had these measures been adopted earlier, we would have made it to the high season with a regulatory framework aligned with the country's interests. FEVITUR is supported by exemplary cooperation with the hotel sector and with local and regional authorities, so we hope to be able to contribute in the same terms of public-private collaboration also with the national government," adds Pereda.

Meanwhile, Juan R. Méndez, a lawyer and expert in holiday rentals, believes that "it is natural that, under the current circumstances of social tension, the Executive should want to take action. It is another matter whether the decisions taken are more or less correct. Since the amendments to the Law on Urban Leases (LAU) exclude tourist rentals by reference to its specific regulations, the boundary between seasonal and tourist rentals is sometimes very blurred. In Spain, seasonal renting has been very traditional (students, fortnights at the beach, etc.) and the irruption of tourist rentals has been a revolution that has turned the market upside down".

"At Madrid Aloja, we are fully in favour of establishing a regulatory framework for the Housing for Tourist Use (VUTs), indeed, we believe that it is absolutely necessary for the good and continuity of the sector. In this sense, the only thing we ask is that it is done fairly, so that there is a balance between the tourism sector's interests, developing the VUTs' activity and the expectations and needs of the places where they are located," says Adolfo Merás, president of Madrid Aloja, an association of individuals, managers and owners of holiday rentals in the Community of Madrid.

On this question, Jesús Leal, Professor of Sociology at the Complutense University of Madrid, one of the most renowned voices in Urban Sociology, Town Planning and Population, agrees that it is too early to draw conclusions. "Until I see the text, I can't give my opinion. The problem is that there are very different types of temporary and holiday rentals. As far as holiday rentals are concerned, I believe that there is total deregulation and that some kind of regulation that protects both the owner and the tenant, with formalised contracts, even if it is only for a week, would not go amiss. The issue is that holiday homes are not disguised as other types of contracts, which is not easy to control or regulate," he says.

The measures will not increase the rental supply

Inlcusding tourist flats in the rental market would not solve the lack of supply because demand is much higher. More specifically, a study by the Secure Rental Foundation and the Rey Juan Carlos University (URJC), based on data from the National Statistics Institute (INE) and the Airbnb platform, points out that the inclusion of tourist rental properties in the residential rental market, with a few exceptions, would mean an increase in supply, but not enough to solve the problem of access to housing in the country's main cities.

"Evidence from the housing market suggests that there are a multitude of factors that determine the low supply. This percentage cannot explain the behaviour of the remaining 98.5%," says Asier Pereda, vice president of FEVITUR.

"Everything will depend on the extent of the reforms. In my opinion, for any measure to have a significant impact, it must be accompanied by other changes in the sector itself. Many aspects of the housing rental market require attention: from taxation to the provision of resources to the courts in cases of non-payment, including land and building; and also the need to provide legal security to a sector that moves a lot of money in Spain and that affects something as fundamental as housing," comments Juan R. Méndez.

"The need for housing in expanding areas (basically the Mediterranean arc and Madrid's area of influence) is such that incorporation into the permanent residential market or sale will not have a very high impact," says Jesús Leal.

There will continue to be a lack of affordable housing

"We will have to wait for more details of the measures. At the local and regional levels, where the authorities have exercised their sectoral, labour, fiscal and urban planning authorities correctly, an excellent relationship between hotels and tourist properties has been achieved. All these announcements, if they come to fruition, will be of little use in these territorial areas where the regulatory frameworks have precisely prevented the scale and characterisation of the sector from creating problems.  In these territorial areas, tourist flats are just one part of the varied supply of accommodation. In the rest, we believe that the proposed measures could lead to conflict between neighbours and owners. But, as I said, it is too early to assess this," says Asier Pereda.

"The distribution of powers in Spain means that a problem such as housing cannot be tackled unilaterally. The State has legal mechanisms at its disposal to harmonise the rental regulation, such as the harmonisation rules of Article 150.3 of the Constitution. But there are also other, less invasive ways of dealing with regional and local powers if the aim is to establish a relatively common legal framework for tourist rentals, seeking to differentiate appropriately between temporary rentals and those intended for permanent residence," Juan R. Méndez points out.

"In this regard, European regulations must also be taken into account, as well as competition and market access regulations, eliminating excessive or unjustified burdens. As for the possible modification of the Horizontal Property Law, it is important to remember that owners' associations already have a high level of conflict, so any modification will have to be approached with caution," adds the lawyer specialising in tourist rentals.

"Ninety per cent of tourist homes are second homes or homes that are used throughout the year by the owners, so they will not return to the market. The reform of the Horizontal Property Law proposed by the Government is not going to reduce or improve the current supply of VUTs. Instead, it is going to transfer the conflict to the owners' associations, when the Public Administration must make life easier for us citizens, not create problems for us," says Adolfo Merás.

"Regulating tourist housing is not only a tax collection issue, the citizens who suffer from its impact on their buildings and neighbourhoods are demanding it. Of course, the state must act to solve the problem of the lack of affordable housing, but it is unthinkable that this can be done by public intervention alone. The cost of approaching the European average for social housing could exceed €300 billion, even if municipalities and communities make land available free of charge. Neither the high debt nor the debt limit imposed by the European Union would allow it to be carried out within 30 or 40 years without affecting other social investments. The current government has a housing budget that is seven times that of the previous government, but it is still not enough," Jesús Leal points out.

In the opinion of the sociology professor, the problem is that "there is a lack of housing and that there is no production or increase in the supply of housing that is affordable for a significant part of the population, either for rent or for ownership. I believe that we have to encourage increased housing production and that the state has to promote both direct intervention and market's intervention to solve the problem. The point is that this must involve the municipalities and communities that still often consider that land for development and construction are not a source of income that can be put to any use".

Creating a single register of short-stay rentals

As for creating a single registration platform for short-stay rentals, most of the actors in the sector are in favour of it. Companies such as Airbnb, which Isabel Rodríguez has asked for help, and associations such as FEVITUR agree that it is a positive measure.

"We think it is a good move, as the European regulation that makes it easier for listings to go through a one-stop shop, at last. Having a single register will make the rules clearer, simpler and easier to follow. This new framework will make it easier for the authorities in each state to have access to the necessary data on this activity and for these states to apply fair and proportionate rules," says Asier Pereda.

"The registry proposed by the government is a tool that the European 'Short term rentals' regulation already established as necessary for the correct functioning of this economic activity. But we believe that before this register can be set up, fair and efficient regulation needs to be developed, based on real data, which takes into account all the actors involved," says Adolfo Merás, president of Madrid Aloja.

Possible adverse effects of rent regulation

"Without knowing the reform's final text, in addition to making the environment even more tense and making neighbourhood relations more difficult, we understand that limiting all the economic activities that can be carried out in a residential building would affect being able to set up other businesses too like law firms, architecture studios, bakeries or a psychology clinics. Otherwise, only one economic activity would be targeted discriminatorily and this would be an unfair measure. On the other hand, we find it almost impossible to identify the infinite number of non-tourist conditions for which a person may temporarily need housing," says Adolfo, president of Madrid Aloja.

"We believe that this type of decision does nothing more than pass the problem on to the neighbours and makes the atmosphere tense, even in communities where there has always been good relations. Legislating in this way, without sincerely addressing all the possible causes, is nothing more than a failure on the part of the Public Administration, which is the one who has to mediate and establish a legal framework in which the interests of both parties are defended without prejudice to any of them. The Ministry of Housing is largely unaware of the casuistry of tourist property owners. This body has called speculators a sector that has many reasons for holiday rentals beyond the monetary one and serves a demand from users," he adds.