Do you want to rent a home you own or are you looking for an apartment to rent? In Spain, especially in large cities, renting an apartment has become quite complicated and expensive. To control this situation, the housing rental price reference index has been established. We tell you what it consists of, what is considered to apply it, in which cases it is applied and how.
The increase in rental prices is a problem
The rental problem in Spain is twofold: on the one hand, there is almost no supply and demand is very high, so apartments are rented by tenants within hours and without even visiting them. On the other hand, according to idealista data, prices do not stop rising, in fact, in December 2023 12.1 euros per square meter were paid, and housing rentals increased by 10.1% during the 12 previous months.
The increase in rental prices in large cities is even higher: in Madrid it was 14.6% and in Barcelona it was 12.4%.
As a consequence of all of the above, the housing rental price reference index (IPRA) has become a fundamental tool to control the Spanish residential real estate market. This system, created by the Government in 2023, aims to provide transparency and balance to the relationships between landlords and tenants, especially in areas with the greatest tension regarding the price of residential rentals.
What is the housing rental price reference index?
The IPRA is an indicator that gives a range of housing rental price values for setting the rent in new rental contracts in declared stressed areas.
It does not apply to rentals for use other than housing such as commercial premises or offices.
To calculate the index, various factors are considered, which are the following:
– The useful surface of the home.
– The state of conservation
– Whether or not it has an elevator.
– The energy certification.
– Whether or not it has parking or whether or not it is furnished.
– If there are common areas such as a garden or swimming pool.
– If you have services such as concierge or concierge
– The year of construction of the building.
– The number of bedrooms and bathrooms.
– The location of the home.
– The average income in the area.
In the case of areas that have been declared stressed, by application of the Housing Law, the upper value of the range will be the maximum limit of the rental income for new contracts of large holders and for housing contracts that have never been rented.
What is the index for?
The index has several purposes, which are the following:
– That there be control by the Government of prices in areas with high prices so that they are reduced.
– That the right to housing be respected.
– That people can access rental housing at lower and more accessible prices.
How is the housing rental price reference index calculated?
The IPRA is calculated by the Ministry of Housing and Urban Agenda using data from rental contracts registered in the Property Registry and other official bodies.
If you want to know the range of values in which the rental price of a home is, you must:
– Enter the ministry website. This is the link.
– Enter the complete address of the home or its cadastral reference (you can find it on the IBI receipt or through the link to the Cadastre’s electronic headquarters).
– Next, you must include all the characteristics of the apartment (age, surface, etc.).
– Finally, the website will give you a range of prices in euros per month and you can print the price report in PDF.
How is the rental price reference index applied?
The IPRA is applied in the so-called stressed areas, that is, those where the rental price has experienced sustained growth in recent years.
According to the Housing Law, stressed areas may be declared by the Autonomous Communities in the event that the following requirements are met:
– That the average cost of the mortgage or rent, plus utility costs, exceeds 30% of the average income of households in the area.
– That the purchase or rental price has increased during the last five years by at least 3% above the increase in the CPI.
In these areas, the upper value of the IPRA range marks the limit of the rental price in the new housing rental contracts of large holders (that is, those people who have more than 10 homes) and in all new rental contracts for homes that have not been rented in the last five years.
In the case of non-stressed areas, the indexis not binding, but can be used as a reference for the negotiation of lease contracts between landlords and tenants. . In these cases, therefore, the income will be freely set by the parties.
The index does not apply to existing rental contracts, nor to rental contracts for officially protected housing.
What happens if you have an apartment already rented with a rent that exceeds the maximum limit of the stressed area?
In this case, the price is not reduced to accommodate the limit, but when the rent is updated, the limit established by the Housing Law must be respected. The price can only be reduced to the maximum limit if the owner is a large holder, the contract is terminated and it is decided to sign a new one.
If you are an owner and have made renovations to the apartment, you can increase the rent by 10% in certain cases.
Why is it generating controversy?
The index has been criticized by various sectors. On the one hand, owners of rental properties consider that it limits their ability to freely set the rental price. On the other hand, other people consider that the index is not accurate and that it does not reflect the reality of the real estate market of each city or municipality.
However, the IPRA is an important tool to regulate the housing rental market in Spain and allow all people to have access to housing.
This index provides greater transparency to tenants and helps them make informed decisions about the home they want to rent. Furthermore, IPRA can contribute to containing the excessive growth of rental prices in stressed areas of Spain which, as we have seen, reaches exorbitant values.
In short, we must consider that IPRA is a relatively new tool and is still under development. The system may be modified in the future to improve its accuracy and adapt it to the needs of the real estate market, so it is necessary to wait and see how it evolves and adjusts in order to meet its main objective: that all people can rent a house at an affordable price.
If you want to rent your house or look for rental housing, contact us and we will help you establish the price in compliance with the law.
