Paying rent has become a challenge for tenants who, in many Spanish provinces, allocate more than 35% of their salary to rent payments (the recommended limit is 30%), according to a study by the Rental Observatory and Fotocasa. In Guipúzcoa and the Balearic Islands, a tenant has to allocate 39% of their salary to renting a property. In Barcelona, the percentage is 38%. The key question now, at the start of 2025, is how the CPI increase will affect rents in 2025. We analyse this topic below.
What is the CPI, and how does it affect housing rents?
The Consumer Price Index is a measure that tracks the evolution of prices of goods and services over a specific period of time. This index is calculated and published monthly by the National Statistics Institute.
When there is an increase in the CPI, it means there has been a general rise in prices and that the overall cost of living has also increased.
For many years, the CPI was the index applied when rent was reviewed, ensuring it was adjusted to the prevailing economic reality. However, with the aim of limiting excessive rent price increases, several reforms have been introduced, and various laws have been passed in recent years to prevent the rising cost of housing rents.
How much could rents rise in 2025?
In 2023, the Housing Rights Law amended several articles of the Urban Leases Act and stipulated that the National Statistics Institute (INE) must define the reference index for rent reviews to avoid disproportionate increases in rental contracts.
In compliance with the law, the INE published on 2 January 2025 an index of 2.20%. You can view the publication at this link.
The new index is calculated based on the lowest value of:
-The annual average adjusted variation rate.
-The annual variation rate of core inflation.
-The annual average adjusted variation rate, which is defined based on two parameters: a reference proposed by the General Directorate of Economic Policy and a reference defined by the General Directorate of Housing and the Directorate of Economic Policy.
To which contracts does the new adjustment index apply?
The index applies to housing contracts signed after the Housing Law came into effect. This index will be published monthly by the INE and will apply to contracts that need to be updated throughout the year.
If the rental contract was signed before the Housing Law came into effect (24 May 2023), the rent will be updated using the CPI, which was 2.4% in November.
Example of rent adjustment in 2025
To clarify, let’s consider the following example:
Juan has a rental property in Barcelona. The contract was signed on 1 February 2024, and the monthly rent is €1,200. This year marks one year since the contract began, and the parties agreed to an annual rent review. Applying the rental housing reference index published by the INE, the new rent will be €1,226.40 per month.
If the contract had been signed before the Housing Law came into effect and the CPI was applied, the new rent would be €1,228.80.
To calculate rent increases, you can use the calculator provided by the Ministry of Housing.
When can the CPI be applied to tenants?
Under Article 18 of the Urban Leases Act, rent can only be updated by the landlord or tenant when each year of the contract’s term is completed, as agreed by the parties. If no agreement has been made, the rent cannot be updated.
If no update mechanism has been agreed, the annual variation of the Competitiveness Guarantee Index will apply, with the limit being the variation of the CPI.
Until now, the maximum annual rent increase had been limited to 3% in 2024, and this year the limit is 2.20%, we insist: for rental contracts signed after the Housing Law came into force.
How is the rent increase notified?
The rent increase can be demanded from the tenant starting the month following the notification of the increase. The notification should be done in the following way:
-In writing with 30 days’ notice. For example, certified mail or burofax with acknowledgment of receipt and certified text can be used.
-It must include the percentage applied for the update.
-If requested by the tenant, the INE certification must also be included.
-The notification can be made on the rent receipt.
What effects does the rent increase limitation have on the rental market?
The intention of the Housing Law was to limit excessive rent growth in Spain to guarantee the right to housing. However, according to data from idealista.com, the consequences are different:
–A significant portion of the housing supply has shifted to seasonal rentals. For example, in cities like Barcelona or San Sebastián, seasonal rental properties make up 30% of the total rental properties, with a 56% year-on-year increase.
-As a result of the above, the supply of permanent housing has decreased by 15%.
–Rent prices continue to rise. In 2024, the increase was 11.5%. In major cities like Barcelona and Madrid, the increase is higher: 13.9% and 15.3%, respectively.
As a result, renting a property in Spain is becoming more expensive and more difficult due to reduced supply, meaning the financial effort required increases every year.
Advice for tenants and landlords regarding rent updates
If the rent on your housing rental contract needs to be updated this year, either as a tenant or landlord, here are some tips:
If you are the landlord:
-Review the signed contract and the clause related to rent review.
-Check the indices published by the INE.
-Analyse the applicable regulations.
-Maintain open and transparent communication with the tenant.
-If in doubt, consult with a lawyer specialising in property law.
If you are a tenant:
-Analyse the contract you signed and the applicable regulations.
-Request justification for the rent review.
-If you are unsure, ask for help from an expert lawyer.
-It is also important to have proper communication with the landlord to avoid conflicts.
In short, the rent increase in 2025 will be limited, but it will not prevent the upward trend in prices over recent years from continuing.
If you need help renting your property or finding a property to rent, contact us for expert advice.
