Sánchez announces a 100% tax bonus for landlords who freeze rents.

In 2026, the term of approximately 630,000 residential lease contracts will expire, according to data from the Ministry of Consumer Affairs. These contracts were signed during the Covid crisis, benefiting from a rent freeze. What will happen now with these contracts? Will tenants have to face increases of more than 30% due to the rise in rental prices over these years? In this article, we analyze the new measure proposed by the Government to support the rental market.

The contracts expiring this year affect 1.6 million people who have rented homes. In 2021, rental prices were capped to control the impact of the pandemic, but since then, prices have increased by an average of 40%. In the so-called “high-pressure” areas of major cities, the increase has been higher, with cities like Madrid reaching 57% and Málaga 68%.

What will be done regarding the rental situation in Spain?

Several scenarios are being considered in response to this situation:

· Extend the rent freeze during this year.
· Regulate tax benefits in the Personal Income Tax (IRPF) for landlords who keep rents frozen.

For now, a Royal Decree-Law has been drafted to establish a 100% bonus on the IRPF for landlords who keep rents unchanged. It is still unclear whether this measure applies only when the same tenant continues in the contract or also when a new contract is signed with another tenant but the rent remains the same.

The measure, therefore, consists of increasing the bonus on income derived from rental properties (real estate capital income) from 50% to 100%.

The bonus is progressive and would be applied according to the landlord’s income level, favoring landlords with higher rents.

What effects will this measure have?

Opinions differ greatly regarding the effects of this measure. The intended objectives are:

· Access to rentals at an affordable price for tenants.
· Promotion of the right to decent housing.
· Control of the progressive increase in prices.
· Benefit both landlords, who will pay less tax, and tenants who will not suffer rent increases.

However, some experts believe the measure will not achieve these objectives for several reasons:

· Price increases are so high that landlords may find it more beneficial to raise rents and increase profitability rather than maintain the rent and apply the deduction, even if they cannot claim that deduction.
· There is already a 50% IRPF deduction for landlords, which applies regardless of whether the rent is maintained.
· The IRPF deduction for landlords who reduce rent by 5% is lower (90%) than that for landlords who keep the rent unchanged (100%).
· The fundamental problem in the rental market is not the price, but the lack of housing supply, which causes a progressive increase in prices year after year.

How is rent revision regulated in the Urban Lease Law?

Articles 17 and 18 of the Urban Lease Law regulate rent and establish, in summary, the following:

· Rent is freely agreed upon by landlord and tenant.
· If the rented property is in a high-pressure area, the initial contract rent cannot exceed the last rent of leases over the previous 5 years in the same property. Rent can only be increased by 10% in certain cases:
1. · If rehabilitation works have been carried out.
2. · If rehabilitation works improve energy efficiency.
3. · If works improve accessibility.
4. · If the contract is signed for 10 years or more, or extensions are granted to the tenant.
· For large landlords, if the property is in a high-pressure area, the initial rent cannot exceed the maximum price limit according to the reference price index. This also applies to contracts on properties not rented in the last 5 years.

Regarding rent updates, the LAU establishes:

· During the contract term, rent can only be updated annually as agreed by the parties. If no agreement exists, rent is not updated.
· Any increase cannot exceed the variation of the CPI.

Tax deductions for rental income in the 2026 tax return

In the 2026 tax return, which refers to the year 2025, several tax deductions can be applied for landlords:

Landlords renting properties in high-pressure areas can apply:

· 90% for new contracts with at least a 5% rent reduction,
· 70% if the tenant is a young person aged 18–35 or a vulnerable family.
· 60% if the property has been rehabilitated in the last two years.
· 50% for reductions in other cases.

Additionally, landlords should consider not only rent itself but also expenses such as:

· Mortgage interest related to the property if the landlord financed the purchase.
· Local taxes such as property tax (IBI), waste fees, or other municipal taxes.
· Insurance related to the home, such as homeowners insurance or rental default insurance.
· Repairs and maintenance works done by the landlord, such as painting, plumbing, or window repairs.
· Community fees, both ordinary and extraordinary (special assessments).
· Utilities such as water, electricity, or gas if paid by the landlord.
· Other expenses affecting the property such as advertising rental on real estate platforms, agency fees for finding tenants, or lawyer fees for contract negotiation and drafting.

Additionally, there are regional tax deductions that may also apply if requirements are met.

In short, we must wait to see how the deduction is finally regulated to verify its effects and whether it achieves the intended objectives.

If you own rental properties and need help finding tenants and obtaining profitability, contact our team of real estate advisors in Barcelona and we will assist you.