New Housing Law 2023: How does it affect you?

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Main key points of the New Housing Law 2023

– The new 2023 housing law will include measures to regulate rental prices in stressed areas. – A new name is proposed for large holders – The update of the rental prices is separated from the CPI – Regularization of rental prices – The expenses of the real estate will be assumed by the owner – New regulatory measures against evictions, foreclosures or auctions of assets in situations of vulnerability.

Price limits on home rentals

The Bill proposes a set of measures to control housing rental prices. Including the elimination of the Consumer Price Index as a reference index for the annual updating of income. From March 2022, it was decided that the update mechanism would be the Guarantee and Competitiveness Index. That cannot exceed 2%, instead of the CPI. This measure has been extended until December 31, 2023. The Bill establishes that in 2024 the increase in rent in housing lease contracts may not exceed 3% for large holders and, in cases where the landlord is not a large holder, the increase will be the one agreed between the parts or may not exceed 3%. In addition, the National Institute of Statistics will define a new reference index. This will be applied instead of the CPI before December 31, 2024. To avoid disproportionate increases in rental prices. These measures will affect all rent updates of housing lease contracts. Regardless of whether the houses are in stressed areas or not.

Regulation in stressed areas

The Bill grants powers to the competent housing Administrations to identify areas with a stressed residential market if the following conditions are met: 1- That the economic burden implied by the cost of the mortgage or rent, together with basic expenses and supplies, exceeds 30% of the average household income 2- That in that area the purchase or rental price of the home has increased in the last 5 years at least 3 points above the corresponding regional CPI. However, compliance with these conditions does not automatically imply the declaration of the affected area as a stressed residential market, since an express declaration from the competent Administration will be required. In principle, the declaration will have an initial validity of 3 years, but it may be renewed annually. The declaration of a stressed residential market area will allow the contract extension regime to be modified. It will also allow to establish a limit on the prices of the leases.

The extension regime

The Bill proposes changes in the regime of extensions of housing lease contracts established by the Urban Leasing Law. After the mandatory extension period ends, the lessee will have the right to requestrequest an extraordinary extension. This will be for a maximum of three years, in which the same conditions of the current contract will be applied. The lessor , regardless of whether he is a large holder or not, must accept the extension, except in the following cases: – If other terms or conditions have been established by agreement between the parties. – The landlord has communicated the need to occupy the leased property for personal use or that of their relatives in the first degree of consanguinity or by adoption or for their spouse in cases of separation, divorce or marriage annulment, as established by law . – A new contract is signed with the income limitations established in the following section. The draft of the new housing law 2023 establishes limits on the rental price. These vary depending on whether the landlord is a large holder or not.

• • • If it is not a large holder, the rent of the new contract cannot exceed that of the previous contract, except in certain specific cases, in which the maximum increase allowed is 10%. In addition, expenses that were not contemplated in the previous contract cannot be passed on to the tenant.
  • • On the other hand, if the lessor is a large holder, the rent cannot exceed the maximum limit of the applicable price according to the reference price indices, which will be published in the future. li>

The draft of the new housing law 2023 defines large holders as individuals or legal entities that own more than 10 properties for residential use or a constructed area of more than 1,500 m2 for residential use, but allows autonomous communities to reduce this threshold to 5 or more properties in areas with a stressed residential market. These regulations will apply to contracts signed after the entry into force of the bill.

Real estate expenses and contracts

The landlord will be responsible for the expenses of real estate management and the formalization of the contract.

IRPF

The modification in the Personal Income Tax (IRPF) is limited to individuals who receive income from real estate rental and who do not carry out a rental economic activity according to the regulations. Currently, the net income obtained from renting a home enjoys a 60% reduction. The Bill establishes four different reductions that are incompatible with each other and that are applied in a specific order: – An increased reduction of 90% for those owners who formalize a new rental contract for a home located in a stressed residential market area and who have lowered the initial rent by more than 5% compared to the previous contract. – 70% for those owners who rent a home for the first time to tenants between 18 and 35 years of age in an area with a stressed residential market. As well as non-profit entities for social purposes. – 60% for those owners who have carried out rehabilitation works in the rented home in the 2 years prior to the formalization of the contract. – Or a general reduction of 50%. The taxpayer can apply the corresponding reduction in each case, with the general reduction of 50% being the last option. These reductions will not be applied if the rules on rent increases are breached within a stressed residential market area. The increased reductions will only be applicable for tax periods beginning on or after January 1, 2024. They may be applied to contracts signed after the entry into force of the Bill.

IBI

The objective of the Project of the new housing law 2023 is to modify the current regulations of the IBI in relation to unoccupied homes. Current regulations establish a 50% surcharge on the IBI for these homes, which affects all property holders. However, the Bill introducessignificant changes: 1– Allows this surcharge to increase up to 100% for homes that have been vacant for more than 3 years. 2– Allows an increase of another 50% (up to a total of 150%) for owners of two or more unoccupied homes in the same municipality. An unoccupied dwelling is defined as that which remains empty continuously for more than 2 years. Except in certain justified cases such as temporary transfers for work reasons or real estate in the process of works or rehabilitation. The declaration of the situation of unemployment must be made through an administrative procedure that includes the hearing of the taxpayer. Although the entry into force of these measures of the new housing law 2023, is scheduled for the day after the publication of the standard in the BOE, its effective application will require the declaration of vacancy of the property.

Measures related to the regulation of subsidized housing

Soil classification for subsidized housing:

It ensures that the classification of a piece of land as a reserve for public protection housing cannot be altered. Except in exceptional circumstances in which the urban planning instrument justifies the lack of need or the impossibility of said destination.

Reservation of subsidized housing on rural and urban land:

It is clarified that the urban legislation can establish a reserve of 40% of the residential capacity foreseen by urban planning on rural land subject to new developments and 20% on urban land that must undergo urban reforms or renovations, except for exceptions in which a lower reserve is established or certain municipalities are exempted.

Percentage of reserves earmarked for rental public housingr:

It is established that the urban or territorial planning legislation must set the minimum percentage of protected housing for rent, which may not be less than 50%, except in exceptional cases.

Disqualification of subsidized housing:

Without prejudice to the conditions and requirements established by regional or municipal regulations, which will in any case prevail, it is guaranteed that homes built on land intended for housing will be permanently subject to some public protection regime. and they cannot be disqualified while the classification of the land is maintained, except in the case of homes built on land whose urban classification does not require said destination and that do not have public aid for their promotion, or in those cases in which it is exceptionally justified. in accordance with regional regulations, and the classification period may not be less than 30 years. Homes that have already been classified with a public protection regime before the entry into force of the standard will continue to be regulated by said regime.

“liveincentivized affordable sales“:

The introduction of the figure of “incentivized affordable housing” is proposed. These are privately owned homes, including third sector entities. These receive urban, tax and other benefits from the competent Administration. All in exchange for being assigned to the habitual residence on a rental basis at reduced prices. Or also any other form of temporary tenure for people with limited income who cannot afford to access a house at the market price.

Guide Rules

Certain guiding rules are established, although they are not binding for the competent administrations. These include the obligation to use the home exclusively for the habitual residence. But also the setting of maximum limits on the rental price and the need not to formally classify it as subsidized housing. In rural areas with population loss. This figure can be accompanied by strategies to boost the economy and society, such as job creation and activity.

Regulation of the public housing stock:

Establishes guiding criteria for its management. Heritage assets can only be sold to other public administrations, non-profit entities dedicated to managing housing for social purposes, and special attention must be paid to the characteristics of each territorial environment. In addition, an updated inventory and an annual report detailing the actions taken to strengthen the public housing stock and adapt it to existing demand are required.

Social protection measures in cases of eviction, foreclosure and real estate auction in vulnerable situations

The Project of the new housing law 2023 proposes significant changes in the procedure for eviction, foreclosure and auction of real estate in situations of vulnerability contemplated in the Civil Procedure Law (LEC). These modifications extend existing social protection measures to effectively address situations of social and economic vulnerability, also known as “social shield”.

The main measures include:

• – The resolution that sets the launch date will be communicated to the competent public administrations. Without the need for the consent of the interested parties, to verify the vulnerability situation of the occupants of the house.

• – The plaintiff will have the obligation to declare if the property is the habitual residence of the occupant and if he is a large holder of housing. Having to accredit the latter by certification of the Property Registry that includes the list of their properties. If the plaintiff is a large homeowner, they must also demonstrate whether the occupant is in a situation of economic vulnerability or not.

• – Lawsuits filed by large homeowners, whose occupants are in a situation of economic vulnerability and inhabit said home, must meet an admissibility requirement that requires the prior completion of a conciliation or mediation procedure between the parties. This procedure will be established by the competent Public Administrations.

• – Protection is extended to vulnerable people in eviction proceedings in the reform of the LEC. In addition to lease cases, it also includes those in which it is intended to recover a precariously transferred property, request summary guardianship of possession or possession of a thing or right, or demand the effectiveness of real rights. The concept of vulnerable person is also expanded. It includes higher income criteria and considers personal situations such as the presence of minors in the home.
• – The reform establishes a new decision-making systemtion by the court in relation to the possible suspension of the eviction procedure, through a weighted and proportional assessment of the specific case, as opposed to the automatic suspension currently provided for by the Justice Administration Lawyer.
• – Suspension times for eviction processes are extended to 2 months for individuals and 4 months for legal entities, compared to the current terms of 1 and 3 months.

Foreclosure of mortgaged assets

The Project of the new housing law 2023 extends the protection of the occupant of the house in a situation of vulnerability in the foreclosure procedures of habitual residence, following the same terms as in the eviction procedures. It is established as an obligation of the performer to indicate whether or not the property constitutes the habitual residence of the occupant and whether or not it is a large homeowner. In the case of being a large homeowner, he must prove if the occupant is in a situation of economic vulnerability through certification from the Property Registry with the list of its properties. In addition, it is imposed as a requisite for the admissibility of the foreclosure claim that, in cases where the executor is a large homeowner, the home is the habitual home of the occupant and the latter is in a situation of economic vulnerability, it has been carried out carry out a conciliation or intermediation procedure between the parties previously, which will be established by the competent Public Administrations. The periods of suspension of foreclosure proceedings are also extended to 2 months for natural persons and 4 for legal persons.

Real Estate Auction

The Project of the new housing law 2023 expands the protection of the occupant of a house in a situation of vulnerability during the auction of the real estate. If the habitual residence of the occupant is the auctioned property. And the owner is a large homeowner or a housing company, the following measures are established:

• – The performer must prove if the occupant is in a situation of economic vulnerability. In case it has not been done previously in the procedure.
• – If the occupant is in a situation of economic vulnerability. The enforcement process cannot be started unless the executor demonstrates that he has followed the conciliation procedure. Or the intermediation process established by the competent Public Administrations.

In any judicial resolution that indicates the release of the occupant, whether in eviction proceedings, foreclosure or property auction, the exact date and time of the release must be specified.