The National Institute of Statistics (INE) published this Thursday the new one, which shows an interannual variation of 2.20% in November 2024. This indicator marks a before and after in the regulation of the rental market in Spain, since It will be the tool to annually update the rental contracts signed from May 25, 2023, when. Its objective, as specified in the regulations themselves, is “to avoid disproportionate increases in the rent of lease contracts.”
The new index, which will be disclosed monthly, will be the main parameter to determine the rental limit. Its calculation combines three references: the Consumer Price Index (CPI), underlying inflation – which excludes fresh food and energy as they are the most volatile – and a third adjusted value that considers the evolution of the previous two, long-term growth. term expected of these (2%) and a moderating coefficient, established jointly by the ministries responsible for Housing and Economy, in order to reflect the particular circumstances of the rental market.
The measure applies exclusively to contracts signed under the framework of the new housing law, that is, to those that occurred after May 25, 2023. Rentals signed on previous dates will continue to be updated with CPI data or the Competitiveness Guarantee Index (which is capped at 2%), as agreed upon by both parties.
The introduction of this index comes at a time when the temporary caps applied to rent updates have already expired. In recent years, and in response to the economic crises derived from the pandemic and the war in Ukraine, the Government had limited rent revaluations to 2% in 2022 and 2023, and 3% during 2024. But a permanent system that allows the market to be regulated, which is why it was decided to introduce the new INE indicator. In any case, the annual update, regulated in article 18 of the Urban Leases Law, does not affect at the initial price set when signing a contract. This is still freely set.
The expected effect
The new index attempts to address a structural problem in the Spanish market: the lack of predictability for tenants. In areas where, especially in large cities and metropolitan areas, this mechanism seeks to offer a more stable framework for tenants. However, there are fears that its impact will be limited. The professor of Applied Economics at the Pompeu Fabra University, José García Montalvo, foresees new strategies on the part of the owners to avoid these limits. “Many of them, anticipating limitations on upgrades, set high initial prices to compensate for the restriction on future increases,” he points out.
This behavior reflects the measure’s limitations in its ability to effectively control the market, as owners adjust the initial value to minimize the impact of these policies, resulting in a reduced real effect. Added to this is what the expert points out as “little bargaining power on the part of the tenant”, who may accept increases higher than what is established by the index, for fear of having to look for a new apartment when the contract ends.
According to the regulations, the tenant has the right to remain in the home for a period of five years, or seven if the owner is a company. During this time, rent increases must be linked to the limits stipulated in the new reference index. “But at the end of the period the owner can raise the price whatever he wants or simply decide that he will no longer renew the contract, which is a deterrent factor for people who rent,” adds the expert.
