For great evils, great and old remedies. The majority partner of the Government, in another attempt to stop the sharp rise in rental prices without intervening in the market, has put a new fiscal piece on the table in the form of a bonus on income tax. The central idea, which is still very green and must take shape, is to create for the owners to keep the price intact when the time comes to renew the contract. However, Pedro Sánchez was born with an obvious paradox. As it is proposed, it threatens to put in the background, if not directly neutralize, the innovative system of tax incentives that was recently launched, after the approval of the state housing law.
This rule, validated in Congress in 2023, introduced a series of reductions in personal income tax starting the following year for landlords of primary residences, with a progressive scheme that, starting from the general 50%, rewards certain decisions, such as lowering rents or renting to young people. The most ambitious and attractive is the 90% reduction in the positive net return for landlords who sign a new contract in a stressed residential market area and, in addition, reduce the rent by more than 5% compared to the previous contract. In the absence of the plan announced last week by Sánchez coming to fruition, the contradiction is evident and raises the question of who is going to reduce the rent by 5% to access a 90% bonus when apparently it will be enough.
“In the absence of knowing the technical details, the proposal to raise the personal income tax reduction to 100% for landlords who freeze prices points in a direction contrary to the incentive scheme introduced by the housing law,” says Raquel Jurado, a technician from the studies service of the Registry of Tax Advisory Economists (REAF). A total reduction in yields in exchange for maintaining income “not only undoes the tax increase that lowering the reduction to 50% meant, but also transforms the most attractive incentive into one linked to not moving prices,” he adds.
Francisco Serantes, coordinator of the IRPF expert group of the Spanish Association of Tax Advisors (Aedaf), also believes this: “Unless there is some nuance or requirement that is not yet known, the announcement leaves the current bonuses empty of content.”
The union of technicians of the Ministry of Finance (Gestha) also highlights the doubts linked to the new proposal, while asking to restructure the current tax incentives. If this redefinition is not carried out, they consider “that it could be perceived that the owners who maintain the price obtain more tax advantages than those who lower it.”
In the Treasury, the department in charge of finding the technical fit and materializing the proposal, they explain that the work is in a very initial phase and that all the details must still be finalized.
The central purpose of the new plan announced by Moncloa is to contain the sharp rise in prices that is keeping the tenant population awake at night. In the coming months of covid-19, after the five years established by the Urban Leases Law in the case of private landlords (for companies, the minimum duration is seven years). The situation, however, is very different from that of then, since rents have grown by around 35% in this time and are around ―about 14.5 euros per square meter, according to real estate portals―.
The situation, in addition to the increase in cost associated with the review, is aggravated by the number of homes that are in this situation. According to estimates by the Ministry of Social Rights, Consumption and Agenda 2030, ―affecting around 1.6 million people― they were signed in 2021 and will have to be renewed during the current year. The equation, however, does not take into account rentals that could be finalized before the deadline or those that are signed in areas declared as stressed (most of Catalonia and cities like A Coruña), where prices are capped thanks to the application of the housing law.
No official data on incentives
The 100% reduction proposal makes the incentives to take advantage of the other reductions contemplated in the housing law even lower. The rule, in an attempt to incentivize landlords, reduced the general reduction to which all landlords are entitled in personal income tax from 60% for life to 50%. In exchange, it expanded the advantages in a series of cases: up to 60% if the home had been rehabilitated two years before signing the contract, up to 70% if it was rented to people under 35 years of age in a stressed area and, finally, up to the aforementioned 90% in exchange for reducing the monthly rent.
This design, which took several months to negotiate between the PSOE and Podemos – partners at that time in the last coalition – sought to introduce a logic of staggered incentives. The greater the response from the owner, the greater the tax premium. The problem is that. If it is articulated as a total exemption from the net return for those who simply freeze the income at the renewal of the contract, the economic message changes radically.
At Gestha, therefore, they see it as premature to propose major changes like the one the President of the Government introduced last week. And the tax reductions of 90%, 70%, 60% and 50% came into force in January 2024, being applied for the first time in the 2024 Income Tax (whose campaign was carried out between April and June 2025. “There has not yet been enough time to analyze their effectiveness,” say the technicians.
A dubious impact
The effectiveness of the proposal also raises doubts among experts. The REAF expert questions whether the measure can really alleviate an increasingly stressed real estate market, since it would be necessary to “compare the tax savings data with what is lost if the rent is not raised.” “We are not so sure that it will be profitable for landlords, especially considering that everyone has the right to apply for a 50% reduction,” he adds.
Arcano Research warns in a document published this Tuesday that the 100% bonus on personal income tax can contain increases in certain cases, but its impact will be limited if it is not accompanied by an effective increase in the supply of rental housing. Furthermore, they remember that the additional tax incentive is relatively modest: given that landlords already enjoy, at least, a 50% reduction, the real benefit of the new measure is equivalent to that extra 50%, which could be insufficient to compensate for potential price increases.
