The tenants of all Spain received with expectation the news that the partners of the Government had agreed on a new Housing Law and that for the first time in the whole country the rental price would be regulated. But, while waiting to know the details and the fine print, the effects of this norm may be very different in Catalonia and in the rest of the State, as this is the only community that already has a norm in force that introduces a regulation of prices in urban leases. In fact, with regard to the limits on rental income, the Government’s draft is more lax than the one that had been approved by Parliament, since it would affect much less properties.
Catalan law came into force just over a year ago, promoted by movements in defense of the right to housing, which considered it a milestone. But the Government challenged it last June for jurisdictional issues, so it is waiting for the Constitutional Court to rule on it. This rule allowed local administrations to declare themselves a zone of stressed prices, so that their leases became limited to a price index. State law will work with a similar mechanism, but it will not act on all rents, but only on those properties owned by “large holders” or owners.
The main difference between the two laws is the definition of “large owner” and, therefore, which properties are outside the stricter price limit. In the law in force in Catalonia, only those owners, individuals or legal entities, with incomes of less than 1,900 euros are exempt from the price cap and it does not affect new construction, to promote protected housing. In the draft state law, however, these exceptions are expanded and will leave out of the regulation all owners who are natural persons, in addition to those legal entities that have less than 10 homes.
“While waiting to see how it becomes concrete, if the regulation is only for legal entities with more than 10 homes, the law will escape many rentiers, in fact in some areas they may be the majority,” explains Irene Escorihuela, director of the DESC Observatory. For this reason, affirms the jurist, both the movements for housing and the Catalan institutions have been legislating on this matter for some time and, therefore, trying to refine the definition of large landlord. After several regulations with different degrees of effectiveness, the promoters of the Catalan law had achieved legislation that covered the majority of owners, leaving out only very exceptional cases of landlords with very low incomes.
Escorihuela gives the example of the city of Barcelona, where according to data from the Metropolitan Housing Observatory, two out of every three homes on the rental market (63%) belong to individuals with less than a dozen properties, while in Catalonia as a whole, that figure rises to 73%. Centered in the Catalan capital, within the group of owners who are not natural persons, 66% have more than ten floors, this means that only 25% of the homes in Barcelona would be covered by the new state regulation. The rest will no longer be limited in price.
The delimitation of stressed area, another difference
The definition of a large fork is not the only difference between Catalan and state regulations. Another important point is the conditions to declare a stressed market area, a requirement for the regulation to begin to be applied in certain municipalities. “What has transcended the agreement between the PSOE and United We Can is that a stressed area will be one that in the last 5 years the average price has grown more than 5% than the variation of the CPI in the same period, a formula that is it tells him about CPI + 5. In Catalonia, on the other hand, it was CPI + 3, that is, three points above the variation of the CPI “, explains Rodrigo Martínez, a member of the Llogateres Union.
The difference is important, according to Martínez, especially in moments of an upward trend in the IPC, such as the current one. Rental prices have already grown a lot in the pre-pandemic period and, in recent months, have stabilized as other consumer goods have risen. “This CPI + 5 formula can cause many areas to be left out of regulation, even some that have house prices that were already very high but have not grown recently,” says the researcher.
Due to the sum of both factors, Martínez fears that the law may have rather limited effects or even none at all. “If you leave out of the regulation 70 or 80% of the properties in the stressed areas and another percentage leave it out of the consideration of stressed area, it is difficult to expect to see effects in the global”, indicates the member of the Llogateres Union. However, it ensures that, although insufficient, the law is a good first step.
The competency shock, salvageable
Another issue of concern in Catalonia is the legal framework, an issue that is always the result of disputes between the Generalitat and the central government. The first to react to the announcement of the agreement was the Minister of Social Rights of the Government, Violant Cervera, who warned that they would look “with a magnifying glass” at the articles of the law. “We do not want the laws that are approved by the State to be even more recentralizing,” he said, after recalling that Catalonia has competences in housing matters.
But the Catalan law, which in its day approved by Junts, ERC, Comuns and the CUP, has little chance of passing the constitutional filter after the Government’s appeal, precisely because of the limit on rent prices. However, the director of the DESC Observatory, Irene Escorihuela, recalls that state law could allow Catalonia to maintain its regulation, also avoiding the problem of competence as the State itself confers this power. Something that, however, does not appear in the information advanced by the Ministry.
This is one of the demands that the Sindicat de Llogateres also makes, when it speaks of “shielding” the Catalan norm. “We brought a legislative initiative to Congress, signed by various groups including United We Can, which already introduced recognition for laws that were already acting, which ended this problem,” says Rodrigo Martínez.
The clash of competences with Catalonia is also paradoxical because precisely this law leaves its application in the hands of the autonomous communities and municipalities, which if necessary may not even implement it, as announced by the president of the PP, Pablo Casado. In this way, communities with stressed markets would not be forced to introduce price limits while, for cities like Barcelona that want to act decisively, their margin of action would be reduced. “This regulation is very well armed for another context, for 2013 when there was no rent bubble and the vulture funds had not landed. But it does not fit the current context,” summarizes Martínez.