Access to housing developments in Catalonia

Written on 22 Jan 2020

Decree Law 17/2019, of 23 December, introduces a series of urgent measures to improve access to housing in Catalonia. The different aspects of this law include, among others: (i) measures for permanent empty dwellings, (ii) measures to resolve social emergency situations, (iii) measures to propose a new model for social housing and (iv) measures to promote fair rental prices for housing.

On 31 December 2019, the Official Gazette of the Autonomous Government of Catalonia published Decree Law 17/2019, of 23 December ("DL 17/2019"). Consisting of two chapters, the first chapter is dedicated to the improving a series of housing measures by amending the provisions of Law 18/2007, of 28 December, on the right to housing (the "Housing Act"), of Decree Law 1/2015, of 24 March, on extraordinary and urgent measures for the mobilisation of housing deriving from foreclosure processes, of Law 24/2015, of 29 July, on urgent measures to address the housing and energy poverty crisis, of Law 4/2016, of 23 December, on measures protecting the right to housing of persons at risk of residential exclusion, and of Law 13/1996, of 29 July, of the Registry and the security deposit for the rental contracts of urban properties and amendment of Law 24/1991, of housing.

The main developments of DL 17/2019 are as follows:

(i) Measures for permanent empty dwellings

DL 17/2019 changes the definition of empty dwelling to include permanently vacated homes without just cause. This means that regardless if the ownership has been transferred or the dwelling is occupied without a title, provided that the owner can prove that no legal actions have been carried out to claim actual ownership during a two-year period, they will be considered empty dwellings.

Additionally, those buildings that are being built for residential purposes and only 80% of the works have been executed after two years from the deadline that they were meant to be finished, are also considered empty dwellings.

In the event of failing to establish permanent residence in the dwellings as stated in the Housing Act, DL 17/2019 increases the powers of the Public Entities to control, inspect and sanction the owners of the permanent empty dwellings including forced expropriation in legally established cases.

DL 17/2019 also extends the period, exercise and scope of the right of first refusal and withdrawal in the following terms:

  • the period to exercise the right of first refusal and withdrawal is extended to 2027 in favour of the Autonomous Government of Catalonia for the transfer of homes acquired through foreclosure processes, by compensation or mortgage-backed debt payment since the Housing Act entered into force;
  • the exercise of this action is extended to subsequent transfers, not just the initial transfer; and
  • the scope of the right of first refusal and withdrawal is extended to all the Catalonia municipalities.

(ii) Measures to resolve social emergency situations

DL 17/2019 establishes that legal entities will be considered major housing owners when they own more than 15 homes independently or through a group of companies instead of owning 1,250 m2 of living space, as the old regulation established, unless they are developers for social housing or more than 15% of the living space they own qualifies as social housing for rent. In addition to financial entities, real estate subsidiaries, investment funds and asset management entities as established by Law 24/2015, the definition of major housing owners also includes venture capital funds and asset-backed securities, as well as individuals that have more than 15 homes. The latter with the exceptions mentioned above for legal entities.

Likewise, this new regulation states that major housing owners should provide mandatory social housing lease offers and mandatory renewal of those existing social housing leases. In any case, the minimum term for social housing leases changes from three to seven years, or five years if the lessor is an individual.

The social housing lease offer must take place before filing any judicial foreclosure or eviction lawsuit against individuals and family units that prove a situation of residential exclusion deriving from (a) non-payment, (b) expired legal title that allows occupying the property, or (c) lacking the title that allows occupying the property. For (c) to be enforced, the dwelling must have been unjustified and permanently empty and for a minimum period of 2 years, the untitled occupant must have been occupying the dwelling for a minimum period of 6 months from the entry into force of these regulations and the occupant should not have rejected any social housing relocation option in the last 2 years.

As for the mandatory renewal for another seven or five years more – depending on the lessor's circumstances – for those cases in which the social housing lease period reaches the end of the agreed term, the affected individuals or family units will have the right to enter into a new lease in accordance with the conditions established by law. In any case, it must be proved that they meet the residential exclusion criteria by submitting the information that supports this at least four months before the contract expires.

The beneficiaries for both the mandatory renewal and social housing lease offer are those individuals or families who can prove they are at risk of residential exclusion. That means they receive (i) income less than 2 times the Sufficiency Income Indicator of Catalonia (Indicador de Renta de Suficiencia de Catalunya, "IRSC") if they are people living alone, (ii) income less than 2.5 the IRSC if they are people living in groups, or (iii) income less than 3 times the IRSC if they are people with disabilities or a significant dependency.

The mandatory social housing lease offer will also apply in the judicial proceedings that were initiated before the entry into force of DL 17/2019 as well as those that are currently in process. To these effects, if the social housing lease offer is not provided, it will result in a fine of €9,001 to €90,000 as established in the Housing Act.

(iii) Measures to propose a new model for social housing

DL 17/2019 establishes that social housing will be eligible as long as (i) the urban planning reserves these public properties for the public welfare use and (ii) they are included in the public property of land and housing.

Additionally, DL 17/2019 modifies the system used to determine the maximum sale and lease prices of social homes. The new system is not based on the level of income of potential housing residents, but it is based on a single basic sale price for social housing within the entire territory of Catalonia, depending on the municipality where the home is located, its energy efficiency, age or state of conservation.

The new system to determine maximum prices will apply to all those homes that are qualified as social housing after the new system is in force. However, it will not apply to those replotted projects that (i) were approved before the new maximum price determination system was applicable or (ii) were approved four years before the entry into force of DL 17/2019.

(iv) Measures to promote fair rental prices for housing

DL 17/2019 regulates the development of a Rental Price Reference Index and establishes the obligation to include the details of the rental price reference index (i) in advertising when the advertisements include the home lease price, (ii) in the home lease offers and (iii) in lease agreements. If this information is not included, an offence punishable by a fine of €3,000 to €9,000 will be incurred. Incidentally, lessors who rent their home for an income lower than the aforementioned index may benefit from public subsidies in order to promote leases.

In addition, DL 17/2019 establishes a right of first refusal and withdrawal, both in favour of the Autonomous Government of Catalonia and of the Catalan Land Institute, for cases in which rental homes are transferred together with the rest of premises that are part of the same building, in accordance with the legislation on urban leases.

Finally, in relation to the rights of first refusal and withdrawal mentioned in sections (i) and (iv) of this article, it should be taken into account that DL 17/2019 sets a period of three months from the date the transferor is notified of the resolution confirming the exercise of the right of preferential acquisition by the public entity to formalise the acquisition of the house(s).

Transitional regime and entry into force

DL 17/2019 is applicable since its date of publication in the Official Gazette of the Autonomous Government of Catalonia, although, like any decree-law, must be submitted to the validation process within a maximum period of 30 days from its date of promulgation.