How Spain's July general elections could affect the enforcement of its new housing law

The Spanish president's decision to move the general election to 23 July, following the outcome of the municipal and regional elections of 28 May, has caused some uncertainty around the enforcement and effectiveness of the Law 12/2023, of 24 May, on the right to housing.

The new housing law, which was published in the Official State Gazette on 27 May 2023, has been promoted by the Pedro Sánchez-led government and introduces, among other new features, measures aimed to regulate the rental market in Spain. 

The approval of the housing law has been possible due to the agreement between the PSOE (the Spanish Socialist Workers' Party) and the United We Can or Unidas Podemos party, with the support of Catalonia's ERC and the Basque coalition EH Bildu. However, the Popular Party, Vox, Ciudadanos, the Basque nationalist PNV, Junts, PdeCat and Coalición Canaria have rejected the new housing legislation.

Rental market measures

The main features introduced by the housing law regarding the rental market are:

• The possibility for the competent housing administrations to declare areas with a stressed residential market.
• The possibility for the autonomous regions to modify the concept of a "large holder", considering as such the owner of five or more urban properties for residential use.
• Amendments to Law 29/1994 of 24 November 1994 on urban leases concerning the duration and rent of lease agreements.
• The creation of a new reference index to regulate the update of the rent of lease agreements during year 2025.

Under the Spanish Constitution, the autonomous regions have assumed full competence in housing matters in their statutes of autonomy and, therefore, the application of the measures included in the legislation is their as well as the municipalities responsibility.

Elections fallout

In view of this development and the results of the municipal and regional elections of 28 May 2023, the Housing Law is unlikely to reach practical application in some territories. This is a result of the new scenario on the Spanish political map, where autonomous communities such as Valencia, Cantabria, the Balearic Islands, Aragon and the region of Murcia could become governed by the Popular Party (with the support of Vox). This would join the community of Madrid, Andalusia, Galicia, La Rioja and Castile and Leon currently governed by the Popular Party.

The next few months will reveal the economic consequences that will be unleashed in the different autonomous communities that apply the measures envisaged in the Housing Law. However, the measures will have a direct impact on the decision by companies to invest in one territory or another depending on the profitability of their assets. Meanwhile, the autonomous communities that apply restrictions on the rental market will be able to remain in the background. 

Osborne Clarke comment

The situation of uncertainty regarding the enforcement and effectiveness of the Housing Law has been exacerbated by Sánchez's decision to bring forward the general election to 23 July, since, depending on its outcome, the Housing Law and any interventionist policies affecting the property market could be largely modified if the Partido Popular wins, as stated by its president, Alberto Nuñez Feijóo. However, Feijóo's party seems willing to maintain certain measures included in the Housing Law such as those designed to offer tax benefits to small landlords to maintain or lower rents.

In any case, the success of the Housing Law's implementation hinges on the outcome of the upcoming general elections on 23 July 2023. The current administration's commitment to upholding the Housing Law and its effectiveness will be put to the test against the Popular Party's possible victory, which could potentially undermine the long-term impact of the new measures introduced by the Housing Law.