Five reasons why Spain's housing law has failed

Tuesday 03 June 2025 - 16:45

By: Dakir Madiha

Five reasons why Spain's housing law has failed

Spain amended its housing law two years ago to curb soaring property prices and rents. The reform aimed to regulate rent prices through a rent control index, increase taxes on landlords with vacant properties, and incentivize below-market rental rates.

Since then, rental prices have risen by 24 percent between May 2023 and April 2025, according to property portal Idealista. Meanwhile, the permanent rental supply dropped 17 percent. Demand surged 79 percent, driving prices to historic highs.

Landlords shift to seasonal rentals

As regular rentals decrease, seasonal rentals increased by 25 percent in early 2025, making up 14 percent of the total rental market. Cities like Barcelona and San Sebastián show especially high shares of seasonal rentals, at 47 and 37 percent respectively.

Landlords avoid legal uncertainty linked to long-term rentals. Many prefer temporary or seasonal rentals that currently face less regulation.

Falling supply, rising demand

The national rental supply fell 3 percent in early 2025. Demand remains strong, with 35 tenants applying per property on average. Competition peaks in Barcelona, with 61 applicants per listing, followed by Palma de Mallorca and Madrid.

Since the law's enactment, demand has jumped 79 percent nationwide.

Rents continue to climb

Rental prices keep rising. Twenty-five provincial capitals reached record highs, with Segovia (+39%), Valencia (+35%), and Madrid (+31%) among the highest increases.

Major cities also show rising rents: Barcelona (+28%), Alicante (+27%), and Málaga (+24%).

Average rent reached €14.3 per square meter in April 2025.

Limited impact of short-term rental controls

The government introduced registration for short-term rentals, effective July 1, 2025. Requirements for justifying short-term lets also complicate matters for landlords.

Despite this, many properties remain off the long-term market, as landlords either leave them vacant or use them as seasonal rentals.

Political deadlock delays tighter regulation of seasonal rentals.

Stressed residential markets plan falls short

The law created ‘stressed residential markets’ to cap rental increases where prices rise more than five points above the consumer price index or where families spend over 30% of income on rent.

Catalonia led by declaring 271 municipalities as stressed. Some Basque Country towns joined early 2025.

Other cities are evaluating whether to apply these limits.

Data from Catalonia’s 15 largest cities show a 21.5% drop in long-term rental contracts since the law and caps took effect, raising doubts about effectiveness.

The housing law’s goals remain unfulfilled. Rising prices, shrinking supply, and landlord reluctance highlight the gap between policy and market realities.