The Executive seeks a negotiating solution to close the housing law with the ERC and Bildu and approve it as a milestone for the end of the legislature. The groups have called for a permanent cap of 3% on annual income growth, and the socialist sector of government intends to assume that cap, but temporarily, while a new index is drawn up. Currently, as an extraordinary measure against inflation caused by the consequences of the war in Ukraine, there is a ceiling of 2% for all rents that fall at the end of this year. The socialist sector proposes that in 2024 this limit for updating rents will go from 2% to 3% and then establish a ceiling on rent revisions with a new price index that is still being designed. It is a compromise solution that the ERC and Bildu could accept, although there is still a lot of negotiation and, above all, another pending issue: what to do with the new apartments that enter the market, how to put a limit to prevent them from preventing prices from rise in the markets.
The Government already has two documents with counterproposals from both ERC and Bildu, and now it has to respond by putting this new business idea and other details in writing. There is still no date for a new meeting, but there are many conversations and the climate among the negotiators is that an agreement is possible, although Unidas Podemos is very critical of the idea of developing a new index yet to be defined, which they blame on the economic vice president, Nadia Calviño.
The current inflationary episode has made one thing clear to investment partners: limiting rent updates to the CPI – a measure introduced in 2019 – is no longer working. The problem is how to regulate going forward, and this is one of the aspects that keeps the future housing law stalled in Congress. As announced by EL PAÍS, the political groups reached a preliminary agreement to set a 3% ceiling on rents. But the economic core of the Executive distanced itself from this position and offered to develop a new specific indicator to regulate increases. The rejection of this proposal by the other parties was unanimous, so now the socialist side of the Government has decided to put a new limitation mechanism on the table. This, which was only informally transmitted according to sources in the negotiations, reconciles the two previous ideas by setting a maximum of 3% for rent updates for some time, presumably the entire year of 2024, while preparing a new index that would come into force. strength later.
Although some parliamentary partners with the Executive are willing to accept that 3% is a temporary ceiling, United We Can does not see the approach with good eyes, according to the sources consulted. The party led by Ione Belarra is not convinced that the definition and elaboration of the new indicator will be done once the law is approved. There is not, however, a clear and definitive refusal, among other things due to the lack of definition of the new proposal, which the groups have not yet received in writing. The initial position of Podemos was to extend the current situation, where rents are limited by the Competitiveness Assurance Index (IGC), which has a maximum applicable value of 2%, but later it gave in and agreed to raise this limit to 3%.
The idea of reconciling the positions of the groups willing to support the project is still maturing. It starts with the possibility of using tax data or lease deposits that landlords must deposit (something that will reinforce the future rule, as currently it is not always complied with) at the corresponding regional body. For this, consultations have been carried out between the ministries and the conclusion is that both ideas are “viable”, according to government sources. They add that the main discrepancy that remains is not that, but that Unidas Podemos does not see clearly that the new law gives rise to a new indicator and is inclined to set a fixed percentage as a ceiling.
The PSOE’s change of position in February around the setting of the 3% ceiling is attributed to the refusal of the first vice-president and Minister of Economic Affairs, Nadia Calviño. His department officially maintains the posture of being “studying all the proposals”, but the minister itself subrayed last week the “extraordinary” character of the 2% limit that approved the Executive in March 2022 and whose validity was extended until the next 31 from December. This is a measure that has advanced within the scope of the package of measures to combat the worsening of inflation due to the war in Ukraine, as underlined by Calviño.
When the CPI began to rise to long-unknown levels, which meant tenants with current leases had to face very sharp rent increases, the Executive responded by linking the updates to the IGC. This is an indicator that Mariano Rajoy’s PP included in the Urban Lease Law (LAU) on a preferential basis, but not mandatory, and that until March last year was little used in leases. Its peculiarity is that, regardless of what it marks, it can never be applied outside the range between 0% and 2%, so the increases are limited.
That ceiling —and therefore, the debate that is taking place now— refers to the updating of rents and has nothing to do with the price limits of new contracts, which the project contemplates in another item. Once a year, tenants with a current contract that specifies this can see an increase in the monthly fee they pay to the landlord. This, recognized in the LAU for many years, can never be done retroactively and must be detailed in the contract, specifying the indicator used for this, which traditionally tends to be the last CPI released at the time when it will be processed to update the next 12 installments.
This is yet another obstacle, but not the only one, for the final approval of a law that has caused major headaches for the Government throughout the legislature. In order to bring the initial positions of the two Executive members closer to the most burning issue, how to limit rental prices, the project opted to combine tax deductions. Thus, the reduction of house prices is encouraged (option defended by the PSOE), reserved for private owners, with maximum prices set by the Administration (Posto’s proposal) that will be applied to large landowners. But this does not eliminate the fact that divergences continue to exist in this matter as well. These measures will only be applied in the so-called stressed areas and one of the differences that persists is the way apartments rented for the first time in these areas are regulated. The rule sent to Congress provides for limiting rents from private landlords based on previous contracts, and there are groups who fear that this condition will become a “filter” to circumvent the ceilings.
However, the positions on other topics that once marked the debate have become very close. This is the case of how to declare an area stressed and with what requirements (in principle there were two, but the members of the PSOE asked to make it more flexible) or the definition of large landowners, in which it is assumed that there will be a way to lower the limit of own more than 10 houses that the bill initially contemplated. There is also a virtually closed consensus on measures to prevent evictions of vulnerable families.
However, admit all sources, with the negotiation still open any point of the text is susceptible to receive changes in the pulse between the groups to finalize the last details. There is also a consensus that the project “has to move forward” and become law in this legislature so as not to disappoint voters from progressive forces. Although the regional elections in May, which will be followed by the general elections at the end of the year, seem like an hourglass draining its last grains. The closer to the campaign, the more difficult it seems to reconcile positions on a matter that was promised to Brussels for September of last year and that, deep down, has only suffered successive postponements since it was raised for the first time already in the previous legislature.
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