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President of the Spanish Government Pedro Sánchez has announced a major shake-up of Spain's rental market, promising landlords a full income tax credit if they agree not to raise rents when their tenants' contracts come up for renewal.

 

The measure is part of a package of urgent housing reforms that the Council of Ministers will approve in the coming weeks through a royal decree-law.

 

Speaking on Monday January 12 at an event to launch Operation Campamento, which will build 10,700 public homes on former military grounds in Madrid, President Sánchez said the aim is to tackle what he called greed and speculation in the rental market. He stressed that, now more than ever, tenants need the government’s help to tackle eye-watering rent increases.

 

What he’s proposing is that landlords who keep rents frozen when renewing contracts will receive a 100% income tax credit designed to offset the extra income they would have made from hiking prices. Mr Sánchez argued that the measure creates a win-win situation for everyone involved.

 

"Tenants can remain in their homes, landlords don't have to find other tenants or give up their income, and society as a whole and the State assume our responsibility, which is to use resources for the well-being of the people," he said.

 

The announcement comes as thousands of tenants whose contracts were signed during the pandemic at much lower rates face renewal this year. Left-wing parties have been pushing for months for an outright rent freeze to prevent crippling increases, but the Socialist government has opted for tax incentives instead.

 

The housing package includes two other key measures targeting loopholes in the rental system. The government plans to tighten regulations on seasonal rentals, which the president said are being used fraudulently to circumvent protections for permanent tenants. New sanctions will be introduced for those who violate state regulations on short-term rentals, including temporary, tourist and room rentals, which have been required to register since July.

 

"We will support those who guarantee decent housing; we will put a stop to those who speculate," President Sánchez said.

 

The third measure focuses on room rentals, which the president said represent a "truly worrying trend" as landlords convert entire flats into individual rooms to maximise profits. The government wants to cap the total rent for all rooms at what would be charged for the entire flat.

 

While this all sounds good on the surface, the measures face a rocky road through parliament. Once approved by the Council of Ministers, the royal decree-law will need ratification by Congress to have lasting effect, but support is far from guaranteed.

 

Both Sumar and Podemos, parties to the left of the ruling PSOE, have already announced they will not back the decree when it reaches Congress. This could lead to its repeal just weeks after approval.

 

Sumar's leader Yolanda Díaz, who typically avoids criticising President Sánchez publicly, was unusually blunt in her response. She called the plan "giving away public money to landlords" and described it as "a grave mistake."

 

Sumar argues that the focus should be on protecting tenants rather than offering incentives to landlords.

 

"There is a worsening emergency, and we must focus on those suffering the most from it, not the landlords, but the tenants," Ms Díaz said.

 

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