The Government Proposes Increasing Rental Contracts from 3 to 5 Years

The Spanish government plans to extend the minimum duration of rental contracts from three to five years and increase tax deductions for tenants and property owners.

The proposal responds to problems affecting rental housing in large cities, including high prices and the growth of tourist rentals. To help reduce rents, the PSOE wants to amend the Urban Leases Law.

Proposed measures

• Extend the minimum rental-contract term from three to five years.
• Increase tax relief for landlords and tenants.
• Allow municipalities to establish reference rental prices by district.

The proposal was presented to Parliament and defended by Beatriz Corredor, the PSOE secretary responsible for territorial planning and public housing policy.

Political and budgetary obstacles

The government of Pedro Sánchez would need to negotiate with the parliamentary groups that supported the motion of no confidence. The initiative faces two principal difficulties: insufficient political support and budget constraints.

Unidos Podemos supports restoring the five-year minimum term and proposes an additional mandatory five-year extension when requested by the tenant. However, it rejects tax deductions and instead favors municipal regulation of rental prices.

The PNV did not support the PSOE initiative to reduce rents and voted against the Unidos Podemos proposal.

Budget restrictions would prevent the government from introducing new deductions before 2019 because it remained committed to maintaining the budget previously prepared by the PP.

Potential tax reductions for landlords

Under the PSOE’s initial approach, municipalities would establish rental-price limits for individual districts. Landlords seeking tax benefits could not charge more than those reference prices.

• A reduction of up to 60% in personal income tax on rental income.
• An additional 10% reduction when improvements to the property’s energy efficiency are completed.
• A reduction of up to 100% when the home is rented to a low-income person between 18 and 30 years old.