For 2024, the government has mandated that the annual increase in rents for housing rental contracts in the Canary Islands will be limited to a 3% maximum. This stipulation is part of the broader Housing Act passed in May as an element of the Recovery, Transformation, and Resilience Plan. It aligns with the conditions set by the European Commission for the disbursement of ‘Next Generation EU’ funds.
Designed to mitigate the economic and social fallout from global crises such as the war in Ukraine, this cap is detailed in the Housing Act’s sixth final provision and applies universally, ensuring that rent increases do not exceed 3%, regardless of tenant-landlord negotiations.
Large Tenant Definition:
The act also provides a precise definition of a ‘large tenant’ as an individual or entity owning more than ten urban residential properties or a built-up area exceeding 1,500 square meters, excluding garages and storage rooms. This definition can be tailored for areas designated as stressed residential markets, potentially affecting owners of five or more properties based on the autonomous community’s justification.
Developing a New Reference Index:
By the end of 2024, the National Statistics Institute (INE) is required to establish a new reference index for the annual revision of housing rental contracts, a directive outlined in the Housing Act.
Initiating New Tax Incentives for Rentals in the Canary Islands in January
Personal Income Tax Improvements:
Commencing 1 January, modifications to the Personal Income Tax (IRPF) regulations for permanent housing rentals are set to promote more affordable leasing arrangements. This reform introduces a 50% deduction in the net yield from permanent housing rentals, with the potential for further increases depending on certain factors like stressed areas and rehabilitation efforts.
Extending Suspension of Evictions and Repossessions
Ongoing Protective Measures:
The suspension of evictions and repossessions for economically and socially vulnerable households from their primary residence is extended until 31 December 2024. This extension is a component of a larger suite of measures responding to international conflicts and environmental challenges. It applies to households undergoing eviction proceedings unrelated to rental contracts and includes special considerations for households with dependents, victims of violence, or minors.
Judicial Discretion for Suspension:
In cases involving property owners classified as ‘large tenants’, judges have the discretion to suspend evictions after a careful assessment and based on a report from competent social services evaluating the household’s economic vulnerability.
Provision for Landlord and Owner Compensation
Compensation Mechanism:
Landlords and property owners affected by the extraordinary suspension of eviction have until 31 January 2025, to request compensation as per the Royal Decree-Law 37/2020. This law addresses urgent measures for social and economic vulnerability in housing and transport and extends the deadline for submitting compensation requests.
These collective measures are designed to balance protecting tenants and ensuring economic stability, reflecting a comprehensive governmental approach to housing market challenges and broader economic conditions.
