The Canary Islands have reached a historic peak in prices for house renting, hitting 14 euros per square metre per month in May 2024, coinciding with the first anniversary of the Law for the Right to Housing. This legislation, approved on the 26th of May last year, aimed to regulate rental prices but has faced significant criticism and limited implementation.
The Impact of the Housing Law
The Housing Law, promoted by the coalition government of PSOE and Unidas Podemos, was intended to control rental prices in areas declared to be under tension. However, it is currently only enforced in 140 municipalities in Catalonia. The law has had unintended consequences, leading to a substantial reduction in the supply of rental housing. According to the National Federation of Real Estate Associations (FAI), the availability of rental properties has dropped by 30.5% since the law’s implementation, primarily due to the exit of small landlords from the market.
Supply and Demand Dynamics
UVE Valoraciones reports that the supply of rental housing is now at a historic low, 28% below 2020 levels. The pandemic had previously caused an increase in available rentals due to the conversion of tourist accommodations into long-term rentals. However, the new legislation has reversed this trend. The developers’ association APCE and the Bank of Spain both warn that the law could exacerbate the housing shortage if structural measures to increase supply are not implemented. The Bank of Spain estimates that 600,000 new homes are needed in Spain by 2025.
Rising Prices for Home Renting
Rental prices continue to climb, with Fotocasa reporting a 5.2% increase in April, bringing the average rent to 12.3 euros per square metre. Eleven regions, including the Canary Islands, have surpassed historical rental price highs. In major cities, rents are even higher, with Madrid and the Balearic Islands leading at over 18 euros per square metre. Idealista data shows a 13% year-on-year increase in April, with Barcelona reaching 21.1 euros per square metre, the highest in Spain.
Housing Affordability Challenges
The burden of rent is growing heavier for households. According to Idealista, renting accounted for 34.5% of household income last year, with figures as high as 43% in Barcelona. The Bank of Spain’s latest data indicates that families need to allocate more than 37% of their gross annual income to housing costs in the first year of home ownership, a figure well above the recommended 30%.
Shifts in the Rental Market
The rental market is seeing a shift towards temporary, tourist, and room rentals, which are less affected by the Housing Law. The Rental Negotiating Agency (ANA) estimates that these alternatives have siphoned off more than 25% of the traditional rental supply. Seasonal rentals have surged by 58%, while the supply of permanent rentals has declined by 15%.
Future Measures and Solutions
The Ministry of Housing plans to introduce a unified state platform by the end of 2025 to consolidate data and regulations on tourist flats. This initiative aims to identify effective strategies, adopt appropriate measures, and combat rental fraud more efficiently. In the meantime, the government has launched a youth rental voucher and committed to putting 183,000 affordable homes on the market, alongside approving a 2.5 billion euro guarantee line for first-time homebuyers.
The Canary Islands’ rental market faces significant challenges, with rising prices and dwindling supply highlighting the need for effective solutions to ensure affordable housing for residents.
