The problems of regulating the housing rental market

Awaiting for the final text on the future Housing Law, the "Center for Economic Policies EsadeEcPol" analyzes the possible impact of the key measures already announced by the government.

The main conclusions of the analysis were the following:

• Regarding price control: the measure as announced, "does not seem to solve the real problem of access to rental housing in the main Spanish cities" and may have negative consequences:
  
  - It can depress rental housing supply, as has happened in other cities where similar measures have been applied (Paris, Berlin or San Francisco), meaning less investment for new homes or rehabilitation, as well as relocating the supply in other unregulated areas.
  
  - It can benefit those who do not need it: The delimitation by zones instead of by the characteristics of the tenants can imply that there could be “families that benefit from the norm without their rental effort being high; and others that don´t benefit at all despite making a big effort to rent ”.
  
  - It entails important implementation challenges: “Autonomous Regions” can decide whether or not to implement the norm. In addition, in case of application, it would be necessary to "classify, find and monitor the owners to distinguish between large and small to apply differentiated rules", which implies execution challenges.
   
• The fiscal measures announced and the plan to increase the supply of social housing for rent will have a more limited impact than anticipated.
  
  - Fiscal measures: Regarding the possibility of raising the municipal tax to owners (IBI) up to 150% for vacant properties of large owners, the report shows that these are rare in stressed areas. Regarding higher deductions for individuals, these would have little impact on the supply of rental homes, since according to an AIReF report “the elimination of the 100% deduction, in force until 2015, only meant a 2% growth in the supply in three years”.
  
  - Regarding the 30% quota on all new promotions devoted to social housing, of which half (15%) would be allocated to social rent, the measure according to the report will also have a limited effect: according to its calculations If this rule had been applied in the 2015-2019 period, the social rental offer would have barely increased by 1.82%, an insufficient level to approach other European countries and to solve the lack of social housing for rental.
   
• The EsadeEcPol Center for Economic Policies proposes as the main alternative to the deficiencies raised by the new law "a much more aggressive policy for the construction of housing for social rent."