The Government is working on a fiscal formula to stop the increases in rental and housing prices in Spain and the main proposal is to use the Personal Income Tax (IRPF) as a tool to discourage owners from increasing the price of rents when they sign a new contract or renew the existing one.
The initiative would be designed by the Ministry of Housing in conjunction with the Ministry of Finance and would consist of reducing the current tax benefits for landlords who decide to raise the rent.
Currently, owners can apply a general reduction of 50% of the net income obtained from the rental in their income tax return, as long as the home is used as a habitual residence. Well, with the penalty proposed by the Government, owners who set the rental price higher when their tenants’ contracts are due to renew would lose a part of that 50% reduction. On the contrary, those landlords who maintain or reduce the rent could obtain better tax advantages for the 2025-2026 Income campaign.
However, the Government has stressed that the reduction would not disappear completely, since the objective is to continue favoring residential rentals over other modalities such as tourist or seasonal rentals.
How the tax penalty would work
The idea being studied by the Government would start with the current system of personal income tax reductions for landlords. Currently, rental taxation depends on the type of contract and certain circumstances.
Since the approval of the Housing Law in 2023, reductions on the net rental yield can range between 50% and 90%, depending on factors such as whether the home is in a stressed area, if it is rented to young people or if the owner reduces the price compared to the previous contract.
The proposal being analyzed would introduce an additional element:
- Fiscally reward those who maintain or lower the rent, even with higher deductions.
- Reduce the 50% tax advantage for those who increase the rental price when signing a new contract.
According to the information known so far, the measure would not affect the annual updates linked to the reference index or inflation, but only the increases that occur when formalizing a new contract or after the renewal of a previous one.
A rental market under pressure
The initiative is framed in a context of strong tension in the rental market, whose prices do not stop rising, especially in large cities and metropolitan areas, where trends such as buying rooms to rent them have even become fashionable. Speculation is its maximum splendor.
In recent years, the Government has tried to contain the increase in prices through different measures: temporary limits on increases, new reference indices to update incomes and tax benefits for those who keep rents stable.
In 2026, for example, the annual updates of many contracts are already linked to the new INE reference index, which replaced the CPI as a mechanism to moderate rent increases.
However, most of the most significant increases occur when a contract ends and a new one is signed, at which point the price is negotiated again.
Political debate within the Government itself
The fiscal strategy has also generated tensions within the coalition Executive. Initially, President Pedro Sánchez had announced tax incentives, including a 100% personal income tax bonus for owners who did not raise the rent when renewing contracts. But other groups like Sumar did not think it was a good idea considering that it meant expanding the tax benefits of the owners.
Given these criticisms, the Government is now studying a formula that combines both tax incentives and penalties for the Treasury when owners take measures regarding the price of their rentals, and all with the aim of influencing the owners’ decisions without completely eliminating existing benefits.
At the moment, the initiative has not been finalized in a bill or in a royal decree, so its final design, its implementation schedule and its real impact on the rental market remain open.