To provoke a fall in rent prices, the housing law includes new fiscal incentives for personal income tax (IRPF) for those landlords who lower their contracts. To date, there have already been incentives for those owners who rented out their property as a regular residence, which are now being modified in an attempt to stimulate the aforementioned price reduction.

This is stated in the housing law, which was finally published in the Official Government Gazette (BOE) this Thursday after approval in the Senate last week. The same regulation (Law 12/2023 of 24 May on the right to housing) states that These tax incentives will come into effect on January 1. Therefore, landlords will see this on their 2024 income tax returns they submit to the tax agency in the spring of 2025.

Meanwhile, the current mode continues to operate. Today, there is already a significant reduction in the income of the owner of a house intended to be rented out as a regular residence. It consists of a 60 percent reduction in net income (deductible income-expenses) of the house, as specified in its rules by the tax agency itself. In other words, the eligible owner pays taxes not on everything he rents, but on the 60% difference between income and expenses.

The current rule applies regardless of the age of the person who rents the house, but It does not matter if the property is being used as a holiday rental, since the reduction is intended to encourage the use of existing homes to meet basic needs, the ongoing need for housing. Now that overall decline is falling to 50%, so it’s less beneficial for landlords overall, but it could rise to 90% if owners abide by the new assumptions.

The new conditions are as follows.

• The above net profit will be reduced by 90% if the same tenant who has already lived in the same house signs a new contract in a busy market area, provided that the landlord reduces the price by more than 5% compared to the rent set in the previous contract. Discounting, yes, the effect of inflation, if prices rose that year.
• Net income will decrease by 70% in the following two cases.
  • First, if the person renting the house is doing so for the first time, they are young (must be between 18 and 35 years old) and the house is located in a tense area. If more than one person lives in the house, the discount is applied to the part of the rent that meets these requirements.
  • The second is valid only if the tenant is a state administration or a non-profit organization (it must be able to use the tax regime of non-profit organizations). In addition, you must allocate the house to social rent, and the rent must be less than the rent assistance program of the public housing plan (currently 600 euros per month, unless the Autonomous Communities increase it to 900 euros per month) per month in certain circumstances), or to the placement of people in a situation of economic vulnerability. Another option is to cover the home with a public housing program that has income limits such as the Minimum Living Income (IMV).
• Net income will decrease by 60% if the above requirements are not met, but the house was rehabilitated within two years before signing the lease.
• In other cases, the discount will be 50%.

In addition, you need to know that these requirements must be met when signing the contract, and that the discount applies as long as they continue to be met. On the other hand, they only apply to positive net income, i.e. if in any case the deductible costs of renting a house exceed the income, the discount will not apply. As for stress zones, they must be defined by the autonomous community government and then approved by the Ministry of Transport, Mobility and Urban Development, responsible for the law.

For tenants, that is, those who rent houses, the law does not provide them with new tax benefits, so they must take advantage of the existing ones that depend on the Autonomous Communities.