The housing market in Spain is facing a significant regulatory change.
As of October 2, 2026, the Congress of Deputies is debating the ratification or repeal of two regulations: the Royal Decree-Law 26/2026, concerning housing and the expansion of affordable supply, and the Royal Decree-Law 27/2026, focused on the stability of habitual rental contracts. The first came into effect on October 1, and the second on October 2, although its continuation now depends on the decision of Congress.
Beyond the debate surrounding any housing reform, it is important to analyze something much more practical: what really changes and how owners, buyers, investors, and tenants may react if these measures remain in force.
Because the various measures do not all act in the same direction. Some reduce the cost of buying or provide tax incentives for residential rentals. Others increase the effective duration of contracts, limit certain rents, reduce the flexibility of temporary rentals, or raise the taxation of tourist accommodation.
The final consequence will largely depend on a very simple question: what each owner will do with their property under the new rules.
One of the most important changes is in the Royal Decree-Law 27/2026.
Currently, habitual rental contracts have a minimum period of five years when the owner is a natural person and seven years when it is a legal entity.
The new regulation establishes that, once that period is exceeded, if neither party communicates a desire to terminate the contract, it will be automatically extended for another full five years or seven years, depending on the type of owner. This system can be repeated in successive renewals.
Additionally, the owner must communicate their decision not to renew with six months' notice.
But there is another even more relevant modification: if it is the landlord who decides not to continue, they must compensate the tenant, with certain exceptions.
The compensation will be at least equivalent to twelve months' rent for a similar property, calculated when possible using the state reference system. Furthermore, it can never be less than one month's rent for each year the tenant has resided in the property.
There are exceptions, for example, when the owner needs the property for themselves or certain family members, when the tenant hardly resides in it, or when they have another suitable property in the same municipality.
For the owner, renting a property as a habitual residence becomes a potentially longer decision with a higher exit cost.
This does not necessarily mean that owners will massively abandon residential rentals. In fact, the regulation itself includes significant tax incentives to try to prevent this.
But economically, it introduces a new factor that the owner must consider before signing a contract.
It is reasonable to expect a greater pre-selection of tenants, because a wrong decision could bind the owner for many years. It may also increase the value the owner places on having the freedom to use the property in the future.
In areas where there is freedom to set the initial rent, part of that additional risk could be incorporated into the asking price. In areas where the price is limited, that adjustment cannot be made in the same way, so it may manifest in other ways: lower turnover, withdrawal of some properties from the rental market, or choosing alternative uses.
The OECD has already warned, in analyzing the Spanish market, that policies affecting rental prices may lose effectiveness when not accompanied by a sufficient increase in supply. It also notes evidence from previous regulations applied in Barcelona, where a reduction in supply was observed and some properties were shifted to other rental modalities.
Therefore, for tenants who already have a rented property, the new system provides greater stability. For those who need to search for a new property, the outcome will depend especially on how the number of available properties evolves.
The Royal Decree-Law 26/2026 also introduces an extraordinary limitation until December 31, 2027.
When the rent is already above the maximum limit of the reference index, it cannot be updated. When it does not exceed it, and in the absence of a new agreement between the parties, the update may reach a maximum of 2%.
In addition, there are already limitations on certain new contracts in areas declared as having a tense residential market.
The immediate effect is clear: the rents of existing contracts will have less capacity to grow.
But there is a second consequence that deserves attention. If demand continues to grow while the available supply does not increase at the same pace, the market adjustment may stop occurring solely through price and begin to manifest through more competition among potential tenants for each available property.
The Bank of Spain has precisely pointed out that the growth of rental prices since 2015 is explained, among other factors, by a demand that has increased more rapidly than the available supply.
Another important change affects temporary rentals.
For a contract to be considered truly temporary, there must be a real, justified, and verifiable reason for the tenant to be temporarily displaced from their habitual residence.
The duration must exceed 31 days and, as a general rule, not exceed twelve months, although it may continue as long as the reason justifying the temporality remains.
This considerably reduces the possibility of using temporary contracts simply as an alternative to ordinary residential rentals.
In recent years, part of the real estate supply had shifted towards seasonal rentals because they offered the owner greater contractual flexibility.
The Bank of Spain has precisely identified temporary rentals, room rentals, and tourist rentals as alternative uses that can limit the growth of residential rental supply.
With the new regulation, the difference in flexibility between habitual and temporary rentals is reduced.
This may cause certain properties to return to residential rentals.
But there is also another possibility: owners seeking to maintain flexibility may consider selling the property or, when regional and municipal regulations allow, short-term tourist rentals.
The issue is that this last alternative also faces new tax burdens.
The regulation expressly incorporates room rentals within the residential or temporary regulation, depending on the actual use made of them.
Additionally, it establishes a particularly important rule: the sum of the rents for all the rooms in a property cannot exceed the price that would correspond to the rental of the entire property. In tense areas, the applicable limits must also be respected.
From an economic perspective, this reduces one of the main attractions of room rentals: obtaining a considerably higher aggregate rent than that obtained by renting the entire property.
Therefore, some investment strategies based solely on maximizing profitability by dividing a property among several contracts may lose their appeal.
Not all measures increase restrictions on the owner.
The new personal income tax regime introduces very significant reductions on the positive net income obtained from residential rentals, especially when the owner retains the tenant, reduces the rent, or rents below certain limits.
In some cases, the reduction can reach 100%. There are also reductions of 95%, 90%, 85%, or 70% depending, among other circumstances, on the location, the age of the tenant, and the agreed income level.
Conversely, if upon signing a new contract the owner increases the rent compared to the previous contract, the tax incentive is progressively reduced, potentially ranging between 40% and 15% depending on how much the rent has increased.
There is also an 80% reduction during certain renewals when the rent does not exceed the reference limit and the owner is not considered a large holder.
This introduces one of the most important counterweights of the reform.
An owner will have to compare not only the monthly rent they can obtain but also their net profitability after taxes.
A property rented for slightly less money but with a very high tax reduction may end up offering a net profitability closer to another rented at a higher price.
Therefore, these incentives could prevent some owners from abandoning residential rentals, especially small owners subject to personal income tax.
A state deduction of 10% of the amounts paid for the rental of the habitual residence is also introduced for taxpayers with a taxable base below 33,007.20 euros.
The maximum base for the deduction reaches 11,630 euros for taxable bases of up to 23,007.20 euros and is progressively reduced from that amount.
For the tenant, this means reducing the effective cost of rent.
From a market perspective, however, demand assistance produces different results depending on the available supply. If the number of properties increases, it facilitates access without causing significant distortions. If the supply remains virtually fixed while the purchasing power of demanders increases, part of the benefit may end up being transferred to higher prices or greater competition for properties.
The OECD has precisely warned of this mechanism, stating that demand assistance, when applied in markets with supply shortages, can end up partially reflecting in higher prices and rents.
For owners and managers of tourist properties, this is probably one of the most relevant sections.
Starting from December 1, 2026, rentals of furnished apartments or homes will no longer be exempt from VAT when they provide services typical of the hotel industry or when the stay is for 30 nights or less and the accommodation is different from the owner's habitual residence. These operations will be subject to the reduced rate of 10% VAT.
This introduces two possible behaviors.
If the owner fully passes the tax onto the guest, the final price of the stay will increase.
If the market or competition does not allow it to be fully passed on to the customer, it will be the owner who absorbs part of the tax through a reduction in their net margin.
In practice, a combination of both is likely to occur depending on each destination, time of year, occupancy, and demand elasticity.
In destinations with very strong tourist demand, a significant portion of the VAT could be incorporated into final prices. In more competitive markets or with low occupancy, the owner will have less capacity to do so.
The second relevant modification for tourist-use properties affects the IBI.
In municipalities located in tense residential market areas, municipalities may establish a surcharge of up to 50% of the net IBI fee for residential properties intended for tourist accommodation.
The surcharge may reach 100% for owners of two or more tourist properties and up to 150% when the owner has four or more. Its application will depend on each municipality and the corresponding tax ordinance.
Here, the effect will be particularly different between small owners and managers with portfolios of multiple properties.
For a single property, the cost increase may be manageable in certain markets. For operators with several properties in the same municipality, the cumulative impact can be considerable.
This will likely require a review of three fundamental variables: average price per night, minimum occupancy needed, and net margin per property.
Some accommodations may offset it with higher prices. Others will need to improve occupancy and operational efficiency. And some properties with low tourist profitability may abandon this use.
Not necessarily across Spain.
The Bank of Spain estimates that in 2025 there were around 355,000 tourist properties, approximately 1.5% of the total housing stock, but nearly 10% of the rental market. Their distribution is also extraordinarily uneven: in certain tourist centers, their weight in the rental market is much higher.
Therefore, the effect of these measures will be fundamentally local.
In destinations with very high tourist demand and high prices, the market may absorb a considerable part of the tax increase.
In destinations where profitability is already low, the effect may be different: some owners may sell, switch to residential rentals, or abandon an activity that is no longer sufficiently profitable.
And an interesting consequence arises: if the number of tourist properties decreases but tourist demand remains high, the properties that remain may gain occupancy and the ability to increase prices.
Therefore, a reduction in tourist supply does not necessarily imply lower tourist prices. It may produce the opposite effect in certain destinations.
The Royal Decree-Law 26/2026 also creates the YOUR HOUSE mechanism, managed by the ICO.
It will allow complementing a private mortgage with a public loan that can cover the lesser amount between 20% of the property's value and 50,000 euros.
The loan will have an interest rate of 0% and no fees. The specific conditions for beneficiaries and access will need to be developed. Properties acquired through this mechanism will also be permanently subject to a maximum transfer price linked to the updated purchase price.
The economic objective is to reduce one of the major barriers to accessing a first home: having the necessary initial savings.
This may produce two simultaneous consequences.
On one hand, certain households currently renting may move to the sales market, partially reducing rental demand.
But on the other hand, new solvent buyers are introduced into the market. If the supply of homes for sale does not increase at the same pace, part of the financial improvement may end up being reflected in sales prices, especially in the entry-level housing segment.
The OECD itself identifies the insufficient response of supply to the growth of demand as one of the main structural problems of the Spanish market.
Until December 31, 2028, entities whose activity includes the acquisition of properties will be limited in purchasing homes when the price is below 70% of their market appraisal value, except for certain exceptions, including some social or affordable housing destinations.
Therefore, this is not a general prohibition for companies to buy housing.
Its effect is mainly concentrated on operations with significant discounts: problematic assets, certain portfolios, distressed sales, or acquisitions well below market value.
This may reduce institutional competition in that segment but also decrease liquidity and capital available to acquire and rehabilitate certain assets.
Its effect on the average housing price should be, in principle, much more limited than that of measures directly affecting credit, supply, or rental.
The reform also includes other modifications that, individually, may seem minor but collectively alter the economic management of a rented property.
Real estate management and contract formalization costs cannot be directly or indirectly passed on to the tenant. The tenant cannot be forced to take out a rent default insurance.
Additionally, certain obligations regarding repairs, guarantees, the condition of the property upon delivery, and rights of first refusal are expanded.
Each of these measures represents a relatively small cost compared to the value of a property, but all affect the calculation that the owner actually makes: expected profitability minus taxes, costs, risk, and loss of flexibility.
And that calculation ultimately decides whether a property is rented, sold, left vacant, or used for another purpose.
It would be incomplete to analyze the new decrees solely from the perspective of restrictions.
The Royal Decree-Law 26/2026 also includes a line of up to 2 billion euros in guarantees, channeled through the ICO, aimed at financing public and private developers to increase or improve the stock of social or affordable rental housing.
Mechanisms related to public housing, industrialized construction, and the promotion of new affordable housing are also being developed.
These are measures that act directly on supply and, if they manage to generate additional housing, can alleviate some of the existing pressure.
The problem is fundamentally temporal: a contractual or tax modification produces effects almost immediately; building thousands of new homes takes years.
Therefore, the short-term and long-term effects may be very different.
There is no single answer.
For contracts that are already in force, the measures exert clear pressure to contain the growth of rents and prolong their duration.
But for those who need to access a new property, the decisive element will be supply.
If tax incentives sufficiently compensate for the new obligations and more owners incorporate properties into residential rentals, the increase in supply could contain prices.
If the opposite happens and some owners decide not to enter the habitual rental market, the lower availability may intensify competition for each property.
In that scenario, although certain prices are regulated, scarcity does not disappear: it simply stops being expressed solely through price.
Here the scenario also has two opposing forces.
On one hand, temporary and room rentals lose some of their advantage over habitual rentals. This may lead some owners seeking flexibility to consider tourist rentals when they can legally do so.
But at the same time, tourist rentals face 10% VAT on many short stays and possible IBI surcharges of up to 150% in certain areas and for certain owners.
Therefore, it is difficult to expect a massive and generalized shift towards tourist housing.
The most likely outcome is a greater differentiation between markets.
In strong tourist destinations, with high demand and good occupancy, better-managed accommodations may pass some of the new costs onto the price.
In weak or highly seasonal tourist markets, some properties may cease to be profitable.
This could ultimately lead to less tourist supply, but more professionalized, with higher average prices in those destinations where demand remains strong.
Perhaps the most interesting consequence of the entire regulatory package is precisely this.
Until now, an owner could move relatively easily between habitual, seasonal, room, and tourist rentals.
The new measures progressively reduce the regulatory and fiscal differences between these alternatives.
Habitual rental offers significant tax incentives, but in exchange for greater contractual stability and less flexibility.
Temporary rental is now much more tied to a demonstrable cause.
Room rentals lose some of their capacity to multiply total rent.
And tourist rentals maintain their flexibility but will bear higher tax costs.
The market may, therefore, move towards greater specialization: owners who truly want to remain in residential rentals for many years and tourist operators capable of professionally managing an increasingly demanding activity.
The Bank of Spain and the OECD agree in pointing out a structural element of the Spanish market: in recent years demand for housing has grown more rapidly than supply in numerous areas of Spain.
Therefore, no isolated measure can alone anticipate a general reduction or increase in prices.
Limitations may contain certain rents.
Tax incentives may attract housing to habitual rentals.
Purchase assistance may shift households from renting to ownership but also increase demand for homes for sale.
The new tourist taxation may reduce the profitability of tourist rentals, but a lower tourist supply may also raise the price of those that remain.
And construction and financing measures may increase supply, although their effects will take longer.
Therefore, in the coming months, it will likely be more important to observe how many properties change use than to limit oneself to observing the average price.
The number of properties that remain in habitual rental, those that move to sale, those that abandon temporary rental, and the evolution of the tourist stock will allow us to see what the true effect of this new regulation on the Spanish housing market will be.
Article prepared based on Royal Decree-Law 26/2026 and Royal Decree-Law 27/2026 published in the BOE, along with data and analysis from the Bank of Spain and the OECD. The described economic effects are reasonable scenarios derived from the incentives created by the regulations and the available evidence, not certain forecasts about the future evolution of prices.
