23 Jul, 2023 @ 12:00
2 mins read

EXPLAINER: Expat holiday-home owners in Spain beware – the new Housing Law is here

Spain Property 2

SPAIN’S new Housing Law landed at the end of May with plans to help out struggling renters who saw their costs spiralling.

But it also contains provisions that will concern expat second home owners, as Pedro Sanchez’s government looks to encourage them to rent out their properties – and penalise them if they don’t.

So what are the key takeaways that expats need to know?

Under the updated regulations, municipalities now have the authority to hit property owners who leave their homes vacant with higher taxes. 

On the ‘stick’ side of the new rules, if a property is deemed ‘permanently unoccupied’ for over two years and the owner possesses four or more houses, a surcharge of up to 150% on the Real Estate Tax (IBI) can be imposed. 

For properties empty for two years, the surcharge can range from 50 percent to a staggering 100 percent of the net tax rate, depending on the duration of vacancy. 

Spain second best country in the world for prospective American expats
New housing regulations will see properties left vacant for over two years hit with stiff penalties

Additionally, landlords who own two or more vacant properties within the same municipality may also face additional surcharges.

However, property expert Alison Johnson, the owner of relocation consultancy Moving To Spain, downplayed the real-life impact of changes on the average expat second home owner – who visits on a regular basis and only has one home.

“For owners of vacation houses in Spain, the recent regulatory changes regarding IBI tax penalties for empty flats might not be a cause for immediate concern,” she told the Olive Press.

On the ‘carrot’ side of the rules, from January 1, 2024, second home owners who rent out their properties may benefit from tax incentives, such as deductions on rental income. 

For those who own second homes in designated ‘stressed areas’, this deduction is up to 50%. 

Deductions of up to 70% are available if a new home is rented to individuals aged 18 to 35, aiming to promote affordable housing options to younger people. 

“Interestingly, the concept of ‘stressed areas’ will play a crucial role from 2025,” Johnson commented.

Spain Property 2
Expat second home owners who pop over to Spain at least once every two years should have little to worry about, according to property expert Alison Johnson

“These areas will be identified based on two criteria: when mortgage or rent payments (including fees) exceed 30% of the average household income, or if property prices have surged more than 3 percent above inflation in the past five years.

“Surprisingly, over 61% of Spanish households fall under this classification.”

Thus, expats who choose to rent out their holiday homes from, say, September to May, rather than letting them sit empty – and be at risk of occupation by squatters – can not only make a pretty penny but save on their tax bill too.

For property owners in these designated areas, there will be price limitations on leases, and the extent of these limitations will be tied to the number of homes owned by the landlord. 

Those with more than ten homes, reducible to five at the council’s discretion, will be subjected to specific price regulations set by the Ministry of Transport through an index.

Overall, holiday home owners need to be mindful to visit at least once in two years, but they are also heavily encouraged to rent their properties out when not in use.

“These changes certainly present a mix of challenges and opportunities for property owners, particularly those with vacation homes in Spain.”


Walter Finch

Walter - or Walt to most people - is a former and sometimes still photographer and filmmaker who likes to dig under the surface.
A NCTJ-trained journalist, he came to the Costa del Sol - Gibraltar hotspot from the Daily Mail in 2022 to report on organised crime, corruption, financial fraud and a little bit of whatever is going on.
Got a story? walter@theolivepress.es

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