Walter Finch
Rental property inventory has plummeted by 17% in two years as Housing Law drives landlords away from long-term lettings
SPAIN’S rental housing is facing what industry experts are calling an ‘extinction crisis’ as up to 150,000 properties are expected to disappear from the long-term market by the end of 2025.
According to new research from the Secure Rental Observatory, around 120,000 homes have already vanished, with the figure set to reach 150,000 within months.
The dramatic decline has been attributed primarily to Spain’s Housing Law, which came into effect two years ago and introduced rent caps in designated ‘stressed areas’ along with increased tenant protections.
The Olive Press has already reported that Spain’s rental stock has fallen by 17% nationally since the law’s introduction, with some cities experiencing far steeper drops.
Barcelona has seen a 46% decline in available rental properties, whilst Córdoba has lost 66% of its rental stock.
Other major cities have also been severely affected: Bilbao and San Sebastián both down 36%, Palma 35%, Sevilla 31%, Málaga 23%, Madrid 21%, and Valencia 13%.
The shortage has created unprecedented competition among prospective tenants.
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In Barcelona, an average of 61 families now compete for each rental property, followed by Palma with 57 families per listing, Madrid with 42, and Bilbao and San Sebastián with 37 each.
“The rental market is entering dramatic territory,” said José María Alfaro, president of the National Federation of Real Estate Associations (FAI).
“It’s no longer about who wants to rent, but who can. Having a stable salary isn’t enough – you have to be chosen.”
The crisis has forced rental prices up by 24% between May 2023 and April 2025, whilst Spaniards now spend an average of 47% of their salary on rent – well above the recommended maximum of 30%.
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Many estate agencies report that 40% have seen their long-term rental offerings fall by more than 50% since the Housing Law’s implementation, whilst demand continues to grow by over 20%.
Industry analysts identify several destinations for the missing rental stock.
Many landlords have switched to selling their properties outright, taking advantage of strong sales prices that have returned to 2008 bubble levels.
But many have taken advantage of short-term holiday rentals, which can generate up to 400% more income than traditional long-term lets, particularly in cities like Málaga.
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Temporary rentals have also surged, with a 25% year-on-year increase in the first quarter of 2025.
These now represent 14% of Spain’s entire rental market, with Barcelona leading at 47% of all rental offers being temporary lets.
The Bank of Spain warned last week that ‘the growth of these modalities could limit increases in residential rental supply in a context of contained institutional investment, both public and private, in this market.’
Some property owners are simply keeping homes empty rather than risk problematic tenants.
A February survey by Fotocasa Research found nearly 3% of Spanish property owners have vacant homes, citing fears of non-payment or property damage.
The uncertainty has led to a 35% increase in rental insurance and guarantee policies as landlords seek protection against potential losses.
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Major property companies are also retreating from the rental market.
German asset manager Patrizia and developer Neinor have begun selling off rental portfolios in Catalonia and the Basque Country respectively, where rent caps and higher taxes on large property holders have made their business models unviable.
The crisis is now spreading beyond major urban centres to second and third-tier metropolitan areas, where rental prices have risen to match those in city centre districts.
This has forced renters to move even further from urban centres, increasing transport costs and commuting times whilst reducing quality of life.
The National Federation of Real Estate Associations reports that some agencies are abandoning the rental business entirely due to lack of inventory and reduced profitability.
The age at which young Spaniards move out of their parent’s home has risen to 30.4 years – frankly unthinkable for a lot of parents and the fourth-highest in the EU – as young people struggle to afford independent housing.
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In Madrid, the shortage has led to extreme measures, with some workers paying €200 for a bed in a shared room, whilst landlords convert properties into multiple bedsits to maximise rental income.
Housing Minister Isabel Rodríguez recently claimed more Spaniards than ever are living in rental accommodation, though critics note she failed to address the deteriorating conditions and rising costs facing tenants.
Only Catalonia and the Basque Country have implemented the Housing Law’s rent caps so far, but the mere existence of the legislation appears to have deterred landlords nationwide from offering long-term rentals.
I must have missed something in all this.
So long term rental market is being squeezed primarily as a result of ” Spain’s Housing Law, which came into effect two years ago and introduced rent caps in designated ‘stressed areas’ along with increased tenant” . Landlords are leaving the market.
This runs somewhat contrarily to what the government is now proposing – effectively increasing the availability if housing, at the expense of the tourist short term rental market. Why not rescind the law as a start?
It is scandalous that this government has caused this distressed state by interferring with the basics of economics: supply and demand
I was thinking exactly the same thing. Throughout the western world governments have attempted to manipulate the housing market with penalties rather than incentives. What these ignorant politicians miss is that if someone’s job suddenly ended pay rises, and they also had to pay higher taxes, then they would leave that job. Property investing is no different as both need to earn a living. If it becomes unviable, then you move on.