The 2% lease renewal limit is limited to easing the inflation peak from March to May.

Since becoming independent in 2014, he does not remember ever attaching importance to the letter that comes every year, in early March, and this time his heart raced. Aitana has in its hands an annual update of the social rental price of a public apartment, which it pays to the Madrid Municipal Housing and Land Company (EMVS). He explains and confirms what he doubted: the rent increases by 7.6% according to the general index of February, which is linked to his contract, and the increase will spread from April.

Aitana looks back and does not remember ever having such a salary increase from one year to the next as she admits. “I hoped the city council would limit growth,” he said.

Just hours after this Monday, Pedro Sanchez, the Prime Minister, embraced this desire to include in the war response plan a historic limit of 2% on rent “from the date of publication of the Royal Decree.” [BOE]”Which will be approved by the Council of Ministers on Tuesday, March 29, according to sources in the Minister of Transport, Mobility and Urban Planning, by June 30.

Aitana’s revenue remains beyond the executive plan it intends to mitigate the decline in purchasing power, leading to households and rising costs that most energy-intensive companies are experiencing due to the current peak in inflation, which is largely accelerated. Electricity and fuel tax increases, and that if in February it increased the CPI by 7.6%, a record high since December 1986, it is expected to exceed 8% in March, according to the average forecast. Experts will release the data released by the National Institute of Statistics (INE) this Wednesday, March 30th.

Event Details: All contracts are indexed by IGC for three months

The annual renewal of most rental contracts is linked to the overall CPI, which in turn is the maximum limit by which rent can be revised upwards, although this is not the only indicator by which the law allows them to be indexed. Leases can, in fact, never be renewed until they are in effect unless otherwise stated.

When projected, this is done against the overall CPI, or, in some cases, the least, as recognized by various sources in the real estate sector, for the CPI for housing rent (see chart), which has barely tightened in recent months, or the competitiveness guarantee. With respect to the Index (IGC), which is also calculated by the INE if an annual update is collected but not a reference.

This last index will be the only reference from the publication of the conjunctural decree, in response to the effects of the war, to the BOE, until 30 June. And as INE itself explains, “this figure will be equal to the part of the EMU Consumer Price Harmonized Index (IPCA) minus the loss of competitiveness accumulated by Spain since 1999”, with a limited range of 0% and between. “Medium-term annual inflation target of the European Central Bank” (initially 2%, although it may be temporarily exceeded according to the latest guidelines of the institution). The IGC last January reading, known as March 18, stood at 2.02%.

In short, the average rent in Spain, which is around 700 euros, will increase by only 14 euros in the coming months and not by 53.2 euros, which will increase according to the February CPI.

The measure will free tenants who will renew the rent in the next three months, although the revised rents from October have already increased by more than 5%, as well as increased basic supplies: electricity, gas … The situation is suffocating and. The rent negotiation agency considers the limit positive, “as long as it is temporary and does not become a market intervention.”

The government does not deny that the event will continue until June 30 if the inflation shock continues. “We have already offered this to our landlord portfolio because it’s a war CPI: it’s not good for the employer and it is not good for the landlord because he is at risk of leaving or defaulting,” the lease continued. Negotiation Agency.

As of December 2021, “approximately 85% of landlords have not contributed to the full IPC increase, and out of 85% of those owners, 27% have not used it directly,” the company said recently. With their own data. .

Very different is the position of Fotocasa, which this Monday issued a statement calling for “compensation formulas to [los propietarios] “It’s not going to hurt the price.” “His house is in the rental market, and if he finds himself in a frustrated environment with constant changes in regulations, it is likely that he will take advantage of the market for sale and be able to withdraw from renting his own house, leading to a contract.”

In the process of full elaboration of the housing law

The decision to halt the rent increase, which is due to be renewed in the coming months, comes after a full parliamentary elaboration of the housing law, which the government hopes to approve by the end of the year.

A procedure that is not easy to expect, given that members of the executive, such as the ERC or Más País-Equo, have already demanded a more ambitious text than what came out of Moncloa. This law is linked to the current decision to limit CPI-related rent increases because, for the first time, it will impose restrictions on price increases, albeit in a very limited way. Only in stressful places and in the hands of companies with more than 10 properties in the hands of large owners.

What the law provides is no interest-related growth restriction. What it will create is an index that the executive has yet to define and suggest how it intends to do so. For this, a deadline of up to 18 months has been granted after the enactment of the law. That is, the earliest, in 2023 or 2024.

This index will be based, in principle, on lease data that the treasury already has – which is annual – and also, what is in the hands of autonomous communities, through collateral records. However, it remains to be determined what other variables will flow into this index to ensure it is up-to-date and effective in the price areas where rent is most prevalent.