How the Housing Act affects the rental market

“It’s early, we’re waiting, but it looks like it’s stopping.” This is the most common response we received when we asked several brokers whether the effects of the new Housing Act are beginning to be felt on the rental market.

Uncertainty is the feeling that dominates between owners, real estate agents and real estate agents involved in the management of rental properties. Some also say that supply is starting to dwindle: “There are clients who have told us that they are not interested in renting, but would rather sell,” says Iñigo Garaicoechea, of the Araxes real estate agency in Donostia.

With more than 40 years of experience in this market, Garaicoechea assures that an owner always looks for two things when deciding to rent a house: “profitability, that is, collecting rent every month and having the house maintained.” According to him, this law harms landlords in these aspects, as it protects the tenant in the event that the property is shown to be an ordinary home and is in a vulnerable situation, making eviction difficult and delayed.

José Luis Polo, president of COAPI Gipuzkoa (Official Board of Real Estate Agents of Gipuzkoa) and owner of the OKADOS real estate agency, agrees with his colleague in this opinion. He assures that the housing market in general, and the rental market in particular, is in very bad shape and that a law was needed to regulate it. However, he sees many shortcomings in the standard that has been approved.

One is that “the concept of realtor or the functions they should have have not been fully defined, although it has detailed that it will be the landlord who will bear the cost of property management.” “If we we have to charge the landlord, the law stipulates that our client is he. It would make sense that we only offer certain services to the owner; for example, a revision of the lease,” he explains. This, he believes, can harm tenants.

Waiting

Although the law is already in force – it entered into force on May 26 – some points call for a development by regional or local authorities. Now that the municipal elections have just been held and the town halls have yet to be assembled, the market is waiting. It may happen that certain aspects are not fully worked out and that the law becomes “somewhat watered down” in some areas.

One of the points that need the development of other administrations is the one that refers to the stressed areas. The text of the law indicates that stressed areas will indicate those areas in which the mortgage or rent payment (+ costs) of the homes exceeds 30% of the median household income or those where the sale/rent price exceeds 3% has risen than the CPI in the past 5 years. However, it is the local authorities that must request the statement from the central government.

In our area, Donostia meets all requirements to be a stressed area, as recognized by Iñigo Garaicoechea: “we will have to see what municipal government is formed and what decisions it takes in this regard,” he says.

When the certificate is granted (and this for a period of 3 years), a check on rents can be imposed and the administrations concerned must draw up a plan of measures to correct the imbalances in the rental market.

Amidst this uncertainty, some owners have decided to wait before making a decision, others have decided to withdraw their home from the regular rental market and sell it and still others have started more demanding when choosing a tenant. In the words of Iñigo Garaicoechea, from the Araxes agency, “they are starting to ask for more information about the tenants and to see the employment contracts and pay slips. They even asked us for the family book to see if they have minors in their position and can be vulnerable.

Non-payment of rental insurance

There are also owners who have decided to look for a different type solutions to keep renting your home, but guarantees peace of mind. In this sense, it has in some cities of the state increased demand for rental insurance non-payment.

Julio Arranz, a Mapfre insurance agent, has been offering this type of insurance for years in the Gros neighborhood of San Sebastián. He assures that a few years ago since the demand for this type of insurance has increasedbecause of the uncertainty the owners had felt.

The policyholder is usually the owner and therefore the person who wants to conclude the contract. The requirements set by insurersThey, in turn, are clear: that the tenant has an employment contract for an indefinite period and that the rent does not exceed 40% of his income. Only then will they provide the insurance.

Once contracted, the landlord can ask to report on the insurance if the tenant fails to pay for a month, but this requires a court order. That is why the lawyers of the insurers will start proceedings in the courts so that the eviction of the house can be carried out.

increase supply

All brokers consulted agree on the diagnosis of the rental market: not enough houses to rent usual and as soon as one comes out it is immediately taken care of. The market regulates the price based on supply and demand and therefore does not fall.

According to them, the solution is to increase the supply of rental properties and to this end they propose to start building encourage social rental housing and ownersespecially for small owners, so that renting becomes something attractive.