The Socialist Parliamentary Group (PSOE) in Spain has introduced a legislative proposal aimed at enhancing the availability of affordable rental housing.

This initiative includes several fiscal measures, prominently the increase of Value Added Tax (VAT) on tourist accommodations to 21%, aligning their taxation with other economic activities.

Additionally, the legislation proposes increased taxation on vacant properties.

Minister of Housing and Urban Agenda, Isabel Rodríguez, outlined these measures during a press conference where she detailed elements of this fiscal package, designed to fulfil commitments made by the government earlier this year.

This package is part of a broader set of 12 measures announced by Prime Minister Pedro Sánchez to improve housing accessibility.

Among the measures is the introduction of a new state tax specifically intended to discourage property purchases by non-EU foreigners and non-residents, imposing a new levy on property transactions involving this group, which will be defined by the state for such transfers.

Furthermore, the proposal includes an extension of income tax (IRPF) deductions for net rental income, potentially reaching up to 100%, in areas that have not been declared as stressed housing markets.

The deduction aims to incentivize property owners who rent below the reference price set by the State Rental Price Reference System.

For the taxation on vacant properties, the current rates range between 1.1% and 2%.

The proposed legislation aims to establish greater progressivity through additional tax brackets, with the tax rates to be updated in coordination with the Ministry of Finance.

Rodríguez also urged local municipalities to augment this initiative through additional charges on vacant properties via their property tax (IBI), aimed at mobilizing these empty homes and second residences to enhance the rental market supply.

The PSOE intends to advance these measures in the Congress of Deputies at the earliest opportunity in June, reflecting a prioritization of implementation.

Rodríguez emphasized that the urgency of the situation necessitates more than mere regulatory measures, suggesting a need for substantial action.

The legislative proposal is exclusively registered by the PSOE, independent of the coalition government, in an effort to expedite progress on these initiatives.

The party aims to garner the necessary congressional support for the proposal.

Regarding the taxation of Real Estate Investment Trusts (SOCIMI), the current tax rate of 15% is set to increase to 25%, with an exception for those promoting affordable rental housing, in which case the tax would be nullified.

Reductions to the 25% rate are considered for entities that allocate more than 60% of their properties to affordable rentals, and a full exemption is proposed if profits are reinvested in affordable housing within three years.

Affordable rental housing is defined as properties with rents below the pricing index established by the Ministry of Housing or annual incomes not exceeding €26,400, provided they meet one of two criteria: being designated as permanent housing or being classified as protected housing, with rents not exceeding 30% of household income.

The legislation also includes provisions to facilitate the transfer of state land and assets to the New State Housing Company to support affordable housing policies, alongside adjustments to the Public Asset Management Law to ensure the sustainability of public housing.

Additional modifications to the Income Tax Law are proposed to extend tax deductions for energy rehabilitation works until 2025, and changes to the Public Sector Contracts Law to enhance public-private partnerships in housing development, addressing the housing deficit.

Such contracts would have a maximum duration of 80 years.

The new tax aiming to disincentivize property purchases by non-EU foreigners will not be devolved to autonomous communities to prevent double taxation.

This tax will apply to real estate acquisitions in Spain, excluding the Basque Country and Navarre, specifically targeting individuals and companies not residing within the EU, except for certain business activities.

Lastly, the registered proposal includes updating the tables for the Increase in Value of Urban Land (plusvalía), aligning these maximum values with recent constitutional court rulings regarding the municipal plusvalía tax.