Five reasons why Spain's Housing Law has failed

The Housing Law was a reform of the Urban Rental Law and was designed to regulate rental prices by creating a rent control index, increase taxes for landlords with empty properties and create incentives for those who rented out their homes at below market value.

Two years on, however, and the situation has only gotten worse. Spain's average rental prices actually increased 24 percent between May 2023 and April 2025, according to data from property portal Idealista.

The supply of housing on the permanent rental market has fallen by 17 percent in Spain during that time and there has also been a significant increase in the number of people interested in renting, up 79 percent in the last two years.

This increase in demand and dwindling supply has also led to historic prices.

All these indicate that Spain's Housing Law has failed abysmally, but why?

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Landlords are turning to seasonal rentals

According to Idealista, while the supply of regular rentals is declining, seasonal rentals have soared with a 25 percent year-on-year increase in supply in the first quarter, now accounting for 14 percent of the entire rental market in Spain.

In Barcelona, ​​47 percent of the homes listed are seasonal rentals, while in San Sebastián they account for 37 percent of the total.

Many landlords are tired of legal uncertainty surrounding standard rentals and so many of them have switched to temporary or seasonal rentals instead, especially given that they're in a legal limbo between short-term and long-term rentals which currently don't have to abide by such strict regulations.

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A drop in supply and skyrocketing demand

Stats from Spain's main property portal show that the national rental supply fell by 3 percent in the first quarter of 2025, in line with what's been happening over the past two years.

Meanwhile, demand is unyielding and the number of people who want to rent an apartment only grows more. For example, each property saw an average of 35 tenants apply for it between January and March of this year.

Competition for rentals is highest in Barcelona with 61 families per listing, followed by Palma de Mallorca (57), Madrid (42), Bilbao (37), San Sebastián (37), and Seville (35).

Below the national average are Valencia (31), Málaga (28), and Alicante (25).

In the two years since the Housing Law was implemented, demand has grown by 79 percent.

Rent prices continue to rise

The rental market, is under a lot of strain with 25 provincial capitals seeing record highs. Prices have in fact not stopped rising in these two years and are now up 24 percent on average. Some of the highest increases have been seen in Segovia (39 percent), Valencia (35 percent), Madrid (31 percent) and Santa Cruz de Tenerife (30 percent).

In the major capitals, the trend has also been towards rising rents - Barcelona (28 percent), Alicante (27 percent) and Málaga and Palma (24 percent).

Around 25 provincial capitals closed April 2025 with rents at record highs, reaching an average of €14.3 per square metre, according to the latest price report published by Idealista.

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Tighter controls on short-term rent haven't had desired effect

The Spanish government has introduced greater controls on Airbnb-style lets, such as the registry of short-term rentals, which means all tourist apartments, seasonal rentals, and room rentals need to register on a platform before being able to be advertised. This will not come into force until July 1st.

Furthermore, landlords and tenants are being forced to provide reasons for short-term rentals such as temporary job contracts, courses or short term visas, which is also causing problems.

Since April, it's also been harder for homeowners with flats and apartments in shared residential buildings in Spain to convert them into short-term holiday lets for tourists.

Despite all these measures, landlords are not putting their properties on the long-term rental market, with many preferring to either leave them empty or make them temporary rentals.

Seasonal or temporary rentals are still being regulated by the Civil Code, as political parties cannot agree on the best steps moving forward.

READ MORE: Why landlords in Spain leave their flats empty rather than rent long-term

‘Stressed areas’ plan hasn’t worked

One of the big parts of the Housing Law was the introduction of ‘Stressed Residential Markets’. This limits the rise in prices for new rental contracts in certain areas. Areas were considered to be ‘stressed’ if prices exceeded the Consumer Price Index (CPI) of their respective province by five points or where families dedicated more than 30 percent of their salary to paying the rent.

Each area of the country was in charge of whether they wanted to implement this or not. Catalonia was the first region to declare 140 municipalities as stressed in March 2024. This was expanded to include 131 more localities in October.

The problem is that these have taken a while to be implemented. Only just at the start of this year several Basque municipalities joined the 271 Catalan towns. San Sebastián is the latest municipality to join the stressed areas in the Basque Country.

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Other cities, such as Bilbao, Vitoria i Gasteiz, A Coruña, Santiago de Compostela, and Las Palmas de Gran Canaria, are currently studying whether they meet the requirements to apply for this or not.

There are also still questions as to whether it works or not. Idealista analysed data from the 15 largest Catalan cities and saw that the number of long-term rental contracts has dropped by 21.5 percent since the Housing Law and the rental cap came into effect.

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