The past Friday, March 15, 2024, the BOE published the first Declaration of a Stressed Residential Market Zone (hereinafter, ZMRT), resulting from the procedure provided for in Article 18 of Law 12/2023. This publication refers to Catalonia, which had published the corresponding declaration in the DOGC the previous day (March 14). The combination of the Catalan declaration and the state publication fully takes effect for rental contracts signed from March 16, 2024 (inclusive). Below we provide a comment on the most important effects of these administrative resolutions.
1. What is it?
The declaration of a Tensioning Residential Market Zone is an administrative act declaring that in certain municipalities (a total of 140), there is a lack of housing – especially affordable housing – to meet the needs of the resident population.
This is a resolution that does not have the character of a regulatory norm and has a limited validity of 3 years (although it can be extended for annual periods).
The approved declaration also includes the expansion of the concept of a large holder to all owners of 5 or more properties, who will now be subject to the consequences intrinsic to this condition, both regarding the limitation of rental contract prices and the submission and processing of mediation or intermediation incidents before filing eviction claims or requesting eviction (in ongoing processes).
2. What effects does it have on Public Administrations?
Public Administrations with housing responsibilities should feel compelled by this declaration and make their best efforts to reverse the situation, promoting an increase in supply sufficient to meet the housing needs – especially affordable – of the resident population in the municipalities declared as ZMRT.
To this end, the Law provides a series of direct consequences on the activities of the administrations, the most important of which is the mandate to develop an Action Plan to reverse this situation. Additionally, administrations can require information from large holders to design their promotion policies, who have a specific duty of enhanced collaboration (specified in Article 20,1,b) of Law 12/2023). Finally, they can also establish collaboration formulas with owners to favor the increase in the supply of affordable housing.
It is foreseeable that the Ministry will develop a specific program within the framework of the current State Plan for the Right to Housing, with the aim of establishing aid to promote the increase of supply in municipalities declared as ZMRT.
3. What effects does it have on individuals?
The most well-known effect of the declaration of a Tensioning Residential Market Zone is the limitation of the maximum price of rental contracts formalized after the declaration comes into effect. This effect means that new contracts signed from March 16, 2024, will see the rental price limited to:
a) In the case of large holders (owners of 5 or more properties), the maximum price will be the one resulting from applying the state reference index of the rental market, or the current rental price from the last contract, updated as appropriate (CPI or 3% for 2024).
b) In the case of owners who are not large holders, the maximum price will be the one resulting from applying the appropriate update to the rent of the last contract. If the property has not been rented in the last 5 years, the price resulting from applying the state reference index to the property.
Additionally, existing contracts can be extended (at the tenant’s request), once they expire, in three annual extensions.
Law 12/2023 does not specifically regulate the consequences of non-compliance with this price limitation, but it is foreseeable that the provisions of consumer protection regulations will apply, although this application may lead to discrepancies.
Furthermore, as mentioned, large holders will have the information obligations established in Article 19 of Law 12/2023, which essentially involve the obligation to communicate (at the administration’s request) essential information about the property (address, year of construction, cadastral reference, energy rating, and area) and its ownership or usage regime.
Finally, individual large holders will be entitled to the IRPF deductions established in the Sixth Final Provision of Law 12/2023.
4. Other aspects we highlight
It should be noted that the Declaration was adopted after the approval of the state rental market reference index. The final approval of the index is a resolution that can be appealed and, therefore, changes may occur.
Additionally, the ZMRT declaration also implies that in the municipalities with this declaration in force, the provisions derived from Decree-Law 3/2023 apply, which essentially means that tourist-use properties require an urban planning license.
Lastly, it should be noted that both the Catalan declaration and the state publication of ZMRT can be appealed. Additionally, the Constitutional Court has admitted several appeals of unconstitutionality questioning Article 18 of Law 12/2023, which regulates the declaration. Therefore, a potential total or partial declaration of unconstitutionality of the aforementioned provision could affect the constitutionality of the ZMRT declaration.
We remain at your disposal to clarify or expand on the content of this note and remind you that our contact details are: dcn@clavellcanalsconstulting.com and acc@clavellcanalsconsulting.com.