New Housing Lease Index to Impact Rent Increases Starting 2025
Recent developments in housing policies have introduced a new measure to regulate rent increases in an effort to maintain affordability for tenants. The National Institute of Statistics (INE) published a new housing lease reference index (IRAV) that could allow rent increases of up to 220 euros. This change comes as part of the broader Housing Rights Law, which seeks to stabilize housing costs amidst rising inflation.
The Housing Rights Law incorporates several price containment measures designed to regulate lease contracts and prevent excessive rent hikes. One of the key provisions of this law mandates that the INE be responsible for creating a reference index for the annual adjustment of rents. This initiative aims to mitigate disproportionate increases in lease payments that have become increasingly common.
To comply with the new legislation, the INE has established the IRAV, which represents the minimum value derived from various inflation metrics. Specifically, it is based on the annual variation rates of the Consumer Price Index (CPI), the underlying CPI, and adjusted annual averages of both indexes. The first figure released, applicable from November, indicates a potential increase of 220 euros.
Starting in 2025, lease contracts signed since the enactment of the Housing Rights Law on May 25, 2023, will be required to implement this new index for updating annual rents. In contrast, leases established prior to this date will continue to adhere to the existing guidelines, which allow the adjustment of rent based on the Consumer Price Index (CPI) or the General Index of Consumer Prices (IGC), as explicitly detailed in the signed agreements.
According to sources from the Ministry of Housing, the adjustments for tenants under contracts signed before May 2023 will depend on the specific terms outlined in those agreements. Annual rent updates could utilize various inflation data available at the time or the IGC, although such increases can never exceed 2%. This regulation aims to provide tenants with more predictable and manageable rent increments in light of the ongoing economic challenges.
As the housing market continues to evolve, the introduction of the IRAV represents a significant step towards enhancing tenant protection and controlling the rising cost of living. These legislative changes reflect a growing acknowledgment of the need for balanced housing policies that prioritize the welfare of renters while also recognizing the financial realities faced by landlords.
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