Barcelona is one of the top European destinations at the moment and one of the most sought-after areas for foreigners to live in. As expected, this has led to a high demand for rental properties in the city in recent years.
In response to this, Barcelona was declared a tense housing market and from September 2020 the city council implemented the application of Law 11/2020 on rent containment in rental contracts. In this way, the rent reference index regulations were introduced and recently, on 18 September 2021, new measures were approved that will regulate the price for the next 5 years.
At Withfor, the ethical real estate agency in Barcelona, we want to help you in everything related to settling into Barcelona, so we believe it is important that you take into account this information about the rental reference index and the new features it entails, whether you want to rent a new flat or if you are thinking of settling in Barcelona.
What is the rental index and how is it calculated?
As the official website of the Catalan Housing Agency states, the rental reference index (index referència lloguer) is an informative indicator so that everyone can find out the average price per square metre of a property for rent. It aims to regularise rental prices in the most sought-after areas in different Catalan municipalities.
There is a 5% variation, which increases or decreases depending on the characteristics of the property. For this increase to take place, the property must have at least three of the following characteristics:
- Furnished dwelling
- Heating or cooling system
- Shared communal areas
- Communal swimming pool or similar facilities
- Concierge services in the building
- Special views
The rental rate is backed by Law 11/2020 of 22 September 2020 on rent containment in housing rental contracts.
On 18 September 2021, the Barcelona City Council approved new measures that bring new changes and indicate, among other things, what is the maximum that a rent can be raised.
Frequently asked questions about the changes in the Barcelona Law
How is the price reference index calculated?
You can use this tool to calculate the Generalitat’s official index. So that you can get an idea of how the calculation is made, factors such as the following are taken into account:
- Location and state of the property.
- Useable square metres (indicated in the certificate of habitability).
- Year of construction.
- Energy certificate.
- If there are communal areas for shared use.
- If it has extras such as: parking, lift, swimming pool, furniture.
What type of contracts are affected by the price regulation index?
Long-term rental contracts (5 years or more) that have been signed since the day of publication of the Law (22 September 2020), and that are located in the area declared as a “tense housing market area”.
And what is a tense housing market area?
These are municipalities or parts of municipalities (neighbourhoods or districts), which are at risk of not having affordable rental housing for the entire population.
What are the areas where the rental rate affects?
In the whole municipality of Barcelona, and in 60 other Catalan municipalities.
What is the maximum rent increase?
If the property is located in an area with a tense housing market, the rent cannot exceed the price of the previous rent.
When does rent containment not apply?
The exception to the application of the price reference index can occur in the following cases:
- If the rental contract is prior to 1 January 1995.
- If the housing is social housing, integration in public networks of insertion housing or mediation for social renting.
- If the rental contract is prior to the entry into force of this Law.
- If the useful surface area of the dwelling is greater than 150sqm.
How can a tenant know the price of the previous rental?
All rental properties located in an area with a tight housing market are obliged to publish the last rental price. And it is up to the landlord to transparently display this information.
Can overheads and individual services (IBI, taxes, community fees, etc.) be passed on?
Expenses can be passed on if agreed with the tenant. In this case, these items must be itemised in each monthly bill, distinguishing them from the amount of the rent. However, if the property has been rented in the last 5 years, only the expenses foreseen in the previous rental contract can be passed on, even if the property changes tenant.
Does this law also affect newly built homes or homes that have undergone a major renovation process?
The law does not stand until 3 years after the entry into force of the Law; that is, until 22 September 2023. From that date onwards, the reference price of a newly constructed or newly built or which has undergone a major renovation process is established on the basis of the rental price reference index, taking into account the upper margin. However, there is also an exception: in the case of public subsidies, the rent is calculated according to the index without the upper margin.
How is the reference price calculated if the landlord has carried out works in the last year?
Interest plus three points must be applied to the capital invested and the total increase can never exceed 20% of the rental price. For example:
Currently, the legal interest rate is 3%.
> If we add the 3 points: 6%.
> If the work carried out has been €2,000, €120 must be applied to the annual rent. Therefore, if we divide it by 12 months, the result is that we must increase the rent by €10 per month.
> If the rent is €800, applying 20%, we know that it can only be increased up to a maximum of €960. But as in this case the amount to be charged is 10 € per month, we are left with a rental price of 810 €, which will be the maximum that can be charged (you should not reach 960 €, as it is a ceiling, not the price to be applied).
At Withfor, we offer our 360º consultancy service to solve any doubts you may have on this subject and many others related to the sale or rental of your property (paperwork, taxes, administrative procedures and much more).
Would you like to have a coffee and talk about it? We invite you to contact us by e-mail or at our Casa Withfor. We will be delighted to meet you.