Housing law and tax incentives: Everything homeowners and investors need to know today

Investing in housing in Spain requires understanding both market trends and the regulations governing rentals and property taxes. Law 12/2023 , on the right to housing, introduced significant changes for landlords and investors, particularly regarding standard rental agreements and applicable reductions in Personal Income Tax (IRPF) .

On the Costa Blanca , where buying a home can be for residential or investment purposes, understanding these measures allows for better planning of profitability and anticipating legal obligations before making a decision.

1. Key aspects of the current legal framework of the Housing Law in Spain

The Housing Law incorporates measures to promote access to decent and affordable housing. Its provisions must be interpreted in conjunction with the Urban Leases Law (LAU) and current tax regulations.

1.1. Main measures affecting homeowners and investors

Among the most relevant aspects are the rules on rent updates, the limitations applicable to certain contracts in stressed areas, and the tax incentives for renting primary residences.

Furthermore, the costs of real estate management and formalization of the contract correspond to the landlord in housing rentals subject to the LAU .

Therefore, real estate profitability does not depend solely on the rental price . Deductible expenses, taxes, maintenance, and compliance with contractual obligations also play a role.

1.2. Stressed areas vs. non-stressed areas: How does it impact the coast?

Areas with a strained residential market are those officially declared as such according to legal criteria. This classification can affect rent determination and access to certain tax incentives.

On the Costa Blanca, it's important to check the situation in each municipality before buying a property to rent out. High tourist or residential demand doesn't, in itself, mean that a town is suitable for this purpose.

You can consult the official statements on the website of the Ministry of Housing and Urban Agenda . Checking the applicable regulations helps you assess the rental conditions before making an investment.

2. New tax incentives in Personal Income Tax for landlords

The Housing Law modified the reductions on positive net income from renting out primary residences for certain contracts. The percentages depend on the contract date and the terms of the lease.

2.1. Reductions in net income in regular rental contracts

For contracts signed from May 26, 2023 , the general regime provides for a 50% reduction of the net positive income . This amount is calculated after subtracting tax-deductible expenses from rental income. Depending on the applicable requirements, the reduction may reach higher percentages.

• 50%: general percentage for contracts subject to the new regime.

• 60%: when the tax conditions relating to certain rehabilitation actions carried out in the two years prior to the contract are met.

• 70%: in specific cases of rental to young people in stressed areas or social rental and public programs.

• 90%: when a new contract is formalized in a stressed area and the initial rent is reduced by more than 5% compared to the last rent of the previous contract, once the corresponding update has been applied.

For certain contracts signed before May 26, 2023, the 60% reduction scheme remains in effect . The signing date is therefore crucial in determining which regulations apply.

2.2. 90% and 70% Bonuses: Requirements to access the highest deductions

Although they are usually called bonuses, technically they are reductions of the positive net return on real estate capital in the personal income tax.

To apply the 90% reduction , the requirements of location in a stressed area and a reduction of the initial rent compared to the previous contract must be met.

The 70% reduction can be applied, among other cases, when a home in a high-demand area is rented for the first time to someone between 18 and 35 years old. It also includes certain social housing rentals and homes covered by public programs with limited rents.

These benefits are not automatically applied to all owners. It is necessary to demonstrate compliance with the required conditions and verify that the contract complies with regulations. Furthermore, tourist and seasonal rentals do not automatically receive the same tax treatment as primary residences.

2.3. Bonus for rehabilitation and improvement of energy efficiency in the home

Renovations aimed at improving insulation, climate control, or energy efficiency can increase a property's appeal and reduce its energy consumption. Furthermore, certain renovations qualify for specific tax deductions.

The regulations provide for deductions of 20% or 40% for certain energy improvements in homes , as well as 60% for certain energy rehabilitation actions in residential buildings , provided that the technical, economic and temporal requirements are met.

These deductions have their own specific conditions and should not be confused with tax reductions for renting a property. Before starting any work, it's advisable to check the deadlines, the required energy performance certificates, and the applicable tax regime. Tax Agency .

3. Comprehensive real estate and tax advice with Larrosa & Co

Investing in real estate requires analyzing the property's potential and the associated legal and financial costs. Having expert advice helps you make informed decisions and reduce unforeseen expenses.

3.1. Customized study for homeowners on the Costa Blanca

In Larrosa & Co , we are specialists in new construction and marketing of resale homes, with more than 30 years of experience on the Mediterranean Coast.

Our market knowledge allows us to guide buyers and owners according to their preferences and objectives, assessing aspects such as location, property type and investment potential.

3.2. Asset management for buying, renting or selling without legal risks

Good planning begins before finalizing the transaction . Reviewing the documentation, studying the expenses, and understanding the owner's obligations allows you to anticipate difficulties.

At Larrosa & Co, we offer services related to buying and selling homes, financial advice, construction, renovation, and real estate investment. For specific tax matters, we recommend complementing this support with specialized tax advice.

4. Conclusion: Opportunities and legal planning for real estate investors

The Housing Law and the personal income tax incentives offer different possibilities for owners and investors, but taking advantage of them requires knowing the requirements of each contract and the conditions of the property.

On the Costa Blanca, studying projected profitability, expenses, and applicable tax advantages allows for more informed decision-making. A well-planned real estate investment combines property selection with rigorous legal and financial management.

In Larrosa & Co. We accompany you in the search, purchase or sale of your property on the Costa Blanca. Contact our team and discover how we can help you find a home that suits your needs.

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