The Government of the Balearic Islands plans to bring to the rental market some 2,000 floors that are now empty or destined for vacation rentals, through a new ‘Secure Rental’ program that guarantees the collection of rent to owners who join and, at the same time, will imply a 30% reduction in the rental price for the tenant.
The new plan announced this Monday by the president of the Balearic Government, Marga Prohenswill be launched next November. The objective is for rental prices to be affordable for residents of the Islands, both young people and families with average incomes who must prove 5 years of residence in the Balearic Islands.
The regional executive will act as an ‘intermediary’ between landlord and tenant “without room for speculation”. These homes will be rented at market price after an official appraisal that may not exceed 1,500 euros in Mallorca and Menorca, and 2,100 in Ibiza and Formentera. Afterwards, the price will be reduced to tenants by up to 30% of the initial price, an amount that will be assumed by the Prohens government. In this way, the maximum price for a rental in Mallorca or Menorca will be 1,050 euros, and 1,470 in Ibiza and Formentera.
This measure is taken in the midst of a social debate about tourist overcrowding and the negative effects that also affect residents’ access to housing. In recent months, a social movement has taken to the streets to cry ‘Tourism, yes, but not like this’. According to the latest Fotocasa study, there are only 0.2% of rental properties in the Balearic Islands below 900 euros per month.
The president explained this Monday that for an apartment valued at 1,200 euros per month, the tenant must pay the regional government 890 euros; If it is valued at 1,000, you will pay 700 euros and if it is valued at 850 euros, you will pay 595 euros. The difference will be assumed by the regional government. The Insurance Rental plan will have an annual cost of 12 million euros per year during its validity.
The Balearic Government will offer owners who join the plan three payment methods: monthly, annual or an advance payment of seven years at once, which is the duration of the contract. In this way, the government wants to give them legal security that they will collect the rent.
«We want to break the barrier for many owners of empty apartments who prefer to have them empty than rentfor fear of non-payments, damages or bad experiences,” Prohens stressed about the objective of this program that will begin in November with the capture of empty homes of small owners. Large holders are excluded.
The Housing Minister, José Luis Mateo, believes that this program will “rescue” homes that are now intended for vacation rentals for the residential rental market. Among other advantages, the owner will have the “absolute guarantee of payment of the rent”, he will be able to deduct 70% in the personal income tax return (as it is housing for social use and at an appraised price) and, after renting, he will recover it in the same good conditions.
To join this plan, small owners must have had the home for at least 3 years. In addition, they must assume the payment of the IBI and community fees.
Tenants must prove a minimum of 5 years of residence and have a maximum income of 6.5 times the IPREM, which is 60,667 euros per year in the case of one tenant or 68,250 euros for two landlords. They must use it as a permanent home and at the end of the contract it will be returned in the same conditions except for wear and tear. For the tenant, the main advantage is that they will pay a price below the market price of the home, that the apartments are in good condition and immediately available.
As a general rule, tenants cannot be owners of a home on the island where they wish to rent the home, nor can they be related up to the third degree with the owner.
To be included in the program, homes cannot be new construction, be at least 3 years old; that have been empty for 6 months or without anyone registered for 1 year, in a good state of cleanliness and maintenance, and with a supply of water and electricity.
The College of Property Agents (Coapi) and the College of Property Administrators (Cafbal) will be in charge of preparing a prior appraisal report of the price that must be paid to the owners.
The president of Cafbal, Antoni Jaume, has explained that the homes will be marketed through ordinary channels (schools and online portals) and taking into account, for example, to determine the solvency of the tenant, they should not allocate more than 40% of their income to pay the rent. Jaume has said that if the program works “it will act as a containment dam for the rental price.”
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