The stressed residential market areas were the great asset with which the Government intended to control rental prices in those areas where they are out of control. A year and a half after the entry into force of the Housing Law, the refusal of the autonomous communities to apply the measure has left the Ministry handcuffed in this regard. It is “counterproductive” because it causes “insecurity” and only serves to “raise prices,” argue the PP leaders, concerned about the owners.
The person in charge of the branch, Isabel Rodríguez, has been trying to combat this discourse for weeks. “It is incomprehensible,” he said during the last Sector Conference about the PP’s refusal to apply the stressed areas that, in practice, cap rental prices. Specifically, Rodríguez has referred on several occasions to the bonuses that the rule contemplates for those private renters, large or small holders who own more than 90% of the rental housing stock, who lower prices by more than 5% if they declare these stressed areas. “Landlords in Madrid are losing tax credits of up to 90% of their income because Mrs. Ayuso does not want to apply the housing law out of pure ideological dogmatism,” he said in September.
This week, the minister once again stressed the importance of taxation. He did so on Tuesday, after the meeting that the President of the Government, Pedro Sánchez, held with thirty representatives of the sector in Moncloa. And he repeated it on Wednesday, during his appearance in the Congress of Deputies to give an account of the lines in which his department works.
But how much can a landlord who lowers the rent for his tenants save more than the 5% required by law on his tax return? To check if this discount offsets the tenant’s savings in economic terms, elDiario.es has carried out several simulations on a rent of 1,000 euros, the approximate median price in the center of Madrid. With a discount of 5.5% – the law establishes that it is “more than 5%” – the tenant would pay 945 euros per month, which would mean a saving of 660 euros per year. The landlord, for his part, would apply a bonus that would go from 50 to 90%.
For a landlord with an annual income of 25,000 euros, to which he adds the rent which, after the discount, is 11,340 euros, he would stop paying about 1,100 euros on his tax return. The owner, in this case, saves 66.6% more than the tenant after lowering the rent. For this simulation, a deduction for rental expenses of around 3,000 euros has been estimated and a regional rate similar to the state rate has been applied.
And, at the same discount, the benefit for the rentier is greater the greater the rest of his income. With a salary of 35,000 euros, the difference is 1,356 euros, the same as with one of 45,000, and, if you pocket 60,000 a year, you stop paying 1,650 euros in taxes for that reduction of 660. “The incentive is greater for “Who has the most, as a result of the progressiveness of the tax and having designed it as a reduction of the tax base and not as a deduction from the quota,” says a tax expert consulted by elDiario.es.
This 90% bonus is only applicable to those owners who already have one or more homes for rent and apply this discount of more than 5% on rent in stressed areas. For those who put a property on the market for the first time, the rule establishes an incentive of 70% if it is intended for tenants up to 35 years old; 60% if rehabilitation works have been carried out in the previous two years; and 50% for the rest.
Tax deductions are a tool to boost the supply of rental housing and have it declared. Before the state law, the bonus was at 60% for everyone. “Now the scheme is changed, it is lowered to 50% and incentives are given in places where the market is declared stressed at 70 and 90%,” explains Eduardo González de Molina, associate researcher at New York University, who points out that it is “a reduction in personal income tax that, therefore, affects individuals and not companies and does not distinguish between small and large owners.” “It may happen that a natural person has 15 apartments, something very common, and you are also giving them an incentive,” he points out.
González de Molina, who was a housing consultant in the Housing management of Barcelona City Council, indicates that these types of measures represent a “small incentive” to the supply, although he advocates being more drastic with the tool. “I would set the bonus to 0 if prices are not lowered,” he says. However, the expert estimates that around 20% of the offer remains in the black, even with the incentive. Precisely, since 2016, the Treasury has raised some 1,000 million euros in rentals of homes, premises or garages, which tried to escape the tax radar, thanks to door-to-door work.
The director of the economic studies office of the Spanish Association of Tax Advisors, Arturo Javier Jiménez, points out that “encouraging a certain trend in the market through taxation is positive.” It doesn’t just happen with housing policies. “If you want to encourage the hiring of workers, you provide benefits to companies,” he exemplifies. But the real estate market, he points out, is “particular and is in conditions of high demand and low supply.” Furthermore, “the overall effectiveness (of the bonus) may come to nothing, because it is conditional on the declaration of tense areas, something that the autonomous communities are not doing,” he analyzes.
For the moment, only Catalonia has been able to analyze the impact of the declaration of stressed areas on prices. According to data from the Generalitat, monthly payments have fallen by 5% in the stressed municipalities, with Barcelona in the lead, while they have remained the same in the rest. According to the data analyzed by elDiario.es, the declines have been especially notable in towns such as Cornellà de Llobregat (-14.7% in one quarter), Ripollet (-11.3%) and Sant Joan Despí (-11.3% ). The downside of this coin is that new contracts signed have fallen by 17%.
Tax incentives are the focus of institutions and social agents. The former governor of the Bank of Spain, Pablo Hernández de Cos, assured that discounts on housing taxes raise sales prices and rents. “The tax incentives and transfers to support housing demand introduced by different administrations could contribute to an additional increase in sales and rental prices in a context of rigid supply and stressed markets,” he stated in his last appearance at the Congress.
The report by the Workers’ Commissions, ‘Four failed decades of housing policy’, published a couple of weeks ago, points in the same direction. Although they focus on aid for purchases and not rentals, the novelty is that they put figures: the different governments of the country have stopped receiving 160,000 million in tax benefits in the last 40 years, with which they estimate that they could have raised 1.6 million public properties to be used for affordable rents.
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