The Government fails to agree on a rent reform after 10 months

At the edge of 10:00 p.m. on October 26, 2020, the negotiating teams of the PSOE and United We Can manage to save the General State Budgets for 2021. The purple ones had threatened hours before not to support the public accounts if they did not collect a rent reform and the Socialists ended up accepting part of their demands.

The following day, October 27, Pedro Sánchez and Pablo Iglesias presented the Budgets and an additional agreement to promote a Housing Law that would include the possibility of lowering rental prices. Ten months later, that commitment remains unfulfilled and negotiations are at a standstill.

“Containment mechanisms will be established, or eventually lower prices, both for new contracts and existing contracts,” reads the text that Sánchez and Iglesias signed in October [here in PDF]. These mechanisms, they promised, would be included in a new Housing Law that, within three months, would be approved by the Council of Ministers and a month later would reach Congress. However, at the end of February, both partners were still embroiled in the search for a solution.

Since then, rents have been declining slightly, due in part to the pandemic. The lower geographical mobility and the number of apartments for tourism that entered the traditional market caused a drop in prices that, little by little, have been recovering.

The Bank of Spain, in a report issued at the beginning of August, pointed out that living for rent in Barcelona or Madrid is 82% more expensive than in other Spanish cities. And, for now, this will continue to be the case given the inability of socialists and purple people to agree on measures to prevent it. The dispute resides in the wording that refers to a “possible drop in prices.” The socialists refuse to intervene in the market in this way and the purple ones cling to the agreement.

Those four words – and all the political burden and the economic consequences that they may entail – have caused more than one friction within the coalition government. The former second vice president went so far as to accuse the former Minister of Transportation, José Luis Ábalos, of “tensing” the alliance by “betraying” the agreement on rents.

Iglesias came to set himself as his main objective before leaving the Executive to attend the Madrid elections the approval of the Housing Law with a regulation of rents. But, in view, he could not.In April, the Minister of Social Rights and new leader of Podemos, Ione Belarra, took over from Iglesias and spoke with Ábalos. However, the proposals that each team put on the table were rejected outright.

Two months later, the one who was responsible for Transport announced that the Government would appeal the Catalan housing law that allowed to put limits on rental prices. Once again, the leases reopened cracks in the coalition.

Last July, in the government crisis that Sánchez opened, Ábalos left the Executive and was replaced by the former mayor of Gavà (Barcelona) Raquel Sánchez Jiménez. A priori, the purple ones looked favorably on this replacement because the Barcelona woman had asked to regulate rents during her tenure in the City Council. However, her arrival at the ministry paralyzed the negotiations while waiting for her to catch up on all the issues.

Also in the middle came August and the summer holidays. Purple sources explain that, to date, they have only had a meeting with Sánchez Jiménez in which she remained in the Ábalos line. There is still no agreement. The last proposal that the Socialists put on the table in mid-June, explain sources of the negotiation, was to put a cap on rents in those areas that are declared stressed for a period of three years.

This measure would also apply to new contracts. That is, during this three-year period, the owners could not rent the properties for an amount greater than that of the previous contract. In addition, they maintain their approach of offering tax incentives to apartment owners that lower prices. Sources from the Ministry of Transport explain to EL PERIÓDICO that the intention is to offer “legal certainty” and they hope to close this aspect soon, the only one pending of the new Housing Law.

The following day, the Ministry of Social Rights rejected the measure. The only solution, they insisted then and now, is to put in place mechanisms to “lower” prices. The counterproposal launched by the secretary general of Podemos is that the new rental contracts, in stressed areas, must be adapted to the price reference indices of the Ministry of Transport.

In this way, if an owner renews or signs a new contract, he will have to lower the price up to the established ceiling. In addition, they argue that if the price of the previous opposite was below the index, they should remain the same. Despite the accumulation of proposals from each party, ten months later they still do not fulfill their commitment and the abusive increases in the price of rents continue to occur.

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