Spain has introduced a wide-ranging package of housing and tax measures through Royal Decree-Law 29/2026, of 6 October. The new legislation seeks to improve access to affordable housing, strengthen protections for tenants, encourage investment in residential property and introduce new tax incentives for both landlords and investors.
The changes extend beyond the rental market. They include amendments to Personal Income Tax (IRPF), Value Added Tax (VAT) and Local Property Tax (IBI), a revised tax framework for listed real estate investment companies (SOCIMIs), and the creation of new savings and investment products. The legislation also introduces measures intended to expand Spain’s public housing stock and encourage the development of affordable homes.
Although the package is primarily concerned with housing affordability, its implications are significant for property owners, tenants, property investors and businesses operating in the residential sector. Importantly, the measures do not all take effect on the same date, so understanding the relevant conditions and commencement dates will be essential.
A New Direction for Spain’s Housing Market
The legislation places greater emphasis on the social function of housing and seeks to discourage certain speculative practices. One of its measures temporarily restricts the acquisition of residential property below 70% of its market valuation in specified circumstances involving entities that purchase distressed assets or large property holders. This restriction is intended to remain in place until 31 December 2030.
The decree also introduces measures aimed at strengthening the regulation of residential rentals, including greater attention to the distinction between habitual residential letting and temporary accommodation. The objective is to ensure that the legal framework reflects the actual purpose of a rental arrangement rather than simply the label given to the contract.
For landlords, this reinforces the importance of reviewing the terms and circumstances of their rental agreements. Where a property is let on a temporary basis, the relevant justification and contractual conditions may become particularly important in determining the applicable legal treatment.
The legislation also introduces changes to rental advertising requirements and the rules governing large property holders. Together, these measures form part of a broader attempt to improve transparency in the housing market and direct more properties towards residential use.
Landlords and IRPF: New Tax Incentives for Residential Rentals
One of the most significant tax changes concerns the reduction available against qualifying net rental income under Personal Income Tax (IRPF).
The legislation introduces a differentiated system of reductions for residential landlords. Rather than relying on a single rate for all qualifying rental arrangements, the applicable reduction will depend on factors such as the type of tenancy, the rent charged, the characteristics of the property and whether the arrangement contributes to the provision of affordable housing.
In certain qualifying circumstances, landlords may benefit from reductions of up to 100%. Other eligible arrangements may qualify for reductions of 95%, 90%, 85%, 80%, 70%, 60% or 50%, depending on the specific statutory conditions.
The framework is intended to encourage landlords to offer housing on more affordable terms, bring previously unused properties into the rental market and support the renovation of existing homes. Special provisions also address certain first-time rentals, qualifying arrangements involving public authorities or non-profit organisations, and properties that have recently undergone rehabilitation.
However, the highest reductions are not automatic. Landlords will need to assess the applicable requirements before assuming that a particular tenancy qualifies. The date on which a rental contract was signed is also relevant, as transitional provisions distinguish between existing contracts and those entered into under the new regime.
For property owners, the practical message is clear: rental income remains taxable, but the amount of net income subject to tax may differ considerably depending on how the property is let and whether the statutory conditions are met.
Tenants: A New IRPF Deduction for Rental Payments
The legislation also introduces tax relief for qualifying tenants, recognising the pressure that housing costs place on household finances.
Under the new provisions, eligible taxpayers may claim an IRPF deduction equal to 10% of qualifying rental payments, subject to income limits and a maximum deduction base.
The deduction is designed to benefit taxpayers whose taxable income does not exceed 33,007.20€.
Eligibility is also subject to additional conditions, including restrictions relating to ownership or rights over another dwelling within a 50-kilometre radius, subject to the exceptions established by law.
The deduction is intended to provide targeted relief rather than a universal tax benefit for every tenant. Consequently, taxpayers should review both their income position and the legal conditions before including the deduction in an income tax return.
The new rules form part of the legislation’s wider approach: combining measures aimed at increasing the supply of affordable homes with direct tax relief for certain households facing high rental costs.
VAT: Changes Affecting Short-Term Lets and Property Renovations
New VAT rules from 1 December 2026 could affect short-term rentals and residential renovation projects. Read our article to understand the changes and the conditions that apply.
IBI: Potentially Higher Charges for Tourist Accommodation and Empty Properties
The legislation gives local councils additional powers to apply surcharges to certain residential properties, with particular attention to tourist accommodation and permanently vacant homes.
In municipalities located within designated stressed residential market areas, councils may establish an IBI surcharge on residential properties used for tourist accommodation. The surcharge may reach 50%, with higher limits in specified circumstances involving owners with multiple residential tourist properties: up to 100% for owners with two or more such properties and up to 150% for owners with four or more.
The decree also modifies the framework for surcharges on permanently vacant homes outside stressed residential market areas. Under the relevant conditions, a surcharge of up to 50% may apply where a property has remained permanently vacant for more than two years and the owner has four or more residential properties. The statutory requirements and any applicable justification for vacancy must be considered.
These measures do not mean that every tourist property or empty home will automatically incur a higher IBI bill. Their application depends on the legal criteria and, where required, the relevant municipal ordinance.
For property owners, the changes make it increasingly important to consider not only the income generated by a property but also its use, location and potential local tax costs.
SOCIMIs: A Different Tax Approach to Residential Property Investment
The decree also changes the tax framework for SOCIMIs, Spain’s listed real estate investment companies.
A new 25% levy may apply to certain undistributed profits derived from residential letting and use, including tourist and short-term accommodation, to the extent that those profits are not taxed at the ordinary Corporate Income Tax rate or covered by the applicable reinvestment provisions.
The legislation provides reductions where the company directs a substantial proportion of its residential portfolio towards affordable rental housing. The levy may be reduced by 50% where more than 80% of the relevant housing portfolio meets the statutory criteria. A 100% reduction may be available where the additional conditions are met, including reinvestment within three years in affordable rental housing.
Transitional thresholds also apply for the initial tax periods: the legislation establishes different portfolio requirements for tax periods beginning in 2026 and 2027.
These changes are intended to encourage residential property investment that contributes to the supply of affordable accommodation, rather than focusing solely on the accumulation of property assets or the distribution of returns.
SOCIMIs and their advisers will need to assess the composition of their Spanish residential portfolios, the origin of their profits and the applicable reinvestment conditions to determine the effect of the new rules.
Encouraging Affordable Housing and Expanding the Public Housing Stock
Beyond taxation, the legislation introduces several measures intended to increase the availability of affordable and publicly protected housing.
One important provision grants a capital gains tax exemption in specified circumstances where a residential property is sold to a public administration or an entity dependent on it, provided that the property receives permanent and indefinite protected status. The precise conditions vary according to the value and circumstances of the property.
The decree also introduces a super-reduced VAT rate for qualifying officially protected housing with permanent and indefinite protection. These incentives are designed to make it more attractive for privately owned properties to enter the public housing system.
The legislation strengthens the role of CASA 47, the state housing entity, and provides for permanent price restrictions on certain homes transferred to it or developed on residential land it has sold. The applicable restrictions are intended to continue affecting subsequent transfers where the relevant legal requirements are met.
In addition, the decree provides for the development of a framework recognising social providers of affordable housing, including housing cooperatives. This framework is intended to facilitate their participation in public programmes and access to certain forms of financing and other advantages.
The broader aim is to expand the supply of housing that remains affordable over the long term, rather than relying exclusively on temporary subsidies or short-lived market incentives.
TU CASA and New Support for Housing Construction
The legislation also establishes the TU CASA financing mechanism, which is intended to support access to housing.
Under the scheme, interest-free loans of up to 50,000€ may be made available, subject to the conditions and limits that are to be established through the relevant implementing arrangements. The framework includes provisions concerning repayment and a potential grace period linked to the mortgage, subject to the statutory maximum.
Homes acquired through this mechanism must be used as habitual residences and are subject to permanent maximum transfer-price restrictions. Where such a property is subsequently rented out, the rent must comply with the applicable limits.
The decree also provides funding and support measures for industrialised construction, including a financing line intended to help manufacturers and developers bring forward projects using more industrialised building methods.
These initiatives reflect the view that increasing housing supply requires more than regulating rental prices or providing tax relief. Access to financing, construction capacity and the long-term availability of affordable homes are also central to the policy approach.
A New Savings and Investment Account: Financia Europa
The legislation extends beyond the property market by introducing the Cuenta de Ahorro e Inversión Financia Europa, a savings and investment account designed to channel private savings towards eligible financial assets.
The tax treatment of income generated through the account is subject to a series of conditions. These include having a single account holder, holding only one account of this type at a time, making contributions in cash and investing only in eligible assets. The account must also meet the applicable requirements concerning transfers between providers and reporting to the tax authorities.
The amount of contributions not yet recovered by the taxpayer is generally limited to 150,000€. A separate reinvestment regime applies to qualifying proceeds from the sale of a residential property, with a cumulative contribution limit of 800,000€ where the statutory conditions are met.
The reinvestment rules are particularly relevant to taxpayers seeking to reinvest proceeds from a property sale while meeting the requirements for the corresponding tax exemption. Early withdrawals or failure to meet the relevant holding-period conditions may result in tax regularisation.
The new account is not simply a conventional savings account with a tax advantage. Its treatment depends on the assets held, the timing and source of contributions, withdrawals and compliance with the statutory requirements. Its availability is also subject to the relevant implementing measures governing providers and tax reporting.
For investors, the product may offer an additional route for organising eligible investments, but the tax consequences should be reviewed before funds are transferred or withdrawn.
A Housing Reform with Wider Tax Consequences
Royal Decree-Law 29/2026 introduces an ambitious package of tax incentives, tighter regulation and greater public-sector intervention, all aimed at making housing more affordable. Yet, as is often the case with public policy, the ambition of the legislation is easier to announce than its results are to deliver.
A complex system of tax deductions, surcharges and regulatory restrictions may change how landlords and investors behave, but it does not automatically create more homes. Housing affordability cannot be legislated into existence through tax measures alone; it also depends on whether building becomes viable, investment remains attractive and supply actually increases.
Ultimately, the reform should be judged not by the number of measures introduced or the promises attached to them, but by a far more demanding standard: whether people can genuinely afford a place to live. After all, a policy may look convincing on paper, but the housing market will not be persuaded by the wording of a decree. Only its results will tell.
