#BlogMeiT

January 31, 2024

What are tenant stress zones?

The Housing Law 2023 (Law 12/2023, of May 24, for the right to housing) brought with it very important innovations in the regulation and control of rental prices. One of the most relevant (and also one of the most controversial) was the creation of the concept of stressed zone.

These are areas in which, due to the particular conditions of the housing market (rental prices, mortgage costs, etc.), there is a risk of insufficient supply for the population and disproportionate rental prices. In these areas, restrictions may be adopted to control the market, although it is up to the regional governments to declare an area as such.

FOR READERS IN A HURRY:

Stressed areas are those where there is a disproportion those where there is a disproportion between the price of rents and the purchasing power of the inhabitants, i.e. where the price of rent is skyrocketing.

By declaring a stressed area, the key is opened to the application of a whole range of rental market control measures defined in the Law, aimed at reducing the tension in that area.

In Madrid, both the mayor of the city and the president of the community declared that they will not apply the measures that depend on the autonomous regions. Even so, laws can last longer than mayorships or autonomic presidencies, and renting being a long-term project, it is necessary to be prepared for what may come.

Measures that can be applied in stressed areas

FOR READERS IN A HURRY:

In these zones, the rental price has limits established by the government. This designation initially lasts for three years and can be renewed annually. The main purpose is to guide government housing policies to ensure that there are sufficient affordable housing options in these zones.

The rental price in stressed areas is subject to restrictions. The declaration of a stressed zone is valid for three years, renewable annually as long as the circumstances for such declaration continue to exist.

The objective is to "guide public housing actions in those territorial areas where there is a special risk of insufficient supply of housing for the population, in conditions that make it affordable for market access", establishing rules for its declaration for the purposes of state legislation.

The main effect of the declaration of these stressed areas is the drafting of a specific plan that will propose the necessary measures to correct the imbalances observed.

Requirements for declaring a stressed area

FOR READERS IN A HURRY:

An area can be considered stressed when the cost of housing (mortgage or rent plus basic expenses) exceeds 30% of the average local income or if the price of housing has risen in the last 5 years at least three percentage points higher than the CPI of that autonomous community.

At least one of these conditions must be met for an area to be declared stressed:

  • The average burden of the cost of the mortgage or rent on the personal or household budget, plus basic expenses and supplies, exceeds 30% of the average income or the average income of the households in that area.

  • That the purchase or rental price of the property has experienced in the previous five years a cumulative growth rate at least three percentage points above the cumulative growth rate of the CPI of the corresponding autonomous community.

These conditions seek to identify areas where the cost of housing is exceptionally high relative to local incomes.

As we have commented at the beginning, in Madrid this measure is not expected to be applied for the time being, and as the processing is municipal and autonomic in scope, its will is decisive. Even so, according to data from the National Institute of Statistics, the CPI in the Community of Madrid increased from January 2018 to January 2023 by 14.1%. In addition, the capital registers an increase in housing prices that places it as the third city in the country that is closest to the maximum price of the real estate bubble. Thus, and taking into account that it meets one of the specified conditions, Madrid could declare stressed areas.

How is a stressed area declared?

FOR READERS IN A HURRY:

In order to declare an area as "stressed", information on the housing market, including prices and trends, must first be analyzed and published. Then, this classification is justified with a detailed report and a plan is prepared with measures and a timetable to solve the market imbalances in that area.

The declaration must comply with certain formalities, such as being preceded by a preparatory procedure of obtaining information related to the situation of the residential market in the area, including indicators of rental and sales prices of different types of housing and their evolution over time.

An information process must also be carried out in which the information on which the declaration of a stressed area is based must be made available to the public, as well as the preparation of a report justifying that the requirements for declaring the area as such are met.

Finally, the declaration will entail the drafting of a specific plan that will propose the measures necessary to correct the imbalances identified, as well as a timetable for their development.

You may also be interested in

Privacy Settings
We use cookies to enhance your experience while using our website. If you are using our Services via a browser you can restrict, block or remove cookies through your web browser settings. We also use content and scripts from third parties that may use tracking technologies. You can selectively provide your consent below to allow such third party embeds. For complete information about the cookies we use, data we collect and how we process them, please check our Privacy Policy