Sanchez Unveils Housing Reforms & 100 Tax On Non EU Buyers

January 14, 2025 Madrid Metropolitan Perdro Sánchez, SPAIN, spain news

The Spanish Prime Minister, Pedro Sánchez, has unveiled his government’s plan to address the country´s housing shortage and reverse the rise in house prices which include plans to impose a tax of up to 100% on real estate bought by non-residents from countries outside the EU, such as the UK & the United States.

The plan announced yesterday, Monday 13th January, includes twelve measures, one of which aims to limit the purchase of homes by non-resident non-EU nationals by raising the property transfer tax to as much as 100% of the property’s value.

Other proposals include a legal amendment to establish a 100% tax exemption on IRPF (Personal Income Tax) for owners who rent according to the Reference Price Index, the application of VAT to tourist flats in so-called tense housing areas, and the creation of a system of public guarantees to protect owners and tenants who participate in the affordable rental system.

Sánchez has repeatedly stated that the current government term must be the legislature of the right to housing.

During the electoral campaign for regional elections, he announced measures to build thousands of social homes and promote affordable rentals. However, the rise in the sale price of previously owned homes remained unchanged in 2024 (7.1%), and the government is now seeking ways to reverse the situation.

On Monday, the Spanish PM appeared at the forum ‘Housing, the Fifth Pillar of the Welfare State’, to present the 12 point plan which is claimed is inspired by models from countries like Denmark and Canada.

Sanchez said that Europe faces the challenge of avoiding a division into a two-class society of “rich owners and poor tenants.” He pointed out that the average price of housing in Europe has increased by 48% in the past decade, a rise that is “unbearable” as it outpaces household income growth by double.

“Access to housing has become the greatest issue for the middle and working classes and a barrier to the independence of young people,” he stated, adding that it is a key driver of inequality and wealth disparity among citizens.

Sánchez has divided the objectives of the plan into three main areas: “More housing, better regulation, and more significant aid.”

More housing, the PM said, involves creating “more social housing,” in particular.

The first measure is the transfer of more than 3,300 homes and two million square meters of residential land to the recently created public housing company. These two million square meters, according to Sánchez, will be used to build “thousands and thousands of social homes for affordable rental, primarily for young people.”

He also announced that, during the first half of 2025, the public housing company will begin to incorporate over 30,000 homes from (Spain’s bad bank) Sareb, 13,000 of which will be immediately available.

The second measure is the creation of a legal mechanism to ensure that the public housing company “has priority in purchasing housing and land.”

The third measure is a legal reform to guarantee that all housing built by the central government “remains permanently in public ownership,” ensuring that what is constructed or renovated with public funds “remains the property of Spaniards” and “does not end up in the hands of vulture funds or major speculators.”

The fourth measure is the creation of a plan to “modernize and innovate in the construction sector and its industrialization,” to build homes “quicker and less costly.”

Sánchez stated that the plan also includes three “unprecedented” measures. The fifth measure is the creation of a public guarantee systemto protect both property owners and tenants participating in affordable rental schemes.

The central government will “provide the necessary funding and guarantees so that citizens can rent, and owners can do so with security and without taking on risks.”

This system, “successfully tested in Spain,” will begin this year with owners renting to individuals under 35 years old.

The sixth measure is a new program to rehabilitate vacant homes for affordable rental purposes. Until now, the Spanish government co-financed owners who renovated homes to improve energy efficiency. Starting this year, a new aid program will be added for those who renovate homes to rent them at affordable prices for at least five years.

The seventh measure is, subject to Congress approval, a 100% exemption from IRPF (Personal Income Tax) for owners who rent their homes according to the reference price index, even if they are not located in so-called tense housing areas.

The eighth measure involves fiscal reform to ensure that tourist apartments are taxed as businesses, thereby applying VAT “in areas with housing access difficulties or tourist saturation.” According to the Spanish PM, “there are too many Airbnbs and not enough homes.”

The ninth measure is a reform of the tax advantages for SOCIMIs (listed real estate investment companies) so that these benefits only apply to the promotion of affordable rental housing.

The tenth measure is limiting property purchases by non-resident non-EU foreigners. The government will increase the tax burden on such purchases, up to 100% of the property’s value.

This is “an unprecedented measure in our country’s history, already applied in other democracies like Denmark and Canada, and highly appropriate given the housing emergency situation,” Sánchez said, adding that in 2023, non-residents bought 27,000 properties in Spain, primarily for speculation.

The eleventh measure is a tightening of regulations to combat seasonal rental fraud and the creation of a fund to allow municipal and regional governments to strengthen inspections of illegal tourist housing and other fraudulent uses of properties.

The twelfth and final measure is the new Spanish housing plan, which will come into effect in 2026. This plan will expand aid for housing access and will “pay special attention” to young people, the elderly, and people with disabilities. “The government is committed and will do everything in its power to make housing accessible,” Sánchez said.

There are around 290,000 UK residents in Spain, many who own their own properties. Last year some 27,000 home sales were to UK buyers.