13 municipalities in the Canary Islands are identified as “rental stressed areas”

13 municipalities in the Canary Islands, which are all primarily tourist destinations, have been deemed “stressed areas” for renting residential housing. In addition, several districts in the islands' capital cities share the same designation due to high rental prices and limited availability of housing.

To be classified as a stressed area, at least one of two conditions must be met, as outlined by Law 12/2023, dated May 24. Firstly, the average cost of a mortgage or rent, plus basic expenses and utilities, should not exceed 30% of the average income or average household income in the area. In these municipalities in the Canary Islands, this percentage is significantly surpassed.

Another condition is that the purchase or rental price of housing has experienced a cumulative growth of at least three percentage points above the increase in the Canary Islands' Consumer Price Index (IPC) over the past 5 years.

The initiation of measures such as price caps to declare stressed areas must be taken by the Canary Islands through the development of regulatory legislation based on the state law. However, as of now, no action has been taken.

No municipality has made a move to request the declaration of a stressed area, although initiatives might be presented in the coming months. The municipalities of Las Palmas de Gran Canaria and La Orotava are the only ones expressing willingness to do so but have not yet officially announced their intentions.

The Government of the Canary Islands has clarified that, if necessary, steps and procedures will be examined. Close sources indicate that if the current trend in the islands' real estate market persists, characterised by a "complete mismatch between the purchasing power of demand and the price," the government might need to implement measures due to the severe shortage of rental properties in these areas.

However, the real estate sector is vehemently opposed to implementing price control measures, as one direct consequence could be the disappearance of rental housing. Real estate portals, associations, and rental management companies rejected the proposed reference price index to control rents in stressed areas, fearing that it would deter new properties from entering the market, further reducing supply and pushing prices up even higher.

The Real Estate Federation (FAI) says that a rental price index that mandates rent caps will instil more fear among property owners, pushing more landlords away from the regular rental market and further diminishing the housing supply available.