The Spanish Government is expected to approve a new housing decree tomorrow (Tuesday 28th July), introducing a package of measures aimed at easing the country's housing crisis, including an automatic extension of two years for long-term rental contracts due to expire before 30th June 2028.

The proposal, which will be discussed at the final Cabinet meeting before the summer recess, also includes plans to increase IVA (Spain) and IGIC (Canary Islands) on holiday lets, and tighten regulations surrounding the tourist accommodation market.

Who will qualify?

Under the proposed rules, tenants whose rental contracts are due to expire on or before 30th June 2028 will be able to request an extraordinary extension of up to two years from the date theirs is due to expire, up until a maximum of 30th June 2030.

According to coalition partner Sumar, the measure could benefit almost four million people and around 1.5 million households between 21st March 2026 and 30th June 2028, expanding eligibility to nearly one million additional tenants.

The aim is to provide greater security for renters while helping to stabilise the long-term rental market.

Wider reforms to the rental market

The new decree has been divided into two main sections.

The first focuses on lowering long-term rental prices, improving tenant stability and tackling fraud. Proposed measures include:

• New regulations for seasonal and room rentals.
• A requirement for all rental contracts to be made in writing.
• Income tax incentives for landlords who reduce rental prices.
• The new automatic rental contract extension.

Holiday Lets also targeted

The second part of the package is designed to increase the supply of affordable housing.

Among the headline measures is a proposal to raise IVA on tourist accommodation to 21%, alongside administrative reforms intended to speed up the delivery of new housing and changes to Spain's land law.

The Government will also seek parliamentary support for additional measures aimed at protecting vulnerable families from eviction, with the objective of ensuring that no household is left without alternative accommodation.

Still needs parliamentary backing

The decree has been negotiated between the governing parties and is expected to be approved by the Council of Ministers on Tuesday.

However, as a decree-law, it will still require approval in the Spanish Congress within the legally required timeframe to remain in force.

If passed, the reforms would represent one of the Government's most significant interventions in Spain's rental market in recent years, as it continues to tackle rising housing costs and affordability issues affecting tenants across the country, including the Canary Islands.