Spain’s rental dilemma: protecting tenants won’t fix the housing shortage
Spain's housing crisis has escalated from a chronic supply problem to the immediate trigger for a snap general election on 29 November, after parliament rejected two emergency housing decrees on 2 October and Prime Minister Pedro Sánchez called early polls three days later — with the flashpoint being the eviction of an 87-year-old tenant in Madrid. Per the full note from ING's Pablo Muylle, the binding constraint is structural, not regulatory: more than two new households have been formed for every home completed since 2021, meaning rent controls can shield sitting tenants but cannot clear the underlying deficit. The rejected package bundled stronger eviction protection, limits on rent increases, and tighter rules on temporary and room rentals; a second decree would have made five- to seven-year lease renewals the default with roughly a year's rent in compensation where landlords decline to renew. For FX, the read-through is second-order but non-zero — a hung or fragmented outcome risks a reform vacuum that keeps Spanish growth and peripheral spread dynamics soft, while any coalition credible on supply expansion would be a mild euro-positive. No tracked G10 or EM pair carries our house target here, so positioning should be driven off Spanish politics via EUR crosses and peripheral spreads rather than a standalone trade expression.
What the desk is arguing
The desk's core claim is that strengthening tenant protections cannot solve Spain's rental affordability problem, because the shortfall is one of physical supply, not contractual leverage. Per the full note, ING frames the election debate as misconceived at the level of diagnosis: politicians are arguing over how to make renting cheaper, while the pipeline of completed homes simply cannot absorb household formation.
The supporting evidence is stark and specific. Since 2021, Spain has formed more than two new households for every single home completed — a ratio that guarantees upward pressure on rents regardless of how tightly the law caps increases. ING's Pablo Muylle also points to a two-tier market in which incumbent leaseholders sit on protected, below-market contracts while new entrants pay the clearing price, meaning rent controls redistribute pain toward the young rather than relieving it.
The counterfactual the desk implicitly rejects is the popular one: that the 2 October decrees, had they passed, would have dented rental inflation. The alternative read — that capping increases and extending renewal defaults compresses landlord yields, discourages new supply, and deepens the very shortage it targets — is the one ING is leaning into. That framing matters for how markets should price Spanish political risk premium.
How other firms see it
There is no tracked institutional consensus on this theme, and no bank in our per-firm coverage has published a target on a related pair tied to Spanish housing politics. That absence is itself information: this is a domestic politics and supply-side story that FX desks are not yet trading as a currency event.
What does intersect the thesis is the broader euro complex — the EUR/USD trajectory, peripheral sovereign spreads, and the ECB's rate path will be the transmission channels if Spanish political risk starts to price. Watch also the Spanish IBEX and peripheral bond spreads as the faster-moving proxies ahead of any FX expression.
What the calendar says
The 29 November Spanish general election is the single dated catalyst in this story and it sits just beyond our standard 30-day window, so it will not appear in the near-term event grid. Traders should nonetheless begin framing positions around it now, because the campaign itself — running through November — is where polling-driven volatility in EUR crosses and Spanish assets typically first appears.
No high-impact data releases for this jurisdiction fall inside the next month, which means the election campaign will be trading on headlines rather than prints. That argues for event-risk optionality over directional spot exposure until the polling trend stabilizes.
Key takeaways
- 01Spain heads to the polls on 29 November after parliament rejected two emergency housing decrees on 2 October, with the eviction of an 87-year-old Madrid tenant as the immediate political flashpoint.
- 02ING's Pablo Muylle argues rent controls protect existing tenants but cannot fix a market where more than two new households have formed for every home completed since 2021.
- 03The rejected package included eviction protection, rent-increase limits, tighter rules on temporary and room rentals, and a five- to seven-year renewal default with roughly one year's rent in compensation.
- 04No tracked G10 or EM pair carries a house target on this theme — the read-through is via EUR crosses, peripheral spreads, and Spanish political risk premium rather than a standalone trade.
Market implications
Watch EUR crosses and Spanish peripheral spreads through the November campaign rather than the 29 November result itself — the polling trend, not the vote, is where volatility will first show. With no high-impact Spanish data in the next 30 days, headline risk dominates, so event-risk optionality around the election is the cleaner expression than directional spot. Peripheral spread widening would be the early tell that markets are pricing a reform vacuum.
Risks to this view
A fragmented parliament that produces a supply-friendly coalition would invalidate the 'reform vacuum' narrative and likely tighten peripheral spreads, pressuring any short-Spain expression. Conversely, a coalition beholden to aggressive rent caps could push Spanish growth expectations lower and widen spreads more than the modest FX channel currently implies. Either way, a surprise election delay or repeat ballot would extend uncertainty and keep the theme untradeable for longer.
Articles Spain’s rental dilemma: protecting tenants won’t fix the housing shortage Published 10:10 Spain Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Spain's housing crisis has become a defining political issue and will dominate the 29 November election. While rent controls can protect existing tenants, they cannot fix a market where more than two new households have been formed for every home completed since 2021 Pablo Muylle Demonstrators march through central Madrid to demand measures to address Spain's housing crisis Rejected housing measures send Spain to the polls Spain heads to the polls on 29 November, months ahead of schedule, with a deepening housing crisis the main reason for the snap election. On 2 October, parliament rejected two emergency housing decrees.
The first contained a broad package of measures, including stronger eviction protection, limits on rent increases and tighter regulation of temporary and room rentals. The second dealt specifically with leases reaching the end of their protection, making renewal for another five or seven years the default unless one party gives notice and generally requiring compensation of about one year's worth of rent where the landlord decides not to renew. Three days later, Prime Minister Pedro Sánchez called a snap election.
The political trigger was the eviction of an 87-year-old tenant in Madrid, after which protests spread around the country. But pressure has been building for years. Housing has become one of Spain’s most politically sensitive issues, particularly for younger households that cannot afford to buy and struggle to find a reasonably priced rental.
The election debate will centre on whether stronger tenant protections can make renting affordable again. They can help, but they cannot solve the problem on their own. Getting a new lease is becoming much more expensive Spain's rental market is increasingly split in two: those with existing contracts and those trying to secure one.
For contracts signed after 26 May 2023, annual rent updates are limited by the IRAV, a reference index published by the Spanish statistics office, INE. It takes the lowest of three measures: headline inflation, core inflation and an adjusted average based on those two inflation rates. The index is designed to prevent unusually large annual increases in existing contracts and is less volatile than headline inflation.
In August 2026, the IRAV stood at 2.47%. For older contracts, the applicable update depends on the contract and the legislation in force. Where the contract provides for an update in line with consumer prices, August’s inflation rate of 4.3% could be relevant.
The existence of either index does not automatically entitle a landlord to increase the rent: the contract must allow for an annual update, and the applicable rules depend on when it was signed. Newcomers face a different price. Advertised rents on Idealista, Spain’s largest property portal, rose by around 6% year-on-year during the summer, after recording growth of close to 10% in late 2024.
Growth has slowed, but the gap between regulated increases on existing contracts and the price of entering the market remains substantial. The measures are not directly comparable. Asking rents are advertised prices for properties currently on the market.
The IRAV governs annual updates for relevant contracts already running. But that is precisely the point: the price of getting in has decoupled from the price of staying. Other evidence points in the same direction.
CaixaBank Research , using anonymised rent-payment data, found that rent increases remained below 3% where the tenant-landlord relationship did not change. By contrast, increases in new rental relationships exceeded 10% at the end of 2025. Young people leaving home, recent migrants, separating couples and workers moving to expanding employment centres are most exposed to the open market.
Existing tenants may be protected against sharp annual increases, while households looking for a new property compete for a limited pool of available homes. Asking rents are rising faster than permitted contract updates Annual change in advertised asking rents (Idealista) and the maximum update for existing contracts (IRAV). Source: Idealista, INE, ING Research "> Annual change in advertised asking rents (Idealista) and the maximum update for existing contracts (IRAV).
Source: Idealista, INE, ING Research 2026 puts contract security in the spotlight Standard residential leases provide a minimum term of five years when the landlord is an individual and seven years when the landlord is a company. This can be followed by annual extensions for up to three more years. Under the existing system, tenants therefore lose their guarantee of continued occupancy after eight or 10 years.
The proposed automatic-renewal decree was aimed at reducing that uncertainty. The original decree argued that contract expiry had become an important channel through which market rent increases are passed on to households after eight or 10 years of tenancy protection. Extending a contract can prevent displacement and give a household greater security.
But it also illustrates the limitation of tenant protection: an extension keeps one tenant inside the protected market for longer, without creating an additional home for the next household. Regulation can also change market behaviour. Some landlords may seek higher rents at the beginning of a tenancy, move towards temporary or room contracts, or sell the property.
Spanish evidence on the scale of these effects remains mixed. But the government’s decision to tighten the rules around temporary and room rentals shows that policymakers regard such shifts as a material risk. The broader October decree required a genuine and verifiable reason for temporary letting and sought to prevent landlords from using repeated short contracts to avoid ordinary tenancy protections.
Homebuilding never recovered from the financial crisis Spain’s housing shortage did not appear overnight. Residential construction collapsed following the financial crisis and remained exceptionally weak throughout much of the next decade. The country moved from building too much before 2008 to delivering relatively few new homes afterwards.
For several years, this was less visible because household growth was also subdued. But household formation began to pull away from housing delivery around 2016 and 2017. Since then, demographic demand has increased while completed housing has responded only gradually.
Immigration is an important part of this shift. Ahead of the upcoming snap election, far-right Vox has drawn a link between migration and housing shortages. But the number of households is also affected by changes in how people live.
When adults leave the parental home, couples separate, or more people live alone, the number of households can rise faster than the overall population. The problem is no longer a lack of demand for new homes. It is the speed and capacity with which supply can respond.
Housing development in Spain involves several layers of national, regional and municipal administration. A shortage of ready-to-build land, lengthy permitting processes, infrastructure constraints, high construction costs and labour shortages can all delay delivery. The European Commission’s 2026 housing assessment for Spain recommends reducing permitting times, removing administrative bottlenecks, addressing construction labour shortages and increasing the provision of social and affordable housing.
The consequences are increasingly visible in purchase prices as well as rents. Spain’s national house price index rose by 12.2% year-on-year in the second quarter of 2026, following increases of 12.9% in both the first quarter and the final quarter of 2025. That is a marked acceleration from annual growth of just 3.5% at the beginning of 2023.
The latest figure is only slightly below the 13.1% recorded at the beginning of 2007, shortly before the previous housing downturn. Household growth has overtaken housing delivery Between 2021 and 2025, Spain added approximately 1.22 million households but completed only around 466,000 homes. That amounts to 2.6 additional households for every completed dwelling and leaves a cumulative gap of roughly 756,000 homes, according to our calculations using INE and Housing Ministry data.
Much of the imbalance is concentrated in large and fast-growing housing markets such as Madrid, Barcelona, Valencia, Alicante and Murcia. The figures should not be interpreted as a precise estimate of the number of homes Spain is “missing". In fact, this may be an underestimation of the gap, as some newly completed properties are second homes, tourist accommodation or purchases by non-residents.
Completions also do not account for demolitions or conversions. The pipeline is improving, but only slowly. Around 139,000 new-build dwellings received permits in 2025, while approximately 92,000 homes were completed.
Permits are a leading indicator and generally take years to become finished properties. Some authorised projects may never be delivered. Even if every permit issued in 2025 eventually became a home, the number would still be well below that year’s net household creation.
Household formation has increasingly outpaced housing delivery Source: INE, Ministry of Housing and Urban Agenda, ING Research "> Source: INE, Ministry of Housing and Urban Agenda, ING Research What the election can and cannot change Spain’s political blocs agree that there is a housing crisis, but they disagree on the cure. The left emphasises rent caps, contract extensions and eviction protection. The centre-right Popular Party argues that stronger regulation risks discouraging the investment needed to expand supply, and instead promises faster planning and more construction.
Each side holds part of the answer. Tenant protection has clear social value. Without it, households that have paid reliably for years can face sudden displacement when a contract expires.
Regulation can smooth rent increases and provide greater security, particularly when open-market rents rise much faster than incomes. But protection primarily determines how an existing shortage is distributed. It cannot, on its own, increase the number of homes.
Expanding supply is therefore indispensable, but that requires more than ambitious construction targets. Spain needs additional ready-to-build land, faster and more predictable planning, sufficient infrastructure and construction capacity, and a much larger stock of social and affordable rental housing. Even then, the results will be slow.
Closing the accumulated gap would require several times the current level of completions. No government elected in November can close such a gap within one term. With housing supply likely to remain constrained, upward pressure on new-contract rents is unlikely to disappear quickly, regardless of the election outcome.
Spain’s next government should therefore be judged on two outcomes: how much tenants pay and how many people can find a home at all. Spain Rental market Housing Households Election Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Pablo Muylle Economist, Belgium Pablo Muylle is an economist at ING Belgium. He joined the team in 2026 and covers Spain and Portugal. Prior to this, he worked as a postdoctoral researcher at Ghent University on topics related to… In this article Rejected housing measures send Spain to the polls Getting a new lease is becoming much more expensive 2026 puts contract security in the spotlight Homebuilding never recovered from the financial crisis Household growth has overtaken housing delivery What the election can and cannot change
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