El artĂculo 47 de la ConstituciĂłn Española establece que “todos los españoles tienen derecho a disfrutar de una vivienda digna y adecuada. Los poderes pĂşblicos promoverán las condiciones necesarias y establecerán las normas pertinentes para hacer efectivo este derecho (…)”.
For this reason, in recent years the government has developed a new concept within the real estate sector that aims to make it easier for people in vulnerable situations to access housing: incentivized affordable housing. We’d like to discuss this in detail today, given the significant role it has taken on as a result of the latest Housing Act.
What is incentive-based affordable housing, and where does it come from?
If you don’t know what “subsidized affordable housing” is or hadn’t heard of it until you came across this article, don’t worry—it’s normal. This is mainly because the concept was introduced for the first time with the enactment of Law 12/2023, of May 24, on the Right to Housing. Prior to that, the bill was approved by the Council of Ministers on February 1, 2022, by the Congress on April 27, 2023, and by the Senate on May 17 of the same year.
It therefore took effect on May 25 following its publication in the Official State Gazette (BOE). Its purpose was to implement measures to increase the supply of affordable housing, prevent tensions in the rental market, and support both young people and vulnerable groups so they can gain access to housing.
Among these, a new type of housing is being created within an existing concept: subsidized housing. This refers to the aforementioned “incentivized affordable housing”—privately owned housing(including properties owned by private-sector entities and nongovernmental organizations) that qualifies for zoning, tax, or other benefits if it is rented out at affordable prices.
What are the differences between subsidized affordable housing and public housing?
This new type of housing is intended for rent by low-income individuals, so that its owners or tenants can access various benefits and tax credits based on this criterion. That is why it is a measure aimed at the private sector.
This is precisely one of the major differences between these properties and subsidized housing, which is tied to the public system. Specifically, they are built in Spain in accordance with design, use, or quality regulations specified by each Autonomous Community, which establishes certain obligations for these properties, including aspects such as their maximum sale price, rent, or transfer of use.
In the case of subsidized affordable housing, the restrictions will be only temporary, limited to usage and maximum prices, and it is intended solely for the rental market; whereas publicly subsidized housing can be offered for both rent and purchase.
Benefits of Subsidized Affordable Housing
There are two groups that benefit from this new housing program: on the one hand, property owners who rent out their properties; and, on the other, tenants who gain access to housing through this program.
Benefits of Incentivized Affordable Housing for Homeowners
In this case, we define “owners” as individuals. And if they choose to rent out their homes at reduced rates, they may be eligible for urban planning and tax breaks of up to 90% on their personal income tax, depending on their circumstances:
- This rebate amounts to 50% simply for renting the property under the affordable housing incentive program.
- The benefit is 70% if the property is also rented to young people between the ages of 18 and 35, or if it involves a new lease with improvements or renovations.
- The subsidy reaches 90% when the rental units are located in high-demand or economically disadvantaged areas.
Furthermore, this measure responds to the requests from the real estate sector to create a social housing fund. This is necessary to increase the public rental housing stock and, consequently, the number of affordable housing units. A key feature of this measure is that the specific classification of these properties can no longer be changed for a period of 30 years, thereby guaranteeing basic conditions throughout that period.
Benefits of Subsidized Affordable Housing for Tenants
As we have seen, both young people and vulnerable social groups will benefit from more affordable prices when entering the rental market.
At the same time, this market will also be able to increase its supply in the medium and long term—a very important factor in meeting growing demand and stabilizing prices, which have spiraled out of control in recent years due to various factors, such as rising construction costs and high inflation.
Requirements for Incentivized Affordable Housing
There are no standard eligibility requirements for the subsidized affordable housing program. The autonomous communities are the authorities responsible for this matter; therefore, applicants must meet the conditions set forth by their region’s specific program.
In any case, from the owner’s perspective, it is advisable to contact a tax advisory firm to receive guidance on how to take advantage of this new option. This is mainly because the process involves a series of steps that can become complex and, if not carried out correctly, may limit the owner’s ability to maximize tax benefits.
Incentivized affordable housing: good news for everyone
In short, with the implementation of the concept of subsidized affordable housing, the Spanish government seeks to involve all stakeholders —public, private, and third-sector —to reach a consensus on addressing current housing supply issues. To this end, it leaves it to the discretion of the competent authorities (the Autonomous Communities) to determine both the public subsidies allocated to housing and the regulatory restrictions.
These measures, along with those previously implemented to promote affordable housing, are expected to have a positive impact on the real estate market and provide direct benefits to young people and those facing social exclusion. This is primarily because they will be able to find more competitive options and enjoy better financial terms, whether renting or buying.
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