Royal Decree-Law 29/2026: urgent measures to safeguard the social function of housing and increase the supply of affordable housing
Royal Decree-Law 29/2026 of 6 October (Official State Gazette No. 249 of 7 October 2026) reinstates, with amendments, the package of measures contained in Royal Decree-Law 26/2026 of 29 September, which was not ratified by the Congress of Deputies. It came into force on 8 October 2026, with the exception of provisions with their own effective dates, mainly of a tax nature. It amends, amongst others, the Urban Leases Act (LAU), Act 12/2023 on the right to housing, the Civil Procedure Act (LEC), the laws on personal income tax, VAT and SOCIMIs, Law 5/2019 on mortgage credit and Law 6/2023 on Securities Markets. It also partially transposes Directive (EU) 2021/2167 on credit servicers and credit purchasers.
Practical considerations for market participants:
- Funds, servicers and purchasers of NPL portfolios: a temporary restriction on residential property acquisitions below 70 per cent of market value, a suspension of evictions without compensation, and a new regime for the assignment of mortgage loans with a repurchase obligation.
- Residential investors, SOCIMIs and large holders: a special 25 per cent tax on undistributed profits from residential property, registration requirements to prove large-holder status, and new restrictions on rent, chargeable expenses and the right of first refusal in block sales.
- Financial institutions: new ‘Financia Europa’ Savings and Investment Account and ‘SIALP Financia Europa’ (pending ministerial orders for their launch), ICO guarantees for affordable and industrialised housing development, and the public ‘TU CASA’ scheme.
It is advisable, as part of due diligence processes, to review the contractual documentation and tax planning for ongoing transactions, in particular acquisitions of assets and portfolios pending formalisation by public deed.
Provisional nature: the Royal Decree-Law must be ratified within thirty days of its promulgation and, as Parliament is currently dissolved, this function falls to the Permanent Deputation. If it is not ratified, it will be repealed, without prejudice to the effects already produced, as was the case with Royal Decree-Law 26/2026, which remained in force for one day. The framework introduced should not be regarded as definitive, and its ratification must be closely monitored.
Temporary restriction on property purchases (Art. 1): from 8 October 2026 to 31 December 2030, entities engaged in acquiring properties or portfolios of defaulted mortgage loans at a price significantly below their appraised value, as well as large corporate holders, may not acquire residential properties free of charge or for a consideration of less than 70 per cent of their market value. The value is determined by an accredited and independent valuation firm, whose report must be provided by the purchaser.
The restriction does not apply, amongst other cases, where the property is intended for use as an affordable or social primary residence until at least 31 December 2030, for use as care homes or for the protection of victims of gender-based violence, nor when the purchaser provides evidence of adherence to a Code of Good Practice to be approved by the Council of Ministers. Transfers recorded in a public deed prior to 8 October 2026 are excluded. The regulation does not specify the consequences of non-compliance or when a price is ‘clearly lower’; it is therefore recommended that a valuation report be included with each transaction and that the exempted purpose be documented.
Evictions, extraordinary suspension of proceedings and mortgage enforcement (Articles 2 and 5): until 31 December 2030, eviction proceedings are suspended where the defendant is vulnerable and has no alternative accommodation, with the rules varying depending on the identity of the claimant. For the funds and entities referred to in Article 2.1, no compensation, periodic review or maximum time limit is provided for. For all other claimants, the suspension is reviewed every twelve months, is lifted in any event after three years and, if the claimant is a natural person or a legal entity engaged in affordable or social housing, the State compensates them for lost rent, unpaid utility bills and legal costs.
An extraordinary stay of proceedings is also introduced (new Article 22.6 of the Civil Procedure Act): in evictions for non-payment, if the tenant’s financial vulnerability is proven and the authorities do not offer alternative accommodation, the authorities must pay or deposit the amount owed within a maximum, non-extendable period of two months. In mortgage enforcement proceedings, the claim must state whether the property is the debtor’s main residence and whether the claimant is a large property owner.
Urban tenancies (Article 3): the LAU is amended in several respects:
- Seasonal tenancies: these are no longer classified as tenancies for purposes other than residential use and are replaced by temporary residential tenancies, which require the tenant to be temporarily displaced from their usual place of residence for a justified and verifiable reason, with the burden of proof resting with the landlord. The tenancy must last for more than thirty-one days and, as a general rule, must not exceed twelve months. In the absence of a duly specified reason, the contract is subject to the rules governing the principal residence with retroactive effect.
- Rooms: the total rent from contracts for individual rooms within the same property may not exceed the rent specified in the single contract for the entire property.
- Rent, charges and security deposits: rent caps in high-demand areas are tightened; rent increases are only permitted if agreed (with the IRAV as the upper limit); property management and formalisation costs may not be passed on to the tenant; and the additional security deposit is limited to two months’ rent for the principal residence and one month’s rent for temporary tenancies.
- Right of first refusal: the right of first refusal and the right of pre-emption no longer lapse when the property is sold together with other properties, provided it can be legally identified as a separate unit, and a waiver of these rights cannot be agreed.
- Short-term letting platforms: those failing to comply with their data reporting obligations to the Single Digital Window for Letting are subject to penalties, with fines of up to 2 per cent of total turnover for very serious infringements.
Royal Decree-Law 28/2026, approved on the same day, further amends Article 10 of the LAU with effect from 15 November 2026; consequently, the rules on lease extensions must be analysed in a coordinated manner.
Law 12/2023 on the right to housing (Article 4): the thresholds for large property owners (more than ten urban residential properties or more than 1,500 m² of residential floor area) remain in place, but this status must now be proven by means of a certificate from the Land Registry, and each unit within a property that is suitable for residential use counts as a separate property. Owners of entire buildings who previously did not meet the threshold because they held a single registered property may now be classified as large property owners.
Extraordinary extension and cap on rent increases: for tenancy agreements for a principal residence in force on 8 October 2026, where the mandatory extension expires before 31 December 2028, the tenant may request an extraordinary extension for annual periods of up to two years, on the same terms and conditions. The landlord must accept this unless otherwise agreed, a new tenancy agreement is drawn up, or the landlord needs to occupy the property. Furthermore, between 8 October 2026 and 31 December 2027, if the rent exceeds the limit set by the reference index system, no increase may be applied; in all other cases, the maximum increase is 2% in the absence of an agreement.
Tax measures:
- SOCIMI: the special tax on undistributed profits rises from 15 per cent to 25 per cent where the profit derives from the letting of residential property in any form. It is reduced by 50 per cent if more than 80 per cent of the rental stock is affordable or social housing, and by 100 per cent if, in addition, the profit is reinvested within three years in affordable rental housing.
- Personal Income Tax (IRPF): the tax reliefs for letting residential property are reorganised; they are now linked to changes in rent and excluded for large landlords in certain circumstances. The deduction for letting one’s main residence is amended, and from 2027 the allocation of property income will be based on a progressive scale applied to the sum of cadastral values. An exemption is also introduced, valid until 31 December 2027, for the sale of vacant properties to the public sector.
- VAT (from 1 December 2026): rentals of furnished properties for a maximum of 30 nights to the same tenant will now be subject to VAT at a rate of 10 per cent, rather than being exempt. The 10 per cent rate for renovation and repair works is extended to properties intended for letting as a principal residence, and the 4 per cent rate to the handover of permanently classified social housing.
- Property Tax (IBI): new discretionary surcharges are envisaged, applicable in practice from 2027, on properties left unoccupied for more than two years without just cause (up to 50 per cent as a general rule and up to 100 per cent in certain cases) and on properties used for tourist accommodation in high-demand areas (up to 150 per cent for owners of four or more properties).
- Municipal capital gains tax: from 1 December 2026, the maximum coefficients under the objective method will be updated, rising for capital gains periods of up to sixteen years and falling from seventeen years onwards.
Affordable housing, industrialised construction, ICO guarantees and TU CASA: affordable housing is defined as housing whose sale price or rent, including all associated costs, does not exceed 30 per cent of the median income of a household in the municipality. The ICO guarantee scheme is being expanded to 2,000 million euros to increase the stock of social or affordable rental housing, with a term of up to thirty-five years, and a further scheme of up to 280 million euros is being created for SMEs using industrialised construction. The TU CASA programme provides for ICO loans to supplement the mortgage for a first main residence, for the lower of 20 per cent of its value or 50,000 euros, at 0 per cent interest and with no fees, backed by an extraordinary credit facility of 10,000 million euros. Among other measures, price caps are established for CASA 47 homes, the Social Impact Housing Fund is created with 400 million euros, and the advertising of tenancies is regulated.
Financia Europa Savings and Investment Account and SIALP Financia Europa: a new title regulating this account has been incorporated into Law 6/2023, in line with Recommendation (EU) 2025/2029. Contributions may only be made in cash, and outstanding amounts may not exceed 150,000 euros. Eligible assets are listed shares of EU or EEA companies (except SOCIMIs) and financial UCITS registered in a specific register maintained by the CNMV. Gains are taxed on a deferred basis and, after five years, 100 per cent of gains up to 10,000 euros and 20 per cent of the remainder are exempt from tax. The SIALP Financia Europa scheme allows for premiums of up to 10,000 euros per year. Both products may only be marketed once the ministerial orders on disclosure requirements come into force.
Assignment of property loans (new Article 25 bis of Law 5/2019): the borrower may raise against the assignee the same defences and objections as against the original creditor, including set-off, and the assignment must be notified to the borrower. The assignment of overdue mortgage loans where the debtor is covered by Royal Decree-Law 6/2012 is prohibited; furthermore, if an overdue loan secured by a mortgage on the principal residence is assigned, the debtor must be informed of the possibility of availing themselves of those measures, with an obligation to repurchase the loan if they can prove they meet the requirements within the following six months. The regime applies to assignments made from 8 October 2026, with a direct impact on the sale of NPL portfolios.