Index and Inflation Dynamics
In September of this year, the update index for residential rental rates in Spain rose by 2.22%. This figure was below the inflation rate, which reached 3% during the same month. The data, published by the National Institute of Statistics (Instituto Nacional de Estadística, INE), reflect the situation following the enactment of the revised housing law adopted in May 2023.
The index applies to contracts signed after May 26, 2023. Compared to August, the index growth accelerated by 0.03 percentage points, marking the second highest value in the entire period of observation. The peak was recorded in December 2024 — 2.28%. Since last May, the index has shown gradual growth.
Impact on Rental Payments
For tenants whose contracts are subject to the new index, the average annual increase in expenses will be around €240, which is roughly €20 per month. In major cities such as Barcelona, Madrid, Valencia, Palma, San Sebastián, and Girona, the annual increase may exceed €300.
Contracts signed before May 26, 2023 continue to be updated based on the terms specified in the agreement. Typically, the Consumer Price Index (IPC) is used, but other options are possible as long as they do not exceed the inflation rate. For such contracts, the September update will lead to an increase of about €325 per year, or €27 per month. In metropolitan areas, the rise may exceed €400, and in some cases reach €500 per year.
Update Rules and Calculation Mechanism
According to the provisions of the Urban Leases Act (Ley de Arrendamientos Urbanos, LAU), the landlord must notify the tenant of any upcoming change in the rental amount at least one month before the new terms take effect. The notification should specify the applicable percentage and, if necessary, confirmation from the INE. This notification can be provided as a note on the payment receipt. The contract must include a clause allowing for annual rent adjustments.
The update index is calculated based on inflation, the base index, and the difference in their annual growth rates. To prevent sharp fluctuations, a special adjustment coefficient determined by relevant authorities is applied. The final value is the lowest of the following three: inflation, base index, or the adjusted average rate.
Legislative Changes and Prospects
The publication of the index complies with the additional provisions of the housing rights law, which require an official mechanism for the annual updating of rental rates to be established by the end of 2024. The authorities aim to balance the interests of tenants and property owners, as well as to prevent excessive increases in housing costs.
