Spain eyes tax hike for holiday rentals

Spain plans to raise taxes on holiday rentals so that they pay “like a business”, Prime Minister Pedro Sanchez said on Monday, as residents of the country’s main cities grappled with soaring rents.

“It isn’t fair that those who have three, four or five apartments as short-term rentals pay less tax than hotels or workers,” Sanchez said at an event on affordable housing.

The measure would be based on a new European Union directive on value-added tax for digital platforms, he said. Spanish hotels now pay a reduced 10% VAT rate, which is included in the bill.

Housing has become a major issue in Spain as it struggles to balance promoting tourism, a key driver of its economy, with concerns over high rents due to gentrification and landlords shifting to more lucrative, short-term tourist rentals, especially in urban and coastal areas.

Sanchez also promised tougher measures to combat fraud around such rentals, without going into details. Last month, authorities opened an investigation into Airbnb for failing to delete thousands of misleading rental offers from its platform.

In addition, landlords in high-rent areas who keep their rents in line with an official price index will get a 100% exemption for the tax on that income.

Sanchez said the government will promote the construction of social housing and cede 2 million square metres (21.5 million square feet) of residential land to a newly created public housing agency.

However, Sanchez’s minority government faces a constant struggle to pass any bill in a fragmented parliament.

His Socialist Party’s housing proposals have drawn criticism from both the right – which labels them as too interventionist – and hard-left allies, who accuse the centrist Socialists of being too tame with abusive landlords.

“The government’s duty is to prioritise residential use of housing and prevent speculative and touristic uses from expanding in a totally uncontrolled manner at the cost of residents,” Sanchez said.

Last year, the Bank of Spain recommended that authorities intervene in the rental market, as the high proportion – compared to other EU countries – of households overstretching to pay their rents could lead to “adverse economic and social effects”.

Several protests have taken place amid rising anger from citizens who feel they are being priced out of the Spanish market as renting becomes more frequent in a country traditionally made up of homeowners.