Advice,  Rental properties

How much will I be able to raise the rent in 2023? How the limit on the increase in lease affects you

Are you already thinking about how much you can increase the price of your apartment this coming year? Wait! We know that in these times where the market price is increasing, you may also consider raising the rent of the tenants. But first, it is important to be well informed about the new regulations and whether the price you want to establish is legal. In this article we will give you all the information about it.


How much can the rental price be raised?

During this last year, the consumer price index has risen as a consequence of the economic crisis since the beginning of the war in Ukraine. This has meant that the average rental price reached a historic rise of 7.6% last February. In April, as a measure to curb this increase, the Spanish Government established a maximum of 2% per year for those contracts that expired after one year, until June 2022. Initially, the measure was expected to last 3 months, however, the government has decided to extend it by one year, until December 31, 2023.

It is precisely for this reason that both tenants and owners begin to take note… But before raising the rental price, it is necessary to know how to distinguish between updating rents and increasing the cost of rent. In addition, depending on the contract between owner and tenant, some criteria or others will be applied.


Updating of rental income

The rent is updated annually, unless something different has been agreed by contract. But watch out! When we talk about updating the price, the same thing that can go up, which is the most common, can also go down. Within the rental contract the following clause is specified, based on Article 18 of the Urban Rental Law:

“During the term of the contract, the rent can only be updated by the landlord or the tenant on the date on which the contract is in force from year to year, in the terms agreed by the parties. In the absence of express agreement, no rent update will be applied to the contracts.”

If what you want is to update the cost of the lease, we advise you to review the CPI data or take a look at the Rental Contract Income Updater Index (ARCA), since it is the only one that considers and focuses on the situation of the rental market.

In addition, you have to know that, as the owner of a rental home, you are obliged to communicate in writing, one month in advance, the percentage of rent increase. The new price that you establish will become effective in the next month after notifying the tenant in a timely manner.


Increase in the cost of rent

As we have just seen, the update of the rental price is carried out annually based on a reference index. On the other hand, only when the contract is about to reach its end or renewal, as the owner, you can raise the cost of the lease.

Therefore, if both parties are interested, it will be the only moment in which you can make any change in the contract conditions.


Freeze rises: Why 2%?

According to sources from the Ministry of Urban Agenda, there will not be a maximum price from which the owners cannot raise the rent by more than 2%. Until now, the law prohibited owners from being able to raise prices above the “annual variation” of the Competitiveness Guarantee Index (IGC). The problem is that, currently, said index is already at 7%. However, the Ministry of Transport, Mobility and Urban Agenda announced that the cap will continue to be and will remain at 2%.

With this implementation, it is expected that the standardization of leases and competitiveness in the medium term will be guaranteed.


What happens if the tenant does not accept the rent increase?

It is possible that the tenant does not want to accept the new price of the house, and it is very likely that he will present a counter offer. Our advice from AB? Listen to what the tenant has to offer. Keep in mind that renting a home is not that easy right now, so consider the fact that if you don’t accept that counter offer, you’ll be willing to take the loss of those earnings for a few months until you find a new tenant.


Read our blog on how to find your perfect tenant, to know what to look for when re-renting your apartment. Keep in mind that the increase you want to make cannot exceed 40% of your net income!


If you have any other questions about what’s new in the rental market, don’t hesitate to contact our team!

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