Government weighs IRPF penalties for landlords who raise rents

The Spanish Government is studying a plan to use personal income tax (IRPF) as a lever to curb rent increases, by reducing tax breaks for landlords who raise prices and maintaining or improving incentives for those who keep rents stable or lower them. The idea would mark a shift from purely housing‑law tools to a direct use of the tax system to influence what owners charge their tenants.

From tax breaks to possible tax penalties

Until now, the Executive had focused on offering carrots rather than sticks. In January, Pedro Sánchez announced generous deductions in IRPF for landlords who rent their homes at affordable prices or in stressed areas, with reductions that in some cases can reach 90% of the net rental income. The goal was to encourage owners to bring more properties onto the rental market and to limit price increases through positive incentives.

The new debate goes a step further. According to government sources quoted by several outlets, the Ministry of Housing and the Treasury are analysing formulas to “correct” or reduce these deductions for owners who increase rents above certain thresholds. In practice, a landlord who raises the rent significantly could lose part of the tax benefit that they would otherwise enjoy, paying more IRPF on their rental income.

How rental income is taxed today

At present, landlords declare their rental income in the savings base of IRPF. They can deduct a range of expenses linked to the property, such as community fees, local property tax (IBI), insurance, repairs, mortgage interest and amortisation. On the resulting net return, current rules allow general reductions — historically 60% for residential rentals that meet certain requirements, with additional bonuses in specific cases such as young tenants or affordable rents in stressed areas.

The Government’s recent reforms are moving towards a more selective system: higher deductions for landlords who support social and housing‑policy goals, and fewer or no deductions for those who do not. The new plan under study would insert a further filter: whether the rent is being raised, and by how much.

Using IRPF to “control” rent rises

According to the information published by Europa Press, Infobae and idealista news, the Executive is considering linking tax treatment to the evolution of each contract. Landlords who keep rents frozen or make only moderate increases would preserve their deductions or even access higher ones, while those who push prices above certain limits could be hit with a lower reduction or none at all.

The thresholds could be tied to inflation, to the reference index for stressed areas or to caps defined in the Housing Law, although no final design has been decided. One of the options on the table is to treat differently the increases that occur when an existing contract is renewed and those applied when a new tenant enters the property.

Part of a broader housing plan

The IRPF measure is being studied within a wider housing plan that includes the declaration of stressed rental markets, limits on annual rent updates in certain areas and the promotion of social and affordable housing. The Government argues that, in the current context of high rents and difficulty accessing housing, it is legitimate to use the tax system to reward “responsible” landlords and discourage speculative behaviour.

Sources close to the negotiations state that the aim is not to impose a general tax increase on owners, but to reorient existing advantages so that public money does not end up subsidising rent rises that go against the spirit of housing policy. In other words, deductions would be concentrated on those who help stabilise or lower prices.

Landlords’ fears and market doubts

Landlord associations and some tax experts have already expressed concern over the idea. They warn that introducing new conditions and potential penalties into IRPF could make renting less attractive, especially for small owners who already face legal uncertainty and rising costs. There are also doubts about how the system would be administered in practice: the Tax Agency would need clear, up‑to‑date information on the evolution of each rent to apply different deductions.

Critics argue that, if the measure is poorly designed, it could reduce the supply of long‑term rentals as some owners decide to leave properties empty, move into short‑term tourist lets or simply sell. That, they say, would risk pushing prices even higher, the opposite of what the Government intends.

Tenants’ groups welcome the debate but demand ambition

Tenant organisations, on the other hand, see the discussion as a step in the right direction. They have long claimed that public policy has been too focused on subsidies and tax benefits for landlords, with limited impact on actual rent levels. For these groups, using IRPF to remove advantages from those who raise prices sharply is a way to align incentives with the goal of containing rents.

However, some tenant platforms argue that tax measures will not be enough on their own. They call for stricter enforcement of price caps in stressed areas, more social housing on public land and stronger controls on tourist rentals and empty homes, which in their view are key factors behind the tension in urban rental markets.

What happens next

For now, the IRPF penalty is only at the study stage and would require changes to the tax law and, most likely, a full political negotiation in Parliament. The Government has not yet presented a concrete draft, but has confirmed that it is analysing “different options” to align tax incentives with its housing policy.

In the coming months, landlords and tenants alike will be watching closely. If the plan goes ahead, Spain could become one of the first countries in Europe to use personal income tax so directly to influence rent‑setting behaviour, adding a new layer of complexity to an already heated debate over who should bear the cost of the housing crisis.