Spain Plans 100% Tax for Homes Bought By Non-EU Residents

Spain is confronting a significant housing crisis, characterized by soaring property prices and a shortage of affordable homes. In response, Prime Minister Pedro Sánchez has introduced a series of measures aimed at improving housing accessibility for residents. Among these proposals is a plan to impose a tax of up to 100% on property purchases made by non-resident, non-EU citizens.

Details of the Proposed Tax

The proposed tax targets non-EU citizens who do not reside in Spain, requiring them to pay a tax equivalent to the full value of the property they intend to purchase. This measure is designed to deter speculative investments that contribute to escalating property prices, thereby prioritizing housing availability for residents. In 2023, non-EU residents purchased approximately 27,000 properties in Spain, often for investment rather than personal use.

Additional Housing Measures

Beyond the 100% tax proposal, the Spanish government has outlined several initiatives to address the housing crisis:

• ·    Expansion of Social Housing: The government plans to transfer over 3,300 homes and two million square meters of residential land to a newly established public housing company. This initiative aims to construct thousands of social homes for affordable rent, particularly benefiting young people.
• ·  Tax Incentives for Affordable Rentals: A legal reform is proposed to establish a 100% exemption on Personal Income Tax (IRPF) for property owners who rent their homes at rates aligned with the Reference Price Index, even if the properties are not located in designated high-demand areas.
• ·   Regulation of Tourist Rentals: The government intends to tighten regulations on tourist apartments, ensuring they are taxed as businesses by applying VAT in areas facing housing access difficulties or tourist saturation. This measure seeks to address the proliferation of short-term rentals that reduce the availability of long-term housing for residents.
• ·  Public Guarantee System: A public guarantee system is proposed to protect both property owners and tenants participating in affordable rental schemes. This system will provide necessary funding and assurances to facilitate secure rental agreements, beginning with owners renting to individuals under 35 years old.

Rationale Behind the Measures

Prime Minister Sánchez emphasized the urgency of addressing housing inequality, noting that average housing prices in Europe have increased by 48% over the past decade, outpacing household income growth. He warned against the emergence of a society divided between wealthy property owners and disadvantaged tenants, advocating for decisive public intervention to ensure equitable access to housing.

Critiques and Challenges

The proposed 100% tax has elicited skepticism from real estate experts and stakeholders. Some argue that the measure may have limited impact, given that the 27,000 annual property purchases by non-EU residents represent a small fraction of Spain's total housing market, which comprises approximately 26 million homes. Concerns have also been raised about potential legal challenges and the feasibility of implementing such a tax.

Additionally, organizations like the Tenants' Union have criticized the plan for not adequately addressing the core issues of housing affordability and availability. They argue that the measures fail to tackle speculative purchases effectively and do not provide sufficient regulation of seasonal rentals that contribute to housing shortages.