Legal development

The Constitutional Court partially upholds the first appeal of unconstitutionality against the Spanish Housing Law

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    In its ruling 79/2024 of 21 May, the Spanish Constitutional Court declared some provisions unconstitutional and, therefore, null and void, but dismissed the appeal on the most critical aspects such as the regulation of stressed residential market areas, the cap on rents and the definition of large holders.

    The Spanish Housing Law: a controversial piece of legislation

    The Spanish Housing Law (Law 12/2023, of 24 May) has been controversial since its approval (see New Spanish Housing Law: Key issues for the private sector). Several appeals of unconstitutionality were filed against it including by the government of Catalonia, Galicia, the Basque Country, and Madrid, as well as by the Spanish People's Party (PP).

    On 21 May 2024, the Plenary of the Spanish Constitutional Court delivered the first judgment on one of these appeals of unconstitutionality, specifically the one brought by the Governing Council of the Autonomous Community of Andalusia (hereinafter, STC 79/2024).

    STC 79/2024 partially upheld the appeal of unconstitutionality of the Governing Council of the Autonomous Community of Andalusia against the Spanish Housing Law in specific aspects. However, it confirmed the constitutionality of the procedure for declaring stressed residential market areas and the cap on rents.

    The Spanish Official Gazette published STC 79/2024 on 24 June 2024. From that date, the provisions declared unconstitutional are deemed to have been annulled for all purposes.

    The Spanish Constitutional Court has yet to rule on the rest of unconstitutionality appeals against the Spanish Housing Law that have been filed and admitted. However, as result of STC 79/2024, part of the subject matter of these appeals has become irrelevant. Moreover, the bulk of the challenged provisions and the legal arguments supporting such challenges are similar in all the appeals and it is expected that the appeals will be resolved in an analogous manner to STC 79/2024.

    What provisions have been annulled by STC 79/2024?

    The judgment partially upholds the constitutional challenge brought by the Governing Council of the Autonomous Community of Andalusia and annuls the following provisions:

    • Art. 16, which established the principles governing social housing.
    • The part of art. 19.3 which listed the specific information to be provided by large holders regarding their residential units in stressed residential market areas, their use and destiny.
    • The third paragraph of art. 27.1, which set out the categories of residential units that may constitute the public housing stock regulated by the legislation of the Autonomous Communities.
    • Art. 27.3, which provided for fines for failure to comply with the social function of housing and established that the revenues derived from the management and disposal of the public housing stock had to be used for the creation, expansion, rehabilitation, or improvement of public housing stock.
    • The first transitory provision which determined that the residential units which, at the time of the entry into force of the Spanish Housing Law, were definitively classified under a public protection regime would be governed by the provisions of that regime, while those forming part of a public housing stock would be governed by the provisions of the Spanish Housing Law.

    Which provisions have been confirmed by STC 79/2024?

    The Spanish Constitutional Court rejects the rest of the arguments of the Governing Council of the Autonomous Community of Andalusia and upholds the constitutionality of the following provisions.

    • Art. 3.f), g) and k), which contain the definitions of subsidised housing, incentivised affordable housing, and large holder.
    • Article 15.1.e), which set out that, in stressed residential market areas, the urban development obligations related to urban building and transformation promotion can only be fulfilled by handing over to the Administration the percentage imposed under the compulsory transfer duty, that must be used for the construction and management of social or public housing, unless other needs of social interest can be accredited.
    • Sections 2, 3 and 4 of art. 18, which regulate the essential procedures for the declaration of stressed residential market areas, and the third additional provision, which establishes the review of the criteria for the identification of these areas after three years.
    • The first final provision, which amends the Spanish Law on Urban Leases (Law 29/1994, of 24 November) with respect to, among others, term extensions and the establishment of a cap on rents in stressed residential market areas.
    • The fourth final provision, which modifies the Revised Text of the Land and Urban Rehabilitation Law, increasing the percentage of buildability that must be reserved for housing subject to a public protection regime.

    Regarding stressed residential market areas, the Constitutional Court considers that the fact that the Spanish Housing Law expressly saves the competences of the Autonomous Communities to provide for their own procedural requirements is sufficient to reject the excess of competence. The Court also explains that, in the past, it has already declared the constitutionality of state provisions requiring other administrations to establish land reserves for housing with some type of public intervention (STC 141/2014, of 11 September).

    On the other hand, the Constitutional Court considers the definition of large holder to be essential for the application of the Spanish Housing Law and, moreover, understands that it is compatible with the existence of other definitions of the same term at the level of the Autonomous Communities. In fact, the Court recalls that the Spanish Housing Law itself provides that the regional report required for the declaration of an area as a stressed residential market area may modulate the definition of large holder in accordance with those regional rules.

    With regard to the amendments to the Spanish Law on Urban Leases, the Constitutional Court refers to STC 37/2022 of 10 March, which annulled the main provisions of Law 11/2020, which imposed a cap on rents in Catalonia (see this link for further information). In this ruling, the Court stated that it was the State "that had the competence to legally regulate the freedom of agreement principle as it applies to the establishment of the rent in residential lease agreements, as well as, where appropriate, to determine its possible amendments or modulations, in line with the design of the State legislator, with regard to the need to adapt or not to adapt the functioning of the real estate market in accordance with the provisions of art. 47 of the Spanish Constitution or other constitutional provisions". It also confirms the constitutionality of the State system of reference prices, without prejudice to the Autonomous Communities' ability to define their own indices.

    The judgment includes a dissenting opinion signed by four of the ten judges of the full court. These judges disagree with the majority's criteria because, among other things, they consider unconstitutional the definition of large holder (which, in their opinion, should be regulated at the level of the Autonomous Communities) and the regulation of stressed residential market areas (because the Autonomous Communities are not allowed to establish their own criteria for declaring an area to be stressed).

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    Ashurst Madrid's professionals are experts in the legal regulation of the housing sector. We will be happy to review any particular situation or portfolio of assets and the implications that this ruling and the pending appeals may have for it, and to recommend the most appropriate course of action in each case.

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