The rise in prices, interest rates, and the increase in inflation are factors present in the tourism sector that have not managed to curb purchasing power or the desire to travel. The positive results of 2023 and the accelerated demand have meant the complete recovery of the sector, but it has also translated into an “uncontrolled” increase in supply. Is everything as positive as it seems?
Uncontrolled burst of supply
The massive arrival of tourists to Spain generated the need to create more accommodation options, leading to the uncontrolled emergence of tourist rental properties. This type of housing, which has lacked national regulation for years, creates coexistence problems in certain neighborhoods of cities such as Barcelona, Palma, Madrid, or Seville. Residential rents have decreased, rental prices have risen, and the quality of the tourism received is lower.
According to Exceltur data, by early 2023, the advertisements for tourist apartments had grown by up to 23% more than the first quarter of 2022, reaching over 80,000 throughout the country, with Madrid leading the ranking followed by Barcelona. Together, these two cities account for over 30% of the total supply, and the figures are expected to continue rising, including other locations such as Bilbao, Santander, and Malaga. Currently, according to INE data, there are 305,136 tourist accommodations being marketed in Spain, both licensed and unlicensed.
It is necessary to achieve control over the social, economic, urban, and legal consequences of this phenomenon, fostering coexistence between citizens and visitors. Most people staying in these accommodations are on vacation, and it is leisure that complicates coexistence, according to Escarrer, CEO of Melia. Noise disturbances, unsanitary conditions in common areas (elevators and entrances), and insecurity due to a lack of staff are some of the reasons why residents argue that they end up leaving the area. Some visitors use these apartments as a place to work remotely, but it is a minimal percentage.
Regulation of a new tourism model
Since the growth of this market and the establishment of the first companies to commercialize it around 2011, there have been attempts to create a system to regulate these establishments and achieve control. By the end of 2022 in Spain, this need was once again raised, and solutions were debated, such as the signing of contracts between customers and property owners or implementing filters on platforms to ensure that apartments comply with regulations by providing their registration numbers for tourist accommodations.
Faced with the “boom” in travelers, Barcelona, one of the most affected cities, approved the Special Urban Plan for Tourist Accommodations (PEUAT) in 2017, with the aim of reducing the number of tourist accommodations and organizing tourism in the city. In 2019, the Superior Court of Justice of Catalonia canceled the law due to a lack of an economic and financial study. The decision was not final, and ultimately, PEUAT was annulled in 2021. In December of the same year, a second version of PEUAT was drafted and approved.
When the first version of PEUAT was canceled, many property owners seized the opportunity to implement their plans. Companies in the sector stopped renewing rental contracts with residents to start marketing them as tourist accommodations, generating more profits.
The requests were rejected by the City Council, but the companies sought legal assistance. In April of this year, Ada Colau, along with the deputy mayor for urban planning, continued to search for ways to prevent the opening of these buildings, invoking an article of the Law on Facilitation of Economic Activity: “if economic activity is not initiated within three months, the license for apartments that still have rental contracts can be revoked.”
Catalonia continues its search for a method to control this business model through the new law approved a few weeks ago. This law advocates for the regulation of tourist apartments in 262 Catalan municipalities that are facing issues of permanent housing access due to rising rental prices, which already have 5 tourist apartments per 100 inhabitants or meet both criteria. “These municipalities cannot grant licenses for the opening of tourist apartments until they adapt their urban planning to the new Decree-Law” justifying that they have sufficient land for housing intended for the permanent residence of the resident population and allowing a maximum of 10 licenses for tourist apartments per 100 inhabitants.
New tourist apartments will need to request a municipal urban planning license and a tourist authorization, both valid for five renewable years. However, in the 262 affected municipalities, no new licenses can be granted until the city councils update their urban planning, demonstrating sufficient land for housing intended for permanent rental while allowing compatibility with tourist use.
Existing tourist apartments in these 262 municipalities have five years from the entry into force of the Decree-Law to apply for the new license or must cease their activity. According to Enrique Alcántara, president of Apartur, this new license will affect around 90,000 existing tourist apartments, an activity that contributes up to 6% of the GDP, depending on the new urban plans of the municipalities. Alcántara argues that Barcelona has not issued licenses for 9 years, and rental prices continue to rise, asserting that this new regulation is not the solution and accusing the Generalitat of drafting a regulation without consulting the sector.
New housing law: ¿How does it affect tourist apartments?
Similar to the increase in the number of tourist apartments, rental prices continue to rise in the most sought-after cities, particularly in what are termed “tensioned areas,” such as neighborhoods like Eixample in Barcelona or La Latina in Madrid, where prices exceed 30% of the area’s median income and have increased by more than 3 percentage points in the last 5 years. A few months ago, they approved the Housing Law with the aim of controlling the market and preventing rent increases.
According to industry experts, the rent price limitation imposed by this law may lead several property owners to shift their apartments to the tourist market in order to maximize profits, achieving the opposite effect of increasing the number of tourist apartments.
Vacation rental: Balance of two realities
Two realities coexist simultaneously: the massive growth of tourist accommodations and the increase in rental prices. Through the laws mentioned earlier, attempts have been made to create a balance to manage both phenomena, which are affecting parts of society. Finding a solution that benefits everyone is complex. The price limitation imposed by the Housing Law may lead to more tourist rental properties, affecting residents, while the law on tourist accommodations, as applied in Catalonia, affects entrepreneurs and limits their ability to grow their businesses. As in previous years, measures are continually being modified and created to reach a consensus among all parties and achieve the main goal: coexistence between citizens, entrepreneurs, and tourists.
Keywords: Vacation rental, Tourism, Prices, Interest rates, Inflation, Travel, 2023 results, Challenges, Housing market, Tourist rental properties, Regulation
Written by Roser Ruiz Priego