Journal
Spain's Housing Decree Explained: What the Two-Year Rental Extension and Tourist VAT Proposal Mean for Costa Blanca Owners
By Elia Living ·
Since early 2026, Spain's government has been attempting to pass sweeping housing legislation — and it has not gone smoothly. One decree entered force, Parliament rejected it, and a second attempt was withdrawn days before a vote. A fresh push is expected in autumn 2026. Here is a clear-headed account of what has happened, what is still proposed, and what it actually means for foreign property owners on the Costa Blanca North.
What Royal Decree-Law 8/2026 Did — and Why It No Longer Applies
On 20 March 2026, the government approved Royal Decree-Law 8/2026 by executive action. It came into force on 22 March and introduced two headline measures for the long-term residential rental market:
- An extraordinary two-year extension for eligible tenants whose primary-home contracts were due to expire before 31 December 2027
- A 2% cap on annual rent increases during any such extension
A Decree-Law must be ratified by Parliament within 30 days of publication. On 28 April 2026, Congress voted against ratification. RDL 8/2026 was formally repealed — its legal life lasted just 37 days — and the repeal was published in the BOE on 30 April 2026.
One nuance matters if you have a long-term tenant: tenants who submitted a valid, written extension request while the decree was still in force (22 March to 28 April 2026) may retain a legal claim to that extension even after the repeal. If you received any such notice during that window, a Spanish property solicitor's advice is the sensible next step.
The New Proposed Decree: What Is on the Table
After the April rejection, the government drafted a new and broader housing package. A 69-page draft circulated on 21 July 2026, and a Council of Ministers vote was pencilled in for 28 July — the last session before the August recess. On 27 July, the Executive withdrew the decree from the agenda, citing the need for further parliamentary negotiation.
No confirmed approval date exists as of August 2026. The government has signalled it will re-table the proposal in September, though political support in Parliament remains uncertain after the previous failure.
The package, if approved, would include:
| Proposed measure | Who it targets |
|---|---|
| Two-year residential rental extension (mirror of RDL 8/2026) | Long-term residential landlords |
| 2% annual rent-increase cap during extension periods | Long-term residential landlords |
| 21% VAT on tourist/holiday lets with hotel-type services | Short-term let operators |
| Stricter rules for seasonal and room-by-room rentals | Seasonal let operators |
| Tax incentives for landlords who reduce rents | Voluntary; open to long-term landlords |
Does the Rental Extension Affect Holiday Home Owners?
For the vast majority of foreign Costa Blanca property owners, the two-year extension provisions do not apply, and it is worth being clear about why.
The extension covers only long-term residential contracts under Spain's Urban Lease Act (LAU 1994) where the rental property is the tenant's primary home. If your Costa Blanca property is your holiday home, a second residence you occupy seasonally, or a property let under a Vivienda Turística (VT) tourist-rental licence, you do not have a qualifying residential tenant. These extension rules simply have no bearing on your situation.
The measures are aimed squarely at Spain's pressured urban rental markets — Madrid, Barcelona, Valencia city — where housing affordability is a far sharper political issue than in coastal resort areas.
The Tourist Rental VAT Proposal: What to Watch
The measure most relevant to many Costa Blanca foreign owners is the proposed change to VAT on tourist rentals.
Under current rules:
- Tourist lets without hotel-type services are generally VAT-exempt
- Tourist lets with hotel-type services (cleaning during a stay, reception desk) typically pay 10% VAT
The draft new decree would apply the standard 21% VAT rate to short-term lets of fewer than 30 days that include hotel-type services. Lets without those services may remain exempt, though the final wording is not yet confirmed.
This measure is not yet law. Parliament rejected a similar decree in April, and the July attempt did not even reach a vote. The scope, rate, and effective date remain subject to negotiation — and could still be amended or dropped entirely.
What to Do Right Now
No immediate action is required for most owners. A practical checklist by situation:
Holiday home you use yourself or let under a VT licence with no hotel services: No change applies today. Keep an eye on September 2026 news to see whether the new decree is approved and what the final tourist-rental VAT provision looks like.
Long-term residential tenant: Check whether you received any written extension request between 22 March and 28 April 2026. If so, seek legal advice. If not, your lease continues under standard LAU rules.
Tourist rental with hotel-type services (cleaning during the stay, linen changes, reception): The 21% VAT proposal is the provision to monitor. If the decree is approved and VAT rises, you will need to factor it into rental pricing and your tax filings. Nothing changes until a decree is actually published in the BOE.
Spain's legislative process — a Decree-Law approved by the Cabinet, then ratified or rejected by Parliament — has already demonstrated it can work as a check on sweeping measures. Owners who let their properties on the Costa Blanca are well-advised to stay informed without overreacting to proposals that have yet to clear Parliament.
At Elia Living, we track these developments closely and work with specialist legal and tax advisers. If you have questions about how any proposed changes may affect your Jávea or Costa Blanca property, we are happy to point you towards the right help.
Frequently asked questions
Does Spain's two-year rental extension apply to holiday lets or tourist rentals? No. The extension applies only to long-term residential contracts (LAU 1994) where the property is the tenant's primary home. VT tourist-rental licences and holiday lets are not affected.
Was Royal Decree-Law 8/2026 definitively repealed? Yes. Parliament voted against ratification on 28 April 2026, and the repeal was published in the BOE on 30 April 2026. Extension requests made in writing while the decree was in force (22 March–28 April) may still carry legal weight — if you received one, take legal advice.
Has the new housing decree with the 21% tourist rental VAT been approved? No. As of August 2026, the government withdrew the July 28 draft from the Council of Ministers agenda due to insufficient parliamentary support. The government intends to re-table it in September 2026, but no date is confirmed and the outcome is uncertain.
Would the 21% VAT apply to all tourist rentals? Based on the July 2026 draft, the 21% rate would target short-term lets of under 30 days that provide hotel-type services such as cleaning during the stay or a reception service. Lets without those services may remain VAT-exempt, but the final wording has not been confirmed.
What should I do as a foreign owner with a VT tourist rental licence in Jávea? No immediate action is needed. Continue operating under the existing Valencian Community rules. Monitor the BOE and quality press in September 2026 when the government is expected to re-table the decree.
Where can I find authoritative updates on Spanish housing legislation? The BOE (Boletín Oficial del Estado) publishes all approved decrees immediately. For plain-English commentary, Spanish Property Insight and Citizens Advice Bureau Spain are reliable sources to follow.