In January 2025, rents will be able to rise by 2.2%. The first rental price update index (IRAV) establishes this percentage. It's one of the premises of the Housing Law that aimed, among others, to regulate rental contracts. The goal is to avoid disproportionate increases in rents.
What is the rental price index (IRAV)?
The Housing Law decoupled the update of rental income from the CPI. After a transition period, from now on, the National Institute of Statistics (INE) is responsible for calculating the rental price index. To do this, it takes three variables into account:
• The annual rate of change of the CPI.
• The annual rate of change of underlying inflation.
• The average annual rate of change adjusted, which includes moderating coefficients.
The IRAV will be updated and published monthly, using the economic data of the immediately preceding month as a reference.
Essential issues related to IRAV
Although expected, the first-time application of the rental price update index has generated some doubts among both owners and tenants:
To which contracts does the IRAV apply?
The rental price update index applies only to contracts signed after the Housing Law came into force on the 24th of May, 2023.
What happens with contracts that do not include an update clause?
In order to revalue the rent, the contract must include a clause in this regard. Those that do not have one cannot be revised, nor can those that fall within the scope of the IRAV.
How are contracts not covered by IRAV?
The annual rent of contracts signed before May 2023 will be revalued according to the reference index agreed upon at the time: variation in the CPI or Competitiveness Guarantee Index. The latter is limited to 2%.
Does the IRAV apply to all types of rentals?
No, those that are not residential are excluded from this rental price index: holiday rentals, offices, premises, rooms, garages, etc.
How do we calculate the rent increase by applying the IRAV?
The formula is simple: apply the index to the rent for the corresponding month and do the calculation.
For example, a rental contract of 900 euros to be updated in January. Applying the IRAV, there would be an increase of 19.8 euros per month. Therefore, the rent would be 919.8 euros.
To facilitate the calculation, the Ministry of Housing and Urban Agenda has enabled a free tool. The calculator allows you to know the revaluation of the contracts, both those that are within the scope of the application of the IRAV and those that are excluded from it.
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