By Clara-Laeila Laudette

MADRID, (Reuters) – Spain’s first housing law is closer to reality after the Cabinet approved a draft that would reward landlords for lowering rents and punish those who have multiple vacant homes.

After months of fighting with Unidas Podemos, the ruling Socialist Party reached an agreement in December as part a larger deal to approve the budget for 2022.

The law allows regional governments to declare high-demand areas if the average household uses more than 30% of their net income for rent or mortgage payments and property prices are higher than inflation.

The general income tax deduction for landlords will be reduced to 50%, from 60%. However, it will remain the same for property owners who have renovated or improved in the past two years.

This would increase to 70% for landlords who list their property for the first-time and let it to someone aged 18 to 35, or make the properties available to state-subsidized social housing.

High demand areas: Landlords that reduce rent by at most 5% from their prior contract are eligible to receive a rebate up to 90%

People who have more than 4 homes may be subject to higher property taxes, unless they renovate or do other work. This is in an effort to curb the number of vacant properties.

Also, the draft legislation addresses accessibility by defining large landlords as entities that have 10 or more properties. The 30% reserved for social housing and the fiscal incentives provided to developers for doing so.

Spain, which has less than 2% of all houses according to the OECD’s statistics, is behind European countries like France, Britain, and Italy. These three European nations have subsidised housing that accounts for 17%, 14%, 4%, respectively.