The RESIDE Plan: Restricting Tourist Rentals in Madrid

The proliferation of tourist rental properties (“VUT”) in major cities in recent years is a phenomenon that has not gone unnoticed by the numerous stakeholders affected.

There is no doubt about the appeal of this type of accommodation for tourists and for both large and small property owners. From other sectors, however, VUTs are viewed with scepticism or even concern due to their potential impact on the housing market and small businesses, as well as their potentially disruptive effect on residents in the buildings.

In Madrid, the City Council estimates that since 2017, VUTs have increased by 32.21%, with 42% concentrated in the city centre. According to official municipal data, only 7% of VUTs hold the required municipal licence.

These figures coincide with a period of unprecedented increases in housing prices, accompanied by a decline in residents and small businesses in the centre of Madrid.

With the aim of addressing these trends, the Madrid City Council has developed the so-called RESIDE Plan for the Protection of the Residential Area in Madrid, a package of measures whose implementation began over a year ago and culminated this September with the publication of its latest phase.

In April 2024, inspections of VUTs were already increased and the sanctioning regime was reformed with higher penalties. Since then, operating a VUT without a licence can result in a minimum fine of €30,000, rising to €60,000 for a second offence and up to €100,000 for a third.

Additionally, the City Council has processed a targeted amendment to the PGOUM, which was published on Thursday, 5 September, and is now in force.

Although the main focus of the reform is on VUTs, other measures have been included to encourage projects converting tertiary-use properties into residential use, allowing increased buildable area and enabling the change of use of privately owned, listed obsolete facilities for the development of affordable rental housing and coliving models.

With regard to VUT licences, as of this September, anyone looking to invest in a property in Madrid for this type of use should note that no new VUT licences will be granted in the historic city centre for residential buildings, and commercial premises cannot be converted into VUTs.

In this more central area, only buildings with non-residential use (tertiary or other compatible or authorisable uses) and certain listed residential buildings will be eligible for a licence, which can be granted for a single-use building exclusively for 15 years, subject to rehabilitation and restoration.

In the outer zone, by contrast, the 2019 implementation conditions remain in force, but for residential buildings, a VUT licence will only be granted if independent access from the residential area is possible. As for the conversion of commercial premises into VUTs, this will not be allowed if located in areas designated as tertiarised zones.

Certainly, the package of measures appears capable of achieving its objectives, but only time will tell whether the measures prove effective in correcting the current trends. For now, Madrid VUT operators should bear in mind that the new legal framework will be not only more restrictive for their activity, but also less predictable, as a review and update is already scheduled within two years, followed thereafter by annual reviews on a permanent basis.

Jesús Redondo, Director of the Real Estate & Urban Planning Department at act legal Spain

Alicia San Román, associate at act legal Spain

Article published in Vozpópuli.