Tax Breaks to Expand Canary Islands Rental Market
The Canary Islands Government Council, following a proposal from the regional parliament, has endorsed amendments to the 1994 Economic and Fiscal Regime (REF) law. These changes introduce tax benefits for companies investing in the construction or renovation of rental properties across the archipelago. Approved by Spain’s Congress on June 18, the reforms aim to alleviate the islands’ chronic housing shortage while maintaining fiscal advantages for investors.
How the New System Works
The revised legislation allows funds from the Canary Islands Investment Reserve (RIC) to be used for real estate projects while preserving tax benefits – provided the properties are dedicated to long-term residential rentals. This innovative approach serves two key purposes: increasing the supply of social housing for low-income residents and expanding the private rental market for families who earn too much for subsidized housing but struggle with market prices.
Breaking Down the Reforms
One significant change removes the requirement that only property development companies can manage social housing rentals. Now, any qualified entity can participate without losing tax incentives, potentially flooding the market with more affordable options. Meanwhile, the private rental expansion targets working-class families caught in the archipelago’s housing crisis – those who don’t qualify for social housing but find open-market rents prohibitive.
Next Steps in Legislation
The proposal now moves to Spain’s Senate, where amendments could trigger another review by the Canary Islands Parliament before final approval. The Senate has until October 27, 2025, to process and potentially pass the legislation. If implemented, these measures could transform the islands’ rental landscape while offering new opportunities for socially conscious investors.
