Andorra Prepares for End of Rent Freeze in 2027
The Principality of Andorra is preparing for a significant change in its housing market as details emerge regarding the unfreezing of rental contracts, scheduled for January 2027. This development marks the conclusion of a period of government-mandated rent controls, which were introduced to address a rapidly escalating housing crisis.
Background to Rent Stabilization Measures
The Andorran government implemented comprehensive measures to stabilize its housing rental market with the enactment of 'Law 24/2023 of November 28, on stimulus and stability measures for the housing rental market,' which officially came into force on January 1, 2024. This legislation was a direct response to an acute housing shortage and an exponential rise in rent prices, which saw increases of 300-500% by 2025 compared to 2020 levels. The law aimed to protect tenants from disproportionate increases and ensure access to affordable housing.
Under these regulations, rental contracts signed before or during 2021 were subject to mandatory extensions and caps on rent increases. The permissible increases during this period varied based on the contract's original date and the rent per square meter:
- For contracts signed before or during 2019, a three-year extension was applied, with rent increases ranging from 0% to 4% above the Consumer Price Index (CPI), depending on the rent per square meter.
- Contracts from 2020 received a two-year extension, with rent updates tied to the CPI.
- Those from 2021 saw a one-year extension, also with CPI-based rent adjustments.
Overall, these forced extensions limited rent increases to a maximum of 0-25% over several years, preventing more drastic hikes.
Implications of the 2027 Unfreezing
As the January 2027 unfreezing approaches, particular attention is being paid to contracts signed before 2012, which could face potential rent increases of up to 25%. This anticipated adjustment is a critical aspect of the transition back to a less regulated market. The government's strategy also includes efforts to mitigate potential negative impacts, such as encouraging households to move into social housing before 2027 and offering tax benefits for rental properties to increase supply.
Broader Housing Market Context and Future Outlook
The Andorran government has also introduced additional legislative changes, including the '2025 Omnibus Law,' effective March 21, 2025. This law amends previous urban property leasing regulations, extending minimum lease terms from three to five years and allowing tenants to renew for an additional two years under specific conditions. Furthermore, measures have been implemented to regulate foreign investment in real estate, aiming to curb speculation and ensure a supply of affordable housing for residents. The long-term impact of the unfreezing remains a subject of discussion, with some experts suggesting it could lead to a significant shift in rental prices or even a 'mass exodus' if housing remains unaffordable.
5 Comments
Coccinella
A 'mass exodus' is not an expert's guess, it's a guarantee. This is a disaster.
Africa
The goal of stimulating new housing supply through market forces is valid, but the immediate impact of potential 25% rent hikes on existing residents will be extremely difficult to manage. A phased approach might have been better.
Comandante
It's understandable that temporary measures like a rent freeze have an expiry date, yet the article highlights the risk of a 'mass exodus' if housing becomes unaffordable. The government's mitigation efforts need to be robust and effective.
Bella Ciao
Acknowledging the need for a healthy rental market, it's concerning that the unfreezing could exacerbate the very problem it was meant to solve: unaffordable housing. The success hinges entirely on the new supply materializing quickly enough.
Mariposa
Rent controls always backfire. This unfreezing is a necessary step.