Andorra Approves Rental Deregulation Bill with 2027 Inflation Caps

The Andorran government has approved its rental deregulation bill, capping IPC inflation at 2.5% for 2027 contract thaws to counter risks from the Iran conflict. This limits total rent increases that year to 3.5%–8.5%, based on current rent bands plus the 1%–6% allowance. From 2028, no caps apply. The bill heads to urgent parliamentary processing at the Consell General next week, targeting approval by June for six months' notice ahead of 1 January 2027 implementation.

Around 7,000 contracts—those signed in 2012 or earlier, or below €6/m²—thaw first in 2027, in their original signature month. The process rolls out over four years: 2013–2015 contracts or under €7/m² in 2028; 2016–2018 or below €8/m² in 2029; and 2019–2021 contracts in 2030. These affect roughly 20,000 of Andorra's 25,000 rentals under forced extensions since 2019. For five years after thawing, whether renewed with existing or new tenants, annual increases scale by rent level: up to 6% + IPC below €7/m², decreasing to 1% + IPC above €12/m². Units below parish affordable housing benchmarks—€7.95/m² in Canillo, €8.81 in Ordino, €9.22 in Sant Julià de Lòria, €9.47 in Encamp, €9.56 in La Massana, €10.70 in Andorra la Vella and Escaldes-Engordany—can reach those levels in three equal annual steps plus IPC. Only living space counts, excluding parking or storage.

Exemptions include rentals over €2,000 monthly (€2,500 in some cases), single-family homes, and those to residents without work permits. Landlords may terminate for personal or family use, major safety or hygiene renovations, employee housing, or sale to a buyer needing it as primary residence, all with six months' notice, up from three. Pre-2019 termination notices stay valid. The bill allows recovery for workers resident two years or qualified staff on two-year contracts.

Penalties align with updated urban leasing rules: 50% of annual rent fines plus refunds for excess hikes; 100% fines, two-year public contract bans, and three-year aid restrictions for serious breaches like blocking renewals. Enforcement uses parish registries, mainly via complaints, with possible inspections; new contracts must register in SICAR.

Housing Minister Conxita Marsol described the bill as "progressive and garantista," favouring tenant continuity with equal increases for renewals or new tenants. She cited average rents at €13.50/m² overall and €7.90/m² for 2027-thawing contracts, urging SICAR registration. Head of Government Xavier Espot, at a Thursday event for the 33rd Constitution anniversary, praised APBI members for their "responsibility, rigour, and sense of country" amid polarisation. He called the bill "protective and balanced," prioritising general interest, reducing uncertainty, and incentivising retention of reliable tenants since increases match those for newcomers. Few changes are anticipated after majority consultations, though opposition input is welcome. The bill requires government incentives for affordable rental construction and rehabilitation, plus a non-payment guarantee fund.

The IMF's Jeff Danforth backed near-total market liberalisation in Monday's projections, supporting the phase-in with self-regulation and targeted aid. APBI President Jordi Marticella hailed it as accelerating thaw without shocks, emphasising aid for vulnerable groups over controls, as owners risk assets without social supports.

Opposition sharpened. USdA Secretary General Gabriel Ubach dismissed IMF advice as out of touch, challenging Danforth to find a non-studio flat under €2,000, and warned of conflict excluding pensioners, youth, and workers. Citing the draft, USdA highlighted examples like an 80m² Escaldes-Engordany flat rising from €420 to €856 (104% over three years) or a 90m² Andorra la Vella unit from €495 to €963 (95%), as low-rent units converge to affordable benchmarks. The union decried 80% market liberalisation by 2030, enabling tenant swaps for higher payers and speculation, plus eased replacement with higher-income workers like those resident two years or on qualified two-year contracts. It renewed calls for early elections, price controls, and a public property registry, insisting rents could double in three years for low-end contracts and salaries or pensions lag far behind.

The Housing Union criticised IMF self-regulation as naive in a concentrated market, demanding robust oversight against speculators, especially for pre-2012 and post-2022 contracts facing hikes, and rejecting aid-focused approaches that treat housing as a financial asset.