But there are other conditions for benefiting from that break. The rental agreement must have a fixed duration agreed on before the contract is signed. The write-off can be as much as 50% for 5 years if the rental agreement is made after April 19, 2002 and the property had been previously unoccupied. What the government is trying to do is encourage renting, hoping to increase demand for such properties and lower the rates people pay.

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The so-called Lagares Commission, which devised Spain�s latest tax reform, complained that until now renting has effectively been penalized in Spain. The previous law, it said, led to higher taxes for those who rent property under the most common contractual terms and this, along with the risk landlords face of tenants who don�t pay, the costs and difficulties owners face when it comes to repairing property damage caused by tenants or recovering the property when the tenant violates the contract, causes many landlords to keep properties empty rather than rent them out or charge high rental prices as a way to offset this unfavorable set of circumstances. The previous system is blamed for the low supply of rental properties in Spain: 13% of all housing compared to 40% as the average for the European Union.

The government�s goal with the reform is to free up rental space and thus, among other effects, encourage geographical mobility as way to fight unemployment.

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Real estate analysts have welcomed the reform. They are recommending that owners of new properties or ones in areas that are growing demographically to rent out their second or third homes for four or five years. That�s enough time for property values to rise. After that, with projected annual rises of 5-10%, it might be a good idea to sell, these experts say.

Meanwhile tenants with low incomes can deduct 10% of what they pay in rent from their income tax, up to 601 euros per year, as long as they make less than 21,035 euros annually if filing singly or 30,000 jointly. Also, their yearly rent must exceed 10 percent of their net income. In other words, deducting rent is only for people who earn very little money.

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