The Omnibus Law in Andorra has introduced various reforms in multiple areas, with one of the central issues being the regulation of empty flats. This legislation aims to address the growing problem of access to housing and to ensure a better distribution and use of the real estate stock in the country. However, the regulation has sparked controversy over market intervention, leading to opposition from the main private associations in the Principality. Below is an analysis of the impact of this law in the context of vacant properties in Andorra.
The Problem of Empty Flats in Andorra
The real estate market in Andorra has experienced a significant increase in housing demand, particularly driven by the country’s appeal to residents and foreign investors, as well as high-income individuals. However, the supply has not kept pace, resulting in rising rental prices and increasing difficulties for local residents to access affordable housing. Additionally, a considerable percentage of properties in the country remain unoccupied because their owners (mostly non-residents) do not wish to declare them for tax purposes in their countries of residence (mainly Spain and France).
The Omnibus Law, approved in 2022, arises as a response to this situation, aiming to mobilize empties properties and introduce measures that encourage their occupation.
Main Measures of the Omnibus Law on empty flats
- Tax on Empty Flats: One of the most significant reforms of the Omnibus Law is the creation of a specific tax for owners who maintain unoccupied properties. The aim of this measure is to discourage the accumulation of empties homes and encourage their entry into the rental or sales market.
- A progressive tax is established, increasing based on the duration the property remains vacant. The intention is for owners to find it more profitable to rent or sell their properties than to keep them unused.
- Definition of “empty flats“: The law defines a “empty flats” as one that has not been inhabited for a specified period (generally one year) without justification. Properties under renovation, awaiting inheritance, or in the process of sale or rental are considered justified.
- Incentives for Property Rehabilitation: The Omnibus Law also includes tax incentives and aid for rehabilitating properties that are in poor condition. This approach seeks to ensure that owners of empties properties, who argue that their homes are not fit to be rented, can access financing programs to improve their properties and make them available on the market.
- Public-Private Collaboration: The law encourages collaboration between the public and private sectors, promoting agreements for owners of empties properties to rent their homes to the Andorran Government or social entities under more favorable conditions, with the aim of designating them for social or affordable rentals.
Expected Impact of the Omnibus Law
The Omnibus Law aims to generate greater turnover in the real estate market, increasing the availability of properties for both purchase and rental. It is expected that this law will help reduce real estate speculation and improve access to housing, particularly for citizens and residents of Andorra who have been affected by rising rental prices.
However, the law could also have a positive impact on the revitalization of urban areas, as many of the empty’s properties are located in regions that require significant improvements in infrastructure and services.
Critiques and Challenges
Despite its good intentions, the Omnibus Law has also faced criticism from certain sectors:
- Owners Concerned About the Tax: In addition to associations, several owners have expressed their discontent regarding the new tax, arguing that there are complex situations behind the inactivity of some properties that the law does not fully consider, such as inheritance processes, legal disputes, or other regularization situations.
- Properties Difficult to Access in the Market: It has also been pointed out that while the tax may pressure some owners to put their properties on the market, others prefer to keep their homes empty due to the difficulty in finding suitable tenants or the low profitability (a fact that should be understood as legitimate in a rule-of-law state that defends private property and the free market, as proclaimed by the Andorran Constitution of 1993).
Conclusion:
The Omnibus Law represents an ambitious effort by the Andorran Government to address the housing crisis and optimize the use of the country’s real estate resources. Through fiscal measures, rehabilitation incentives, and the promotion of public-private collaborations, the Government hopes to reduce the number of empties properties and improve the supply of affordable housing. However, there are also concerns that this legislative initiative could have the opposite effect, as “over-intervention” in the market tends to lead private owners to restrict the supply of real estate products in most jurisdictions that have taken such measures. In any case, it will be necessary to remain attentive to the final text of the regulation and the consequences of its practical implementation.
As it is implemented and its real impact is observed, it will be essential to adjust and refine certain aspects of the law to achieve a fair balance between owners, investors, and citizens seeking housing in Andorra.
We look forward to your comments and observations regarding the new Omnibus Law. Please feel free to contact us at info@augelegalfiscal.com for any questions or issues that may arise.
