Editor’s Note
This article explains how Spain’s Consumer Price Index (CPI) functions as a key indicator of inflation and its direct legal impact on rental contracts, including the possibility of rent adjustments during periods of negative CPI.
The Consumer Price Index (CPI) is a statistical measure of the evolution of prices for a basket of goods and services considered representative of what the resident population in Spain consumes. If the CPI is positive, it means prices have risen; if it is negative, it means they have fallen. Therefore, the CPI can also be negative and directly impacts rental contracts governed by this index.
This is an important indicator that guides central banks in setting their monetary policy. It is used to update housing rents, serving as a key argument in any salary negotiation and being decisive for pensions. It is calculated monthly by the National Statistics Institute (INE). The CPI is published around the middle of each month, reflecting the statistics from the previous month.
Currently, as a consequence of the economic crisis generated by the Ukraine conflict that began in February, the annual variation rate of the CPI in Spain in February 2022 was 7.6%. The Rental Negotiating Agency (ANA) recommended that landlords do not temporarily increase the rent price in line with the “wartime” CPI, because applying such a high increase could lead to contract terminations, as tenants would seek cheaper rentals.
At many times, especially during the hardest months of the COVID-19 pandemic, the CPI has recorded negative values. In these cases, for all contracts that use the CPI to update a rent, that decrease must be applied. If another index is used to update the rent, according to the Urban Leasing Law, this index cannot be higher than the CPI.
An example would be an apartment we rent for 1,000 euros per month, whose contract reaches its annual renewal in September, and where a -1% annual CPI variation rate is recorded in July. In September, the landlord of the apartment we rent should reduce our rent by 1%, that is, 10 euros, so we would pay 990 euros per month. Similarly, they must notify us of this reduction one month in advance, that is, in August.