IRAV, the reference price index and the previous rent: three distinct concepts for calculating rent in Catalonia

Since January 2025 two instruments have coexisted in Spanish law which bear on the price of rented housing and which are frequently confused in practice: the reference index for the annual updating of the rent, drawn up by the “Instituto Nacional de Estadística” (INE), Spain's national statistics institute, and the state system of reference price indices used to set the maximum initial rent in stressed residential market areas. To these is added, in Catalonia, the reference to the previous rent of the last five years as a specific limit in stressed market areas. This paper draws a conceptual distinction between the annual updating index, the state reference price index and the previous rent, and analyses how the three interact in practice in the determination of rent in Catalonia.

21/05/2026

Landlord and tenant

1.The annual index for updating residential rents

The “Ley de Arrendamientos Urbanos” —the LAU, Spain's urban tenancies act— retains the general rule that the parties are free to agree how the rent is to be updated, but Law 12/2023 on the right to housing has introduced specific limits on the annual variation of the rent in certain residential tenancy contracts. Since January 2025, the annual updating of the rent under those contracts may not exceed the value of a specific index drawn up by the “Instituto Nacional de Estadística” (INE), Spain's national statistics institute, an index which replaces the “IPC” (Spain's consumer price index) as the automatic reference and is conceived as a more stable and moderate indicator. That index, which may be called the reference index for updating residential rents, applies to the annual variation of the rent during the life of the contract, not to the setting of the initial rent.

In practice, the annual updating index operates on the rent agreed in the contract, allowing annual increases within a given ceiling. If the parties have agreed an indexation clause tied to that index, the rent will be adjusted in line with its movement; if they have agreed a different system, the Act may impose maximum limits based on the index for certain contracts, particularly where the landlord is a “gran tenedor” —a large-scale landlord— or the dwelling is located in a stressed market area. That index does not determine the initial rent, but the annual variation of a rent already set.

2.The state system of reference price indices for the maximum initial rent

Law 12/2023 has created a state system of reference price indices for rents, which is used to set the maximum initial rent in stressed residential market areas where the landlord is a large-scale landlord and, in certain cases, where there has been no principal-residence tenancy in the last five years. Art. 17.7 LAU provides that, in those cases, the rent agreed at the start of the new contract may not exceed the maximum price limit applicable under the system of reference price indices, having regard to the conditions and characteristics of the dwelling and of the building. That system draws on data from the “Agencia Tributaria” (Spain's tax authority), the “Catastro” (the property cadastre), the rental deposit registers and other sources, and provides rent values per square metre for dwellings with given characteristics within specific territorial areas.

In April 2026 the State updated the methodology and the data of that system, improving its territorial accuracy and its ability to reflect the characteristics of dwellings, in coordination with the “comunidades autónomas”, Spain's autonomous regions. In Catalonia, where an index of its own already existed based on INCASÒL data, the updating of the state system has called for technical harmonisation and has strengthened the role of the state index as the main reference for the maximum initial rent in stressed market areas where the landlord is a large-scale landlord.

Unlike the annual updating index, the state system of reference indices applies to the setting of the initial rent, not to its annual variation. Its function is to establish an objective ceiling for the rent under new contracts in stressed market areas, so that the initial rent cannot exceed the maximum value which the index assigns to the dwelling in question. Once the initial rent has been set within that limit, the annual updating will be governed by the updating index or by the clause agreed, within the statutory limits.

3.The previous rent of the last five years in stressed market areas

Art. 17.6 LAU introduces a third element into the determination of the rent in stressed market areas: the previous rent of the last five years. Where the dwelling is located in a stressed residential market area and has been let as a principal residence in the last five years, the rent agreed at the start of the new contract may not exceed the last rent under the previous contract, once the annual indexation clause has been applied, and no new terms may be set which charge the tenant fees or expenses not contained in the previous contract. An additional increase of no more than ten per cent over that last updated rent is allowed only in a closed list of cases: refurbishment works, energy improvements, accessibility improvements or long-term contracts.

In Catalonia, where the declaration of stressed market areas has been extended to a significant number of municipalities and where the definition of large-scale landlord has been tailored, the reference to the previous rent takes on considerable practical importance. For dwellings which have been let as a principal residence in the last five years, the maximum initial rent under the new contract is determined, in principle, by the last updated rent and not by the state index, unless the landlord is a large-scale landlord and the legislation extends the application of the index to those cases as well. The previous rent operates as a historical limit, tied to the particular history of the dwelling, whereas the state index provides a structural limit based on the market.

4.The practical interaction of the three concepts in Catalonia

In practice, determining the rent in Catalonia calls for a clear distinction between these three concepts and their respective scope. First, for dwellings with a previous contract in the last five years, the maximum initial rent in stressed market areas is determined by the last updated rent, with possible increases for improvements within the ten per cent limit. For dwellings with no previous contract, or where the landlord is a large-scale landlord, the maximum initial rent is set by the state system of reference indices, which provides a maximum value per square metre for the dwelling in question.

Secondly, once the initial rent has been set within those limits, the annual updating is governed by the index for updating residential rents drawn up by the INE, where the Act so requires, or by the clause agreed, within the statutory limits. The updating index cannot be used to justify an initial rent above the limit set by the previous rent or by the state index, nor can the state index be confused with the annual updating index.

Thirdly, the previous rent and the state index may come into tension in cases involving a large-scale landlord in stressed market areas. If the last updated rent is higher than the maximum value under the state index, the prudent construction is that the initial rent under the new contract may not exceed the stricter limit, that of the index, where the landlord is a large-scale landlord, unless state legislation expressly provides otherwise. If, on the other hand, the last rent is lower than the index, the maximum initial rent will be given by the previous rent, unless improvements are present which allow an increase within the ten per cent limit.

5.Conclusions

The annual index for updating residential rents, the state system of reference price indices and the previous rent of the last five years are three distinct instruments which bear on the price of rented housing in Catalonia and which must be handled with precision if confusion is to be avoided. The annual updating index applies to the variation of the rent during the life of the contract; the state reference price index is used to set the maximum initial rent in stressed market areas, particularly where the landlord is a large-scale landlord or where there has been no previous contract; the previous rent operates as a historical limit on the initial rent in dwellings with a previous contract in the last five years.

For litigation practice and for tenancy advisory work, it is essential to identify in each case which of these instruments applies, how they combine and which is the stricter limit. Correctly delimiting the “IRAV” —the reference index for updating residential rents—, the reference price index and the previous rent makes it possible to calculate rent in Catalonia in accordance with the law, to avoid void or ineffective clauses and to anticipate the risks of an administrative penalty or of a challenge before the courts in a context of increasing public intervention in the rental market.

Alburquerque AbogadosLaura GarrigaBarcelona 21/05/2026

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