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The rental boom and the growth of defaults increase the contracting of insurance

The boom in the rental housing market in recent years has represented an important social transformation in a country traditionally made up of majority owners. According to the recent  Survey on Living Conditions of  the INE, the number of rental homes was slightly above 3 million in 2018, compared to 2.4 million in 2008, which is equivalent to a growth of 25% in a decade.

According to the study  Recent evolution of the housing rental market, published by the Bank of Spain (BdE), “the difficulty of groups with lower income to increase their income due to the still high incidence of unemployment, the short duration of new contracts working hours or the greater relevance of short hours would have increased the demand for residential rental, especially among young households ”.

Specifically, the proportion of the population living in Spain in rental housing reached 23.9% in 2018, four and a half points above the 19.4% registered in 2005.

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From mortgage delinquency to non-payment of rents

This increase in demand has consequently been accompanied by an increase in rental costs. Continuing with the BdE report, “residential rental prices in the whole of Spain have shown remarkable dynamism from their minimum at the end of 2013”, with accumulated growth up to mid-2019 of around 50%.

This increase in rental prices, together with job insecurity, has led to defaults on rents having increased notably in recent years. One consequence of this is the rise in the number of launches (evictions) due to non-payment of rental income, which between 2016 and 2018 has grown by 9%, according to figures from the General Council of the Judiciary (CGPJ).

In fact, the number of these types of launches practically doubles that related to mortgage defaults.

Homeowners demand more protection

This boom in the demand for rental housing, the increase in market prices and the increase in defaults by tenants have generated concern among property owners, who see as the aforementioned mortgage delinquencies that have been bearing the During the crisis banks have progressively moved to non-payment of rental income in recent years

This type of insurance in  addition to covering in favor of the owner the advance of the rental income if the tenant does not pay, they offer legal assistance in the event of an eviction process and legal advice and protection against the neighbors, the community of owners, the buy goods for the property, etc.

After the legal ups and downs that began at the end of 2018, the approval by the Government of the decree of urgent measures for housing and rent last March has only confirmed the concern of the owners.

The content of said regulation (the minimum legal term in which the tenant can stay in the rented house was increased from 3 to 5 years for natural persons and up to 7 years if it is a legal entity) has caused landlords to want to better protect themselves against possible defaults on a relationship that has prolonged its potential duration.

More legal inquiries about rentals

Beyond contracting insurance against non-payment of rents, social concern about this issue is reflected in other fields. At a legal level,  citizen inquiries about leases received by the DAS Seguros Legal Assistance Center have grown by more than four percentage points between 2018 and 2019  and already represent the largest group in absolute terms, above traffic fines, consumer problems or labor law issues.

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