How does regulation impact housing rental prices? Evidence from Spain using fractional integration techniques

This paper examines the impact of housing regulations on rental prices in Spain from 1962 to 2024, focusing on fiscal policies and contract duration regulations. Employing fractional integration techniques, we assess the effectiveness of supply- and demand-side measures in stabilizing rental prices. The findings reveal that regulatory interventions have not achieved consistent long-term price stabilization, with shocks to rental prices displaying persistent effects. Notably, the 1999 fiscal policy changes temporarily influenced demand, but no significant lasting impact was observed across other regulatory measures. These results highlight the structural deficiencies in Spain's housing policies, characterized by a lack of effective supply-side incentives and protection and inadequate demand-side measures. To address affordability challenges and meet constitutional housing mandates, the study recommends adopting comprehensive policies, including fiscal incentives for landlords, expanded social housing programs, and stronger tenant protections. This research contributes to understanding the interplay between regulation and housing market dynamics in Spain.