Andorra has decided to take housing (even more) seriously. Aware that it has become the biggest headache for its citizens, beyond other daily problems such as salaries or traffic, the principality’s authorities have decided to launch an ambitious package of measures that will put an end to some of the region’s major real estate challenges at once: the shortage of affordable rental apartments, the proliferation of tourist flats and the effects of foreign investment on the housing market.

The Andorran Government also wants the extension of leases approved by the new “omnibus law” at the end of last year to be completed by 2027.

Hit the real estate desk. This is what the government led by Xavier Espot is looking for: to strike a powerful and effective blow to the table when it comes to the real estate market. To this end, the Council of Ministers approved the omnibus bill “for sustainable growth and the right to housing”, which includes “shock measures” that will affect housing rentals, tourist apartments and foreign investments.

The package of measures adopted by the Andorran Administration aims to “increase the supply of rental housing by slowing down urban and tourist growth.” It is no coincidence that it focuses on the real estate sector. A few months ago, Andorra Recerca + Innovació (AR+I) published a study revealing that 63.5% of Andorrans believe that the “main problem” of the Principality is housing, far above other daily problems (in most cases to a lesser extent) that keep you alert in the region, such as salaries.

War on empty flats. The Andorran Government wants to put an end to empty apartments. More precisely, it wants this stock of unused apartments to be transferred to the market, whether for sale or for rent. To this end, the focus is on residences that do not have an electricity supply contract or have not consumed energy for two years as of January 1, 2024. The government’s initial and provisional calculations indicate that in this case, there will be 2,000 apartments.

What does the new law foresee? Authorities will contact the owners of houses that fit this profile and give them a three-month period during which they will have to prove that the flat is not in use. “In any case, they will have the opportunity to sell, rent or transfer the right of use to the State, in order to make their house part of the public rental pool at an affordable price,” they explain.

What about three months later? If this period is met and the owner does not prove that his house is occupied, the Government will activate the administrative mechanism: it will find that the property is not used, declare that it is not suitable for its “social function”, and the administration itself will accept the “transfer of the compulsory and temporary use of the dwelling in favor of the Government” for a maximum of five years. This does not mean that the owner loses all his rights. During the “transfer of use”, you will receive financial compensation equivalent to the rental income of the house. The formula is not new. A similar model is applied in Brussels to strengthen the rental offer.

Andorra’s measure also has a subtle twist. For example, if a house needs to be renovated so that it can be rented on “reasonable” terms, the costs must be borne by the landlord, although not directly: they will be deducted from the rent transferred to him. The principality will also be responsible for the tenants, meaning that if they stop paying, the Government will “pay” on behalf of the owner.

Empty houses are more expensive. The law envisages another scenario: the principality identifies an empty house and includes it in the affordable rental housing stock, but this scenario fails. If this happens and no interested tenant can be found after six months, the landlord will regain use of the house. Of course, it will not be cheap if it is empty. The bill, which has just been approved by the government, foresees a significant increase in the tax on empty properties: from 50 euros/m2 to 100 euros/m2.

“The aim is not a forced and temporary transfer, but rather the return of empty apartments to the rental market,” comments the head of government, Xavier Espot. The government explains that, at least in some cases, the empty houses belong to people who do not reside in Andorra and who “ignore” their responsibilities. “We believe that it is legitimate for the government to approve the temporary transfer with this guarantee process and to put these apartments on the market,” the leader said.

Tourist apartments are in focus. The omnibus bill the principality is drafting will not only focus on empty houses. Another area it is particularly keen on, with equally or even stronger measures, is tourist apartments: goodbye to new licenses for tourist apartments. “The bill will prohibit the issuance of new HUT licenses (as housing) and tourist apartments (as hotels),” the administrator says, while also vetoing caravans outside designated areas.

What about licenses that already exist? The law has thought of them too. Those who already have a tourist apartment licence will not be exempt from the new rule. Andorra will implement a “temporary expiration system” that will force owners to renew the licence after three years. Of course, adhering to the fine print: tourist apartments must be located in buildings (HUTs) where more than 30% of the houses are dedicated to this purpose; this is a crucial requirement for the licence to be renewed “with new conditions of increased quality”.

The administrator clearly states that “HUTs located in a building where less than 30% of the total residential units are HUTs will not be able to renew their licence.” Their calculations show that there are approximately 660 flats in the Principality that will be affected by this, representing close to 25% of the approximately 2,800 houses counted for tourist use.

The rule stipulates that in any case, if the flat is transferred to the National Housing Institute and is not rented after six months, the owner will regain the licence to use the flat for holiday letting.

Restrictions on buyersAnother aim of the law is to “find the balance between foreign real estate investment and access to housing” for Andorrans. To this end, the Government has decided to apply a series of restrictions to three profiles of potential buyers interested in the Principality’s real estate market: non-residents, those who have been resident in Andorra for less than three years, foreign companies, and companies of foreign origin and registered in Andorra, but more than 25% of the participation is foreign.

“They may only purchase a plot of land for the construction of two flats, apartments or studios or detached houses or a single-family house or three parking spaces, together with their annexes, not exceeding three parking spaces and three warehouses or the like for any floor,” the government said in a statement, adding: “Similarly, foreign real estate developments, except for those aimed at the rental market, will be prohibited.”

In principle, the restrictions do not apply to companies wishing to purchase real estate to “carry out their commercial activities”.

Image by Jorge Franganillo (Flickr)

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