From October 8, 2026, Royal Decree-Law 29/2026 limits the annual rent increase for habitual housing to 2% until December 31, 2027, unless a new agreement is reached between the parties.
According to madridinforma.es, a property owner cannot freely increase the rent while the contract remains in force. The Urban Leasing Law allows rent updates only when each year of the contract is completed and there is an express agreement to that effect.
From October 8, 2026, Royal Decree-Law 29/2026 will govern annual reviews until December 31, 2027. If there is no new agreement between the landlord and tenant, the increase cannot exceed 2%. Furthermore, if the rent already exceeds the maximum price set by the reference index system, no increase is applicable.
In practice, a rent of 1,000 euros per month would rise to 1,020 euros with a 2% increase, meaning an additional 20 euros per month and 240 euros per year. If both parties agree on a different percentage, they must adhere to the current legal limits.
In contracts signed since May 26, 2023, the annual update is linked to the Housing Rental Reference Index (IRAV), published monthly by the National Institute of Statistics (INE). Its latest figure, corresponding to September 2026 and published on October 14, places the indicator at 2.54%. This percentage does not allow all rents to be increased by that amount, as the extraordinary cap of 2% also applies.
For contracts prior to that date, the applicable regime at the time of signing and the agreed review mechanism must be reviewed, which may refer to the CPI or another index. The reform of October 2026 modifies Article 18 of the LAU and sets the IRAV as the maximum update limit, meaning an old clause does not allow for the full application of any CPI increase.
Without an update clause in the contract, the landlord cannot increase the rent each year simply due to the rise in market prices. When there is a clause, the increase must be communicated in writing with the applied percentage, and the new monthly amount is payable from the month following that communication. If the tenant requests it, the landlord must provide the corresponding statistical certification.
The Community of Madrid is not listed among the stressed areas published by the Ministry of Housing in its resolution of November 3, 2026. Community fees, certain taxes, and utilities have their own rules and are not governed by this annual update.
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