A new proposal in the Spanish Congress aims to turn up the heat on holiday rentals in the Canary Islands, with increased taxation and penalties targeting unlicensed properties in what could soon be officially declared a high-pressure housing zone.

The left-wing coalition party called Sumar with ministers in the Spanish government has submitted a series of amendments to the ongoing reform of the Canary Islands’ Special Economic and Fiscal Regime, currently under debate in the Finance and Civil Service Commission. At the heart of these proposals is a goal to rein in what they call the “intensive exploitation” of housing for tourist use—a growing concern linked to the region’s wider rental affordability crisis.

Fighting tourist rentals with fiscal measures

One of Sumar’s central proposals is the introduction of a new specific tax rate within the Canary Islands Indirect General Tax (IGIC)—the regional equivalent of VAT—on services provided by holiday rental properties. This would apply not only to direct bookings but also to those made via digital platforms like Airbnb or Booking.com.

While the Spanish Congress lacks the direct power to modify regional taxes such as the IGIC, the party is urging national and regional authorities to collaborate within the established division of powers to implement fiscal policies discouraging short-term tourist lets. The aim is clear: make operating a holiday rental less attractive and help alleviate pressure on the long-term housing market.

According to Sumar, these steps are urgently needed to address what they describe as a “severe housing crisis” in key areas affected by mass tourism—including the Canary Islands.

Declaring tension and introducing penalties

The amendments go further by proposing the formal classification of parts of the archipelago as “residentially strained zones”—a label introduced in Spain’s new Housing Law. This would allow councils in the Canary Islands to limit rent increases and apply more stringent controls on the short-term rental market.

In addition to fiscal disincentives, Sumar recommends setting up an autonomous register for lease agreements and non-residential dwellings that would work in tandem with the regional tax agency and national land registry. The idea is to create greater transparency and traceability in the rental market.

Perhaps most striking is the proposed punishment for rule-breakers. Property owners listing their homes as tourist rentals without proper licensing could face financial penalties, particularly if operating in designated high-pressure zones. Revenues collected from these fines would, under Sumar’s plan, be funnelled directly into public housing initiatives.

More national support requested

To round off their proposal, Sumar is calling on Spain’s Ministry of Housing and Urban Agenda to allocate additional resources to the Canary Islands under the State Plan for Access to Housing and the Affordable Rental Fund. These funds would support the autonomous community as it grapples with soaring rental prices and housing scarcity, inflamed by the short-term rental boom.

What’s next?

The proposed measures are now headed to the next stage of the legislative process, where they will be debated within a commission working group. If approved by a majority, they will be integrated into the broader reform package of the Canary Islands’ Economic and Fiscal Regime.

In the meantime, landlords and investors in the Canary Islands’ holiday rental market may want to keep a close eye on parliamentary developments—you might soon need more than just a licence to stay ahead of the tax man.