The growth of non-payment of rent is advancing rapidly, driven by the Housing Law. At the moment, according to calculations by the company Grupo Mutua Propietarios, the actual rental insurance market affects approximately 330,000 homes. This represents between 100 and 150 million euros in annual premiums, which indicates that this insurance still has great potential, since, according to INE data, there are currently around 3.3 million rentals in Spain. Therefore, the product's penetration potential would be around 90%.
It is important to bear in mind that Spain is the European market with the highest exposure to real estate risks, as Spaniards accumulate 75% of their savings in housing. Furthermore, in this context, we must remember that the Housing Law came into force in 2023.
The new Housing Law has had a significant impact on non-payment of rent insurance, according to Ramón Gómez, Commercial Director ad Interim at onLygal. On the one hand, there has been a reduction in the supply of rental housing due to the insecurity generated in landlords, which has even decreased the turnover of properties that were already on the market. This has led to a decrease in the volume of transactions. On the other hand, the increase in time and procedural costs related to evictions has led the entire sector to make a series of changes to the non-payment of rent insurance to adapt it to the new regulation.
OnLygal has been able to quickly adapt to this new regulation. Among the main changes are theincrease in the maximum insurable period for the coverage of unpaid rents, from 18 to 24 months, and the inclusion of new options for taking out insurance without excess, which allows the owner to be indemnified from the first month of non-payment. In addition, adjustments have been made to adapt to the redefinition of the large tenant concept, reformulating both the product and the service.
César Crespo, deputy general manager of Mediated Business at Mutua Propietarios, also highlights the important implications that the new Housing Law has had on the objective risk faced by landlords of rental properties. In the case of large landlords, they are now required to demonstrate whether or not the tenant is vulnerable in order for their claim for repossession to be accepted. This declaration must come from an autonomous public body and can take up to 2 months. In addition, both the landlord and the tenant must go through a conciliation process under a public authority if a claim is filed and if the tenant is vulnerable. This process can also take up to 2 months to try to reach an agreement between the parties. If no agreement is reached and if the landlord is found to be entitled to repossess the property, Social Services must be given input before proceeding with the eviction. These services have up to 4 months if the landlord is a legal entity and 2 months if the landlord is an individual to find a social housing solution for the defaulting tenant.
As for small holders, they must prove through registration notes that they are not large holders. This implies additional expenses and losses compared to before. The period for Social Services to work is also increased by one month for both individuals and legal entities in cases of vulnerable tenants.
Despite all these legislative changes and their effects on the offer, onLygal has experienced significant growth in this area of non-payment of rent insurance. This is due to the increase in prices, the incorporation of new clients (large tenants) and the good evolution of the commercial segment. As for the commercial segment, they have experienced growth of over 70%, as landlords are discovering the importance of the product and the need to insure their properties.
Mutua Propietarios has achieved a growth of more than 20% in premiums in non-payment of rent insurance thanks to its strategy based on three pillars: omnichannel, capillarity and technology. The omnichannel approach allows the contracting to be carried out through any channel and the facilities for contacting the insured are maximum. Capillarity is achieved thanks to an extensive network of sales advisors distributed throughout Spain who can reach real estate agencies and professional mediators anywhere in the country. Finally, they use advanced technology that allows them to analyze the tenant's risk without the need to manipulate the documents provided by the tenant, which greatly speeds up the leasing process between landlord and tenant.
In summary, non-payment of rent is a growing problem stimulated by the new Housing Law. Both onLygal and Mutua Propietarios have made significant adjustments to their products and services to adapt to this new regulation and offer guarantees to cover the new and growing risks associated with renting.
Source: Galilea Group
