Temporary or long-term rental: which one to choose?
Throughout 2025, significant transformations in the rental sector are expected, particularly affecting short-term and temporary rentals, as well as tourist accommodations. These changes promise to redefine the real estate market landscape, making it essential for property owners to stay informed about new trends and regulations that will impact both profitability and property management.
Since January 2, Spain has become the first European country to implement a unified registry for short-term rentals. However, the full enforcement of this regulation will not take effect until July 1 of the following year, allowing businesses and administrations time to adapt to the new procedures. This legislative change follows the approval of the Royal Decree on December 23, during the last Council of Ministers meeting, which established the creation of a Single Digital Lease Window. This platform will serve to collect and share information on short-term rental services to ensure proper control over these spaces, a segment that has grown rapidly and affects property owners, tenants, and tourists alike.
Nevertheless, in today’s real estate market, this type of rental coexists with the traditional long-term leasing model. Both options have advantages and disadvantages, depending on the property owner’s needs, the type of property, and the tenant profile.
Permanent or Residential Rental: Long-Term Contract and Stability
Permanent or residential rental is the most traditional model and is highly regulated by the Ley de Arrendamientos Urbanos (LAU), Spain’s Urban Leasing Law. It refers to long-term contracts, usually lasting between one and five years, making it an ideal rental type for those seeking stability and secure income. Contracts are automatically renewed after the initial period unless either party decides not to extend them.
Advantages:
- Stable income. A long-term contract guarantees a steady monthly rental income, reducing the risk of prolonged vacancy periods. One of the key advantages of this model is the financial stability it provides landlords. However, this also means that annual rent increases are capped under current regulations. One of the most significant changes introduced by the recent Housing Law modifications is that the Consumer Price Index (CPI) is no longer the primary benchmark for calculating rent increases. Instead, the New Housing Rent Update Index (IRAV) has been introduced. Under this system, landlords can raise rental prices by up to 2.2% in 2025.
- Fewer management tasks. Tenant turnover is lower, reducing the need for frequent searches and assessments. Additionally, maintenance tasks are minimized.
- Less property wear and tear. With long-term tenants, properties typically experience less deterioration compared to short-term rentals.
Disadvantages:
- Less flexibility. Once the contract is signed, the landlord cannot easily reclaim the property.
- Legal regulations. Long-term contracts are subject to stricter tenant protections and regulations.
Short-Term Rental: Flexibility and Higher Short-Term Profitability
Short-term rentals typically apply to brief periods, ranging from days to months, making them a popular choice among tourists, students, or business travelers.
Advantages:
- Higher profitability. In tourist areas or high-demand locations, short-term rentals can generate more income than traditional leasing.
- Flexibility. The landlord can use the property during specific periods or adjust prices based on demand. This type of rental allows contracts ranging from 32 days to 11 months. Rentals for less than 32 days are classified as vacation rentals.
- Lower risk of non-payment. Since payments are made upfront, the risk of tenant default is minimized.
Disadvantages:
- Higher tenant turnover, leading to increased management tasks such as frequent cleaning and maintenance. Additionally, each time a contract ends, the landlord must find new tenants, which may result in vacancy periods.
- Irregular income. Demand can fluctuate seasonally, affecting the landlord’s financial stability.
Short-term rental contracts are also regulated by the LAU. Specifically, Article 3 of this law classifies them under ‘leases for purposes other than residential use’. This means they are not governed by the same rules as permanent residential leases but instead follow specific conditions designed for temporary stays. In this case, the landlord has greater freedom to negotiate contract terms, including rental prices, lease duration, and conditions, but always within market limits.
Tax Comparison
On the other hand, both rental modalities have important tax implications for property owners. In the case of long-term residential rentals, income must be declared as net income in the income tax return. Owners of permanently rented homes can deduct up to 90% of their income in the Income Tax, which represents significant tax relief. In the case of short-term rentals, although net income must also be declared, tax deductions are more limited.
According to data from Idealista, the supply of permanent or long-term rentals experienced a 3% year-on-year decrease in the fourth quarter of 2024. In contrast, seasonal rentals increased by 24% in the same period, now representing 14% of the total rental supply in Spain. Long-term rentals have thus accumulated three and a half years of year-on-year declines, currently standing just 5% above the historic low recorded in June 2024, a month when supply is particularly reduced due to summer seasonality.
Regardless of what the comparison shows, the choice between a short-term rental and a long-term rental will depend on the owner’s needs and the type of property. For those looking for stability and a steady income, long-term rental will be the safest option. Furthermore, the tax advantages and the protection offered by the Urban Leasing Law are attractive to both landlords and tenants.
On the other hand, those who prefer greater flexibility and the possibility of generating higher short-term income may find short-term rental to be the right choice. However, it is important to remember that this modality involves greater risk and more intensive management.