Madrid approves the conditions for the temporary change of use from tertiary offices use to social housing
The two-year period for applying for the new special change of use regime of the Community of Madrid (from offices to social housing) opened on 4 November 2024.
A few days earlier, on 31 October 2024, the Madrid City Council published the specific conditions applicable to these licences in the Madrid Municipality. These conditions include, among other things, the exclusion of the referred special regime of plots of land that do not have expressly established the office use as a qualified use.
What is this temporary regime of change of use?
Given the current housing shortage in Madrid, on 28 June 2024, the Community of Madrid approved Law 3/2024 on Urban Development Measures to Promote Social Housing which included, as a highlight, a new regime for the change of use from tertiary use (offices) to residential use (social housing) without the need to modify the existing urban planning.
As a general idea, this regime allows the development of social housing units (as an alternative use) on plots of land and even existing buildings already developed for tertiary office use, with a maximum of 30% of the global tertiary buildability of the sector. The conditions for development include the urbanisation of the land, the prohibition of partial implantation and the fulfilment of urban planning obligations. For more details on Law 3/2024, refer to The new Law for the Promotion of Subsidised Housing in the Community of Madrid comes into force.
This regime is temporary and motivated by the current situation of the housing market. The application for licences is limited until 4 November 2026 (although the Madrid Regional Government may extend the measure for a justified reason).
If this is a Regional measure, why is the City Council intervening?
Municipalities have a decisive role in the implementation of this special regime They can choose to apply it fully or partially (or even not to apply it at all), impose additional conditions or define the territorial areas for its implementation. In this way, they can adapt the regime to the specific needs and characteristics of their territory, taking into account the developers obligation to transfer land for local public networks (or, alternatively, to opt for a monetary payment) and the responsibility of licence applicants for the extension of infrastructures and public networks outside the corresponding plot.
The Madrid City Council has consequently approved specific conditions for the implementation of the referred regime by means of the Plenary Agreement of 29 October 2024, available in Spanish at the following link (the "Madrid City Council Agreement").
In which areas of the Municipality of Madrid will it be possible to apply for the new regime?
According to the Madrid City Council Agreement, in the Municipality of Madrid, alternative residential use in the form of social housing for lease may be implemented (by virtue of Law 3/2024), on the following plots of land with qualified tertiary office use:
(a) Plots whose qualified use is exclusively for offices.
(b) Plots with other qualified tertiary uses (in addition to offices) that can be implemented alternatively (so that the owner can choose to implement any or all of the uses at the same time).
In these cases, if the urban planning conditions of the plot allow it, the conversion of part of the buildability into a residential building for social housing will be allowed, and the rest of the buildable area may be used for another building exclusively for tertiary use on the same plot.
(c) Plots that, in addition to the tertiary office use, have other qualified uses with specific buildable areas allocated in a differentiated way for each use.
In these cases, the implementation of the alternative residential use is permitted, consuming the buildability of the tertiary office use, provided that the buildability allocated to the other qualified uses is materialised at the same time. These latter buildability may be located in the floors allowed for the complementary uses or in an exclusive building on the same plot, if the urban planning conditions allow it.
On the other hand, in the Municipality of Madrid, the change of use to alternative residential use in its modality of social housing (for rent purposes), by virtue of Law 3/2024, cannot be implemented in:
(a) Tertiary plots that do not expressly establish the class "offices" tertiary use as a qualified use.
(b) Areas or sectors of global industrial use.
(c) Plots whose qualified use is tertiary offices, but in coexistence with industrial use.
(d) The plots regulated by Zoning Regulation 9.3 (which represent 10% of the consolidated industrial area and are mainly located in the northern and eastern periphery of Madrid, as can be seen in this link).
What are the other peculiarities in Madrid with respect to the general regime established by Law 3/2024?
In accordance with Law 3/2024, the applicable conditions of buildability, height and the rest of the urban planning parameters of the developments under the special regime will be those of the corresponding plot, as well as those of the corresponding sectorial regulations for social housing. In addition, new residential units must comply with the conditions of habitability and construction applicable to this residential use.
The Madrid City Council Agreement, in relation to general regime established by Law 3/2024, specifies that the urban planning conditions will be:
(a) Those of the qualified tertiary office use in terms of the volumetric and positional conditions of the building (i.e. setbacks, distances to boundaries, distances between buildings, movement area, adjoining boundaries, occupation, buildability, building height, constructions above height, overhangs, projections, aesthetic conditions, etc.).
(b) Those of the resulting residential use as regards the conditions of use of the building itself (sanitation, services, access and security, specific conditions of use, etc.).
Law 3/2024 also prohibits partial implementations. Consequently, the implementation of the residential use must be for the building as a whole. For these purposes, the Madrid City Council Agreement clarifies that this definition of "building as a whole" is referred to the building for alternative residential use with the applicable regime of interrelation of uses and, therefore, that it is possible to implement on the same plot other exclusive buildings for other permitted uses if the urban planning conditions allow it.
What is the regime of compatibility of uses in the plots of land in Madrid to which the special regime applies?
In accordance with Law 3/2024, when the alternative use is implemented, the regime of associated and complementary uses will be the one allowed by the specific regulation applicable to the principal use, provided that the compatible uses do not exceed 20% of the buildability.
In the Municipality of Madrid, some additional conditions are established in order to protect residential use. Specifically, associated and complementary uses are not allowed above the first floor and, in addition, certain uses are prohibited: in particular, (i) leisure tertiary use in the category of recreational and meeting rooms, and (ii) industrial use in the class of storage and category of grouped kitchens.
When can licences be applied for in the Municipality of Madrid?
Licences can be applied for from 4 November 2024.
It should be noted that, in accordance with Law 3/2024, the alternative use of social housing for rent purposes to be implemented may not exceed 30% of the overall buildability of the tertiary use of the area or sector. For this reason, the Madrid City Council clarifies that the licence's applications will be processed in a strict order of priority, taking into account the time at which all the documents are fully submitted in accordance with Ordinance 6/2022, of 26 April, on Licences and Responsible Urban Planning Declarations of the Madrid City Council.
If a licence is applied for, when does the duty to transfer need to be fulfilled or the alternative payment settled? When does the duty to extend networks have to be executed?
In line with the provisions of Law 3/2024, the implementation of the alternative residential use requires the obligation to hand over in favour of the Madrid City Council land for local public networks, although this obligation may be substituted with a monetary payment.
These urban obligations will be determined and the interested party will decide whether to make the assignment or pay the money during the licence procedure. This means that any assignment or payment must be made before the relevant licence is granted. If this is not the case, the procedure will be closed (due to the expiry of the deadline) and the interested party will be informed that the licence is not granted for reasons attributable to it. Once the assignment of the public networks has taken place, it will be consolidated.
Similarly, if the implementation requires the extension of public infrastructures and networks outside the plot, the responsibility and cost of their execution will be borne by the applicant. The need for such extension of external public infrastructures and networks will also be determined during the licencing procedure.
What opportunities does the temporary change of use regime offer to developers?
This temporary regime of change of use from offices to social housing represents an opportunity for the private sector to convert tertiary real estate assets to residential, taking advantage of the demand for social leases and the advantages offered by the regional regulations (in particular, the flexibility in complementary uses and the unnecessary need to modify the urban planning).
However, as explained above, this new regime has important limitations in terms of time and scope of application, which make it advisable to act quickly in analysing the feasibility and profitability of any potential promotions.
At Ashurst we have a team specialised in urban planning and real estate issues, with extensive experience in advising developers, investors and financial institutions on all types of real estate projects, both residential and tertiary. We can assist in the analysis of your asset portfolio, carry out the legal study of the possibility of opting for the new regime, collaborate in the legal design of the development, advise on all the urban planning procedures and resolve any doubts or conflicts that may arise in the development of your promotion.
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