The most controversial provision in the bill would set price hike caps for landlords with multiple residential properties.
Spain's left-wing ruling coalition wants to rein in soaring housing costs by imposing rent increase caps on landlords who own 10 or more residential properties.
Opposition parties and leaders of business organisations have criticised the proposal as an improper intervention in the free market by Spanish Prime Minister Pedro Sánchez's government.
Government ministers approved draft rent control legislation during a weekly Cabinet meeting on Tuesday. Vulnerable families and young adults in Spain's biggest cities would be the main beneficiaries of the proposed law, the government said.
Low salaries and a 35% youth unemployment rate — the highest among the 19 nations that use the shared euro currency — mean that many Spaniards cannot afford to live on their own. They leave the family home at an average age of 30, compared to a European Union average of 26.4 years old.
The most controversial provision in the bill would set price hike caps for landlords with multiple residential properties, a move designed to target large real estate companies and investment funds. The government has not yet published the draft so details about the cap were not immediately available.
But officials said the bill also includes tax discounts of up to 90% for landlords with fewer than nine properties who decide to lower their rents.
The prime minister announced that as part of a separate initiative, the government plans to help adults 18-34 with their rent by awarding them a €250 monthly bonus for up to two years if they earn less than €1,977 per month.
The proposed law also would set aside 30% of all public housing as rental units instead of making them available for people to buy at a reduced price, and would significantly increase local taxes on vacant residential properties.
Regulating the housing market was the main obstacle that prevented Sánchez’s Socialists from agreeing on a national budget for 2022 with the coalition government's junior partner, the anti-austerity United We Can party.
Lawmakers are expected to pass the annual spending plan on Thursday, both parties said on Tuesday. The vote in the Congress of Deputies, the lower house of the Spanish parliament, is regarded as a test of the government’s strength.
To get the budget passed, Sánchez’s minority government needs the votes of lawmakers outside the coalition, including separatist parties from Catalonia and the Basque Country.
"Housing is a grave problem in our country,” Sánchez said.
Labour minister and United We Can leader Yolanda Díaz said the bill opened the path “to a new country.”
“The moment has arrived for great multinationals to pay what they must,” she said.
But the conservative opposition Popular Party accused the government of mounting “an unprecedented attack against private property.”
“We have a government with communists that intervene markets on a daily basis," party spokeswoman Cuca Gamarra said.
Antonio Garamendi, leader of the country's main business group, CEOE, also opposed the move.
“People have the right to save money, and for the state to come now and say how should you manage what you have already paid for and you are already paying taxes for is a brutal distortion of what is the freedom and right to property,” Garamendi said.