Bezos backs José Andrés: Spain needs housing, not decrees

Bezos backs José Andrés: the problem isn't decrees, it's housing

How many new homes does a decree create? None. That is the question chef José Andrés put on the table and Jeff Bezos amplified with a terse "100% correct diagnosis and prescription. And it’s not just in Spain". The chef's diagnosis is simple: Spain does not have a problem with a lack of decrees, it has a problem with a lack of housing. And while the Government confuses announcing measures with solving problems, the market will continue managing scarcity instead of ending it.

The diagnosis: subsidising demand without building supply

The central argument is textbook: subsidising demand without increasing supply pushes prices up. Regulating more and more of a market without building new housing does not eliminate scarcity, it manages it. Penalising a type of rental fiscally may change incentives, but it does not lay a single brick. The chef's conclusion is that housing does not become cheaper by distributing scarcity, it becomes cheaper by ending it.

The proposed recipe includes more available land, permits in months not years, more density where possible, legal certainty and much more public and also private housing. In essence, a reproach to the Executive for preferring to intervene on the few existing homes rather than creating the conditions for many more.

The data that debunks the narrative: 700,000 homes and prices halved

The empirical evidence cited in the analysis is from 2007: 700,000 homes were built and in the trinc five years prices fell by half. The mechanism is not instantaneous. If 700,000 homes were started today in areas with demand, prices would continue to rise for two or three years, because those homes need to be completed, on the market, and a period of adjustment must pass. Just as they do not rise overnight, they do not fall overnight either.

Those who defend this thesis argue that speculation is a consequence, not the cause, of the mismatch between supply and demand. And that the 2006-2008 bubble was, in reality, a credit bubble: without cheap and abundant credit, there is no possibility of formation.

The demographic objection: what if the problem is demand?

The most repeated criticism of the proposal is that the number of homes can be increased, but so can the number of inhabitants. It is argued that you cannot add a million claimants every year without everything exploding, not just housing. And it is recalled that between 2010 and 2019, with the population stagnant or in slight decline, there were no housing problems.

The counterargument is that the ideal is to tackle both parameters simultaneously and nothing prevents it. Others point to a third factor: shrinkage. If since March 2020 the economy has been shrinking, not one more home will be built, because there is no energy for the few developments being erected.

The real bottleneck: land, permits and labour

Entire neighbourhoods with thousands of detached homes have been built in the northwest and west of Madrid. In Brunete, Villanueva de la Cañada, Villaviciosa de Odón and Pozuelo de Alarcón, more than 150,000 flats are being built in total, according to the circulating calculation. But you cannot build overnight. And there is an added problem: to build more housing, much more people would need to be brought in, because here no one wants to work in construction. If much of what you bring does not work, the balance remains negative.

Social housing (vivienda de protección oficial) appears in the analysis with its own flaws. It is argued that everyone involved in the process — politicians, unions, builders — ends up getting one for their children. And that if it is restricted to low incomes, by statistics it will not be obtained by the young couple who want to move in together, but by those receiving the Minimum Vital Income (IMV) and paying per child.

The forgotten context: the ECB and cheap credit

There is a cause of the cause that is repeated: in 1998 the ECB (European Central Bank) is created and the first thing it decides is to pursue an expansionary policy, cheap and abundant credit. The excess liquidity is transferred to certain sectors, in this case housing, causing a bubble. Later, the blame was put on banks, which lowered controls, when their margins had just been minimised.

The ECB sets single rates for the entire eurozone, so that what may be expansionary for Spain may be contractionary for Germany. When Spain entered the euro, the risk premium fell as the possibility of competitive devaluations disappeared. When the Bank of Spain raised its voice of warning in 2003, the government's obligation was to take countercyclical measures to curb the bubble.

The uncomfortable conclusion

The Government can approve all the measures it wants and sell them as great solutions. It can string together decrees, announcements and propaganda campaigns. But the question remains unanswered: how many new homes does all this create? With these threads, the only thing that is certainly built is headlines. And we already have plenty of those.