Building VPO in Spain: Why Volume Isn't the Answer

Building public housing does not guarantee lower prices: without rules preventing resale to investment funds or hoarding, public stock ends up in private hands, diluting the effort.

Protected housing construction has been Spain's main housing policy tool for decades. However, its effect on final prices has been limited. Between **1996 and 2007**, coinciding with the governments of **José María Aznar**, hundreds of thousands of homes were built annually, many of them protected housing. Far from falling, housing prices multiplied during that same period.

## The problem is not how much is built

The flaw is not in the volume. It is in what is done with what is built. If public housing is sold to investment funds below its real value, the protected stock ceases to be protected. The **Madrid Municipal Housing Company**, created under the mandate of **Alberto Ruiz-Gallardón** and developed during the term of **Esperanza Aguirre**, is a frequently cited example in these debates. Some argue that part of this stock ended up in the hands of opportunistic funds at prices well below market.

## Rules that prevent the big flip

For public housing to fulfill its function, proponents of such measures propose several conditions. The first: prohibit investment funds, banks, and savings banks from buying these homes, let alone below their value. The second: prevent anyone who already owns a home from buying. The third: bar purchases by any foreigner, including citizens of the **European Union**. The fourth: give preference to residents with more than **30 years** in Spain. The fifth: prohibit renting these apartments, so they can only be inhabited or sold.

## The underlying debate

These proposals clash with European free movement of capital laws and the principle of equality before the law. They also raise doubts about their real effectiveness: restricting demand without addressing supply may leave the problem where it was. What is clear is that building without post-construction control has not worked. Taxpayers' money in Madrid funded a public stock that, in part, ended up on the private market.