Buying will get pricier without rentals, debate suggests

Regulating rent to make it cheaper ends up making housing more expensive

The more rent prices are intervened in, the more expensive it becomes to buy a flat. It's not a play on words, but the sequence described by the analyses dominating the debate on Spain's new rental regulations. With the Housing Law in force and a second decree awaiting a vote, the most repeated thesis is that the rental market is shrinking just when demand keeps growing. The calculations cited point in the same direction.

Indefinite rentals and the antiestéticar of 'de facto expropriation'

Each new regulation drives homes out of the market. That's the most repeated warning. When indefinite tenancies are approved, one strand of analysis argues, putting a flat up for rent will amount to giving it away: if you can't freely set the price, recover the property or evict quickly, private landlords will choose to sell or leave it empty. Some go further and describe the measure as a de facto expropriation: the State would take over the use of the property in exchange for a lifetime annuity that it would also set itself. The figure of the small landlord, they argue, is numbered; the business will be left to large holders with in-house lawyers.

Hence the central paradox. Those who can't rent will have to buy. That is, the same measure aimed at containing rental prices would push more households into the sales market, precisely where stock is already scarce. More people bidding for the same thing: the result, if the forecast holds, is a property price that keeps rising.

Why is there a housing shortage in Spain?

The supply deficit is the root cause pointed to by several participants. According to the calculation used in the debate, around 200,000 new households are created each year, but only between 80,000 and 100,000 homes are built. The gap is chronic and supply doesn't absorb demand. Add to that the steady flow of migration: it's noted that more than half a million people enter each year, concentrated in Madrid, Barcelona, Málaga, Valencia and the archipelagos. Demand clusters where land is already expensive, and there's talk of a population that could approach 54 million inhabitants.

Another figure circulating: at least 500,000 construction workers would be needed to build all the supply that demand would require. An army of labour that, meanwhile, also needs housing. Squaring the circle.

Land as the origin of the problem

Before the bricks comes the land. Part of the analysis points to urban rezoning as the real start of the price surge. One participant says he has seen land go from 5,000 to 300,000 euros the moment the city council allows construction. The council, it's argued, is the first link in the chain, and the most exposed to corruption.

The solution proposed from another flank is subsidised housing. Building protected housing, this strand argues, is the only lever that defuses speculation, instead of suffocating the market with decrees. The problem, they note wryly, is that public housing policy has been off the agenda for years.

Three scenarios for the same market

While some anticipate rises, others sketch different scenarios. Some believe sale prices will fall, because owners who planned to rent will switch to selling and increase supply. And some argue just the opposite: with rentals stifled, hardly any flats will be available and rents will soar. The consensus, if any, is minimal.

Underneath simmers an older discussion: that of money. With a currency losing value and no accessible alternatives for the average saver, housing continues to function as a refuge. Those who own a physical asset, they argue, protect themselves from the loss of purchasing power; those who don't, pay for the party. Some recall that four decades ago money also depreciated and housing was affordable; others reply that the balance was broken by interventionism.

Politics as a backdrop

No analysis escapes the political noise. Some blame the Government for stoking prices to feed the narrative and mobilise its electorate; others attack the opposition and the investment funds that, they claim without evidence, finance parties to keep things untouched. In the middle, parliamentary arithmetic: approval of the first decree depends on a Catalan group that, it's noted, finds it hard to justify a yes to its voters.

Every home that leaves the rental market is a landlord calculating, a family competing and a price that moves. With supply falling and demand rising, the question is no longer whether the market will tighten, but how long it will take to break down completely. And no one, for now, dares to sign off on the forecast.