Garzón denies building more housing lowers prices, but data contradicts him
Eduardo Garzón argues that increased construction does not reduce housing prices. However, supply and demand data in Spain suggest otherwise.
English · Original discussion in Spanish · Published
Garzón denies that building more housing lowers prices
Eduardo Garzón stated clearly: "Claiming that building more lowers prices is fighting the data." This phrase, turned into a headline, has sparked intense economic debate this week. The economist and MP argues that supply and demand do not explain the Spanish residential market, claiming that large holders set the prices. The majority response was simple: if so, Detroit should be the most expensive city in the world.
What exactly Garzón says and why it generates rejection
Garzón’s thesis is that housing does not behave like a normal good. Demand comes not only from families but also from multiple owners and funds capable of absorbing any price. If demand is infinite, building more does not lower costs. The argument has a formal flaw: Garzón presents it as a battle with the data, when it is actually an interpretation of the data.
The most repeated counterexample is Detroit. There, the population left en masse due to unemployment, and housing is given away for free. Many homes per 1,000 inhabitants, ridiculous prices. At the other extreme, New York: scarce land, sky-high housing. The correlation Garzón denies appears in both cases.
The error of looking only at supply
The logical fallacy pointed out is textbook: confusing cause and effect. Where more is built, it is not because prices rise; it is because high prices attract more construction because developers earn more. Madrid builds more than Zamora and is more expensive, but not because it builds, but because there is demand. Reversing the arrow is what allows one to say that supply is excessive.
A participant clarified the formal version of the argument: with demand for 1,000 homes and 200 built, the price rises; with 1,200 built, it falls. You don’t need a Nobel Prize. And if the price-quantity function were increasing, as Garzón suggests, reaching zero homes would miccionan an infinite price, and negative quantities—demolishing houses—would lower it. The absurdity is the proof.
The data Garzón doesn't mention: Spain builds half of what it needs
The indicator of homes per 1,000 inhabitants is misleading, and there is agreement on this. Spain has many second homes and tourist apartments that are not where the demand is. A house in a village in Castilla does not solve a rental issue in Madrid. But this nuance does not save the thesis: it reinforces that the problem is poorly distributed supply, not irrelevant supply.
The hard data circulating in the analysis is the gap between population and construction. Spain gains half a million inhabitants a year and builds fewer than 100,000 homes. Austria, with 9 million inhabitants, has been putting up between 40,000 and 70,000 a year for some time. The comparison is not perfect, but it points to a structural deficit that no pricing policy corrects alone.
Public housing, funds, and the ownership problem
The most repeated solution is public housing. If the State builds it, a fund does not buy it. Others point out that the problem is funding: building publicly with debt has a cost. And the Spanish public housing stock is among the smallest in Europe, so the starting point does not help.
Regarding funds, there is uncomfortable data: according to one participant, their properties have more than doubled since the current government took office. The criticism is that price control policies expel small owners and leave the market in the hands of large holders. That is, the opposite effect of what is sought.
That is where the analysis stalls. Everyone sees the problem, but no one agrees on the cause. Meanwhile, prices continue to rise.
Eduardo Garzón stated clearly: "Claiming that building more lowers prices is fighting the data." This phrase, turned into a headline, has sparked intense economic debate this week. The economist and MP argues that supply and demand do not explain the Spanish residential market, claiming that large holders set the prices. The majority response was simple: if so, Detroit should be the most expensive city in the world.
What exactly Garzón says and why it generates rejection
Garzón’s thesis is that housing does not behave like a normal good. Demand comes not only from families but also from multiple owners and funds capable of absorbing any price. If demand is infinite, building more does not lower costs. The argument has a formal flaw: Garzón presents it as a battle with the data, when it is actually an interpretation of the data.
The most repeated counterexample is Detroit. There, the population left en masse due to unemployment, and housing is given away for free. Many homes per 1,000 inhabitants, ridiculous prices. At the other extreme, New York: scarce land, sky-high housing. The correlation Garzón denies appears in both cases.
The error of looking only at supply
The logical fallacy pointed out is textbook: confusing cause and effect. Where more is built, it is not because prices rise; it is because high prices attract more construction because developers earn more. Madrid builds more than Zamora and is more expensive, but not because it builds, but because there is demand. Reversing the arrow is what allows one to say that supply is excessive.
A participant clarified the formal version of the argument: with demand for 1,000 homes and 200 built, the price rises; with 1,200 built, it falls. You don’t need a Nobel Prize. And if the price-quantity function were increasing, as Garzón suggests, reaching zero homes would miccionan an infinite price, and negative quantities—demolishing houses—would lower it. The absurdity is the proof.
The data Garzón doesn't mention: Spain builds half of what it needs
The indicator of homes per 1,000 inhabitants is misleading, and there is agreement on this. Spain has many second homes and tourist apartments that are not where the demand is. A house in a village in Castilla does not solve a rental issue in Madrid. But this nuance does not save the thesis: it reinforces that the problem is poorly distributed supply, not irrelevant supply.
The hard data circulating in the analysis is the gap between population and construction. Spain gains half a million inhabitants a year and builds fewer than 100,000 homes. Austria, with 9 million inhabitants, has been putting up between 40,000 and 70,000 a year for some time. The comparison is not perfect, but it points to a structural deficit that no pricing policy corrects alone.
Public housing, funds, and the ownership problem
The most repeated solution is public housing. If the State builds it, a fund does not buy it. Others point out that the problem is funding: building publicly with debt has a cost. And the Spanish public housing stock is among the smallest in Europe, so the starting point does not help.
Regarding funds, there is uncomfortable data: according to one participant, their properties have more than doubled since the current government took office. The criticism is that price control policies expel small owners and leave the market in the hands of large holders. That is, the opposite effect of what is sought.
That is where the analysis stalls. Everyone sees the problem, but no one agrees on the cause. Meanwhile, prices continue to rise.
Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (154 replies).
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