Housing Decree: Everything But Land

The long-awaited housing decree falls short by not addressing the cost and availability of land, the true driver of housing prices, leaving the root of the problem untouched.

The Council of Ministers is preparing to approve a housing decree that, after a delay in July, appears to have the green light. However, beyond measures on rent, fraud, and affordable housing mobilization, there is a major absentee: land. And it's not a minor detail. If anything defines the price of a property in Spain, beyond construction or financing, it is the right to build in a specific location. This decree, for the most part, acts on the consequences, not the cause.

## The planning reform, a piece up in the air

The text being negotiated includes a reform of the Land Law, a measure aimed at streamlining urban planning procedures and reducing the legal uncertainty that often paralyzes projects. The idea is clear: to prevent formal errors in urban planning from leading to the annulment of general plans, as has peine in cities like **Vigo** or **Gijón**, forcing them to operate under transitional regimes for years. The goal is to provide stability to planning so that construction can move forward.

This reform, which has been attempted unsuccessfully on previous occasions, addresses aspects such as invalidity and appeals against planning, seeking to limit the effects of defects and facilitate the correction of errors. It also contemplates the registry regime for reversion rights on expropriated land. In theory, this should make land available for construction. However, the reality is that, even if a brake is removed, the cost of keeping a plot of land unused is not addressed. A plan that is not annulled still allows the owner to wait, and the decree does not plan to increase the cost of this inactivity.

The land reform is, in fact, the most contentious piece of the decree. **Podemos** considers it a gateway to speculation, while **Junts** alleges an invasion of regional competencies. The construction employers' association supports it as a measure to increase supply, and the **PP** sees it as a way to facilitate land availability. The tug-of-war is such that its final content is up in the air. If it is finally shortened or eliminated, precisely the only part of the decree that could have modified the rules on how land becomes buildable will have been ceded.

## Land: the decree's great omission

The central thesis is forceful: the biggest housing problem in Spain is land. It's not just about having land, but about who has the right to build on it, where that right is granted, and, above all, what it costs the owner to keep it unused. The measures being outlined in the decree, such as extending rental contracts, regulating seasonal rentals, increasing VAT on tourist flats, or offering tax breaks to landlords, act "downstream" from this problem. They decide how the existing housing stock is distributed and used, or how demand is incentivized, but they do not add a single buildable square meter nor increase the cost of holding a plot of land while waiting.

Economic logic, already pointed out by **David Ricardo** two centuries ago, explains why land is key. The price of a property is not high because rent is paid for the land, but rather rent is paid because the property is expensive and the supply of buildable land is limited where demand is high. When the buyer can pay more (due to salaries, credit, aid), and the land supply does not react, that additional purchasing power is capitalized into the price of the land. Aid for tenants, savings accounts for purchases, or any public down payment guarantee, if the land supply doesn't move, end up inflating prices. The developer calculates how much they can pay for the land by subtracting construction costs, financing, taxes, and their profit margin from the selling price. Any additional purchasing power from the buyer is transferred to the land price.

## Is there too much land or not enough of the right kind?

The most common objection is that Spain has too much land. Data from the Ministry of Transport, Mobility and Urban Agenda, through the Urban Information System, indicates that there are **1,069 large sectors** in **400 municipalities** with capacity for approximately **2.47 million homes**. However, **64.4%** of these sectors have not even begun to be urbanized. Only **276** have available developed land, with **489,186 homes** pending.

But this does not translate into half a million homes ready to be built on vacant plots. In many of these sectors, construction has already begun or is advanced. There are **19 large sectors** fully developed with no construction yet, with capacity for **36,398 homes**. The report also indicates that the full development of these sectors can take an average of **18.5 years**. The problem is not just having developed land, but that the current system does not incentivize rapid construction.

Furthermore, the Ministry's study points to a "structural challenge" due to a shortage of developable land in high-demand areas such as **Barcelona**, **Bilbao**, or **Madrid**. Large land reserves are concentrated in **Andalusia**, the **Valencian Community**, **Castilla-La Mancha**, and **Murcia**. Crucially, the study focuses on large sectors, excluding individual urban plots, which are precisely what are scarce within cities with the highest demand pressure.

Land fails, therefore, on two fronts. In areas where demand is high, the supply of new buildable land does not grow at the necessary pace. And where the right to build has already been granted and the land is developed, exercising it can take years. The plot pays its property tax (IBI) and its financial costs, but there is no specific surcharge for remaining undeveloped. These are two sides of the same coin: who decides when land becomes housing and what it costs not to do so. And neither of these issues will truly be on the Council of Ministers' agenda.

## The cost of inaction: what no one is asking for

The most revealing aspect of the decree, for those analyzing the situation, will not be what is approved, but what is left out. Reviewing the demands of the various political groups, the absence of requests for land that is serviced and undeveloped to cost money is striking. Neither the left, which speaks of speculation, nor the right, which focuses on supply, nor the nationalists, who defend competencies, propose mechanisms to penalize land inactivity. **ERC** comes close with proposals on vacant housing, which is a different issue.

When political actors, often in opposition, agree to leave a key element untouched, it is legitimate to ask who benefits from this inaction. The mechanism that **Michael Heller** termed the "tragedy of the anticommons" perfectly describes this situation: a resource remains unused because too many actors have veto power over its utilization. In Spanish urban planning, owners, compensation boards, administrations, and other agents must converge for an abstract right to build to materialize.

The decree, instead of addressing this bottleneck, seems to replicate it at a legislative level. If the decree moves forward, its content regarding land will be limited, at best, to the procedural piece on the invalidity of plans and reversions, and only in the version that survives negotiations. The inclusion of measures such as an annual surcharge on serviced residential land that remains undeveloped, similar to what **Ireland** has applied since **2025** with a **3%** annual charge on market value, is not foreseen. Nor will the legal application of a different IBI rate for the value of land and another for construction be enabled, something that current local tax law does not permit. Nor is a homogeneous capture of rezoning capital gains or the effective application of construction deadlines with real consequences, such as forced sale, contemplated. These tools, although they have existed in the legal system for centuries, have had minimal application.

In short, the housing decree focuses on managing demand and the existing stock, but ignores the factor that most influences prices: land. Without measures to increase the cost of holding unused plots, any boost to demand or improvement in the management of the current stock risks being absorbed by the increase in land value, perpetuating the underlying problem.