Housing demand in Spain is insolvent, forum user argues

Housing demand cannot afford what gets built

Why isn't more housing built in Spain if prices keep rising? The answer given by a participant in a forum debate is that the problem lies not with supply, but with the solvency of demand. In the middle of an economic boom, a growing share of the population that needs a roof over its head cannot sign a mortgage or pay a market-rate rent. And if demand is not solvent, the developer doesn't build, the owner doesn't rent and the bank doesn't lend. The circle closes.

The diagnosis starts from a concrete scene: private investment in housing has long been reluctant. It's not just the price of land or bureaucracy. It's that the person asking for the home cannot pay for it. And the same happens in the rental market from the other side: owners are wary because demand is insolvent too. The consequence, according to this analysis, is that the government's only solution is to protect the vulnerable by blocking evictions, which discourages owners from putting housing on the market and drives away the companies that build apartment blocks.

Why isn't more housing built if prices are rising?

The paradox is only apparent. If prices rise, there should be an incentive to build. But the developer doesn't sell to whoever needs a home, they sell to whoever can pay for one. And that group is shrinking. Banks grant mortgages to families with a stable paycheck; private investors sell to people with solvency. Anything else, this diagnosis says, would be financial suicide. The question hanging in the air is what the government is aiming for: does it want homeowners to act as charities?

Some argue the state should launch a mega public investment plan in housing, accepting that returns would be negative due to defaults and because tenants are not solvent. Others reply that this was already tried in the 1980s, when subsidized housing (vivienda de protección oficial) kept being built for vulnerable Spanish nationals who had neither a trade nor a job. The plan was to end slums in the cities. The architect Sáenz de Oiza, who designed Torres Blancas in Madrid, clashed with those people, who protested even though they were being given an apartment for free. The anecdote reappears in the analysis as a reminder that the problem is not just about bricks and mortar.

The calculation nobody puts on the table

The Spanish economy, this thesis holds, is unable to absorb the number of immigrants entering each year. The government would have decided to turn them into a vulnerable group, hand them benefits, and let rowers and apartment owners gift them housing. The other option would be the public mega-plan with negative returns. Neither fits the logic of the private developer.

The argument rests on a simple idea: private investors sell to people with solvency, banks lend to solvent families. Anything else is suicide. The question the analysis raises is whether the state can sustain a stock of public housing with tenants who don't pay, or whether it ends up like Cuba, with blocks falling apart and utility and property tax (IBI) debts that local councils cannot absorb. Maintenance, cleaning, insurance, special levies: nobody has explained who pays for them when housing is free.

Wages, taxes and the productivity trap

The diagnosis of insolvency doesn't stop at housing. It extends to wages. Some argue the real problem is not that everything is expensive, but that wages in Spain are perversos and taxes confiscatory. A country that hands out benefits to those who don't work and squeezes those who do can only end up as a failed state. Social Security contributions, in some cases, exceed net salary. And the birth rate is collapsing because young people cannot even consider having children until they are 45.

The double trap goes like this: without immigrants there is no replacement, because there is no birth rate. With immigrants there is not enough money, because there is no productivity. The result is a dead end that some sum up in one word: guano. The discussion drifts towards demographics, ageing and the sustainability of the welfare state. Natives don't take out loans to buy the homes being built either. The investment horizon is so long that only funds can step in.

What about empty homes in Spain?

The most common objection is that there are already enough empty homes and no more are needed. The answer is that many are four walls and a roof falling to pieces in villages of emptied-out rural Spain. In cities there are unused homes, but their number is not significant enough to justify building nothing more. Add another bottleneck: in many urban areas there is no room to build because there is no guarantee of meeting electricity demand. The conditions required are not met by every neighbourhood.

The problem, according to this analysis, is not just land or regulation. It's infrastructure, the power grid and the utilities. Building doesn't happen overnight, and feeding the networks that supply those homes doesn't either. But it can be planned in a synchronised way. The excuse, they say, doesn't wash.

The political trap: everyone talks about housing, nobody wants to touch anything

Politicians of every party have latched on to debating housing. The most cynical diagnosis is that they do it because if the scope of debate widened, it would turn out that none of them intends to change anything substantially. Housing has no solution because among the actors involved, only the one without a home is interested in change, and that is usually the one with the least power to bring it about. If ten million semi-free homes were built for people or couples who don't have one, the price-value of the apartments bought with the sweat of the other thirty or forty million would tend towards zero. Nobody would vote for a party that hinted at such a plan.

Some propose conditioning all kinds of benefits on having lived in Spain for twelve years and contributed for four. Half would leave. But nobody wants to do it. The discussion drifts towards maintenance: if homes are expropriated, who pays the special levies? In 2008, the banks that repossessed apartments were accumulating unpaid bills from homeowners' associations. If free housing turns into chaos, we will see blocks falling apart and sky-high utility and property tax debts that few local councils will be able to absorb.

---

With all this on the table, the conclusion that imposes itself is that the housing problem is not fixed with more bricks, but with more solvency. And solvency cannot be decreed. It has to be earned. Or imported. And there the debate stands, as uncomfortable as at the start.