Landlords vs the State: the battle over Spain's soaring rents

Landlords to blame, government responsible: the battle over rent

Rents have been rising for decades, and the argument over who is responsible has become a battleground. The opening position holds that landlords knowingly do harm by raising prices with no one holding a gun to their heads, but that the State has a constitutional mandate to prevent speculation and has failed to act for decades. The conclusion is uncomfortable: either it is dereliction of duty or active collaboration.

Article 47 of the Spanish Constitution is the starting point many cite: all Spaniards have the right to decent housing and public authorities must prevent speculation. On that basis, the debate splits between those who believe the State should intervene and those who argue it already intervenes too much.

The State already builds roads, why not housing?

The core argument of the initial position is that the State expropriates land for infrastructure, builds and manages that infrastructure, provides healthcare and education, plans land use, and even caps the number of pharmacies or taxi licences. Yet the idea that housing should be provided by the free market is treated as unquestionable dogma.

The question hanging in the air is why what is accepted for a road is not accepted for a flat. The original text sums it up wryly: The Gospel according to Saint Bernardos.

The market's answer: the buyer sets the price

Against that thesis, the most common rebuttal is that in any economic transaction the price is set by the buyer, and if the good is scarce, by the buyer with the deepest pockets. Under that logic, the solution is not intervention but increasing supply.

That is where the argument comes in that the State takes more than 50% of the cost through taxes, fees and land. The proposal is to build more and limit the regulations that make development more expensive. This is the position that dominates in much liberal economic analysis.

The landlord's maths: renting is not that profitable

One of the most detailed analyses in the discussion dismantles the idea that landlords are raking it in. The calculation is simple: a flat worth 200,000 euros plus taxes, rented at 900 euros a month, nets between 600 and 700 euros after expenses. Over a year, the net income doesn't even reach 8,000 euros.

The conclusion of that analysis is that the only truly profitable rental is a flat already paid off, inherited or bought very cheaply in another era. Everything else, with a mortgage involved, delivers poor returns. A lousy return, in the words of the analysis itself.

Not just a Spanish problem: the global dimension

Some point out that the phenomenon is worldwide and that there must be deep macroeconomic reasons affecting all countries. On top of that, several million Spaniards own multiple homes and many buy without a mortgage, pointing to very solvent demand.

Foreign money and investment funds also antiestéticature in the analysis. Funds go for holiday or short-term rentals because they can push prices harder and extract more profit, and they have the muscle to buy entire buildings. Long-term rentals are left to private owners with cheap flats from another era.

The divide between owners and tenants

The discussion descends into a clash of experiences. Some landlords describe their situation: a tenant who pays without problems, months without hearing from him, neighbours who never hear a peep. They add that what they earn they share among their children, and that if they were raising a family it would be perfect. I'm consistent: the housing situation seems such an outrage that I can't be part of it, one of them insists.

Against that, the accusation of hypocrisy is a recurring one: if you owned a flat and it rented for 700 in your area, you wouldn't list it at 300. Interventionism, others reply, ends in poverty. And the sarracena of the market becomes the crux of the disagreement.

The role of immigration in the equation

Some participants introduce immigration as a pressure factor on demand. The argument is that mass population inflows send housing needs soaring and that rental subsidies end up in landlords' pockets, who raise prices by the same amount. The repeated proposal is that without curbing external demand, building more only creates a pull effect.

That thesis coexists with the view that the problem is one of supply and land, not demand. And with those who point out that short-term rentals are the only option for short stays, because nobody rents for ten days.

The 2008 crisis as a mirror

The comparison with 2008 comes up repeatedly. Back then there was a huge housing stock and credit restrictions caused a drop in demand that forced prices to be liquidated. Now, by contrast, demand is described as very solvent, with people buying without mortgages and heavily guaranteed credit.

The conclusion drawn is that a crisis would not necessarily bring prices down, because sellers would not feel the same urgency to sell. This is where the analysis gets stuck: without cheap credit but with liquid demand, the adjustment does not come through the classic route.

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The shared diagnosis is that the situation is unsustainable. The disagreement is over who should foot the bill. And meanwhile, the question remains unanswered: if the State has the powers and the mandate, why has it failed to use them for decades?