Montero’s Committee: Why Building Less Housing Might Lower Prices

Montero proposes lowering housing prices by building less

How can something become cheaper by producing less of it? This question puzzled half of Spain when Irene Montero announced an expert committee to tackle housing costs, with a viral message sarcastically suggesting the problem is that too much is being built. The thesis, summarized in that message, is so counterintuitive that even its supporters doubt the MEP can explain it. While there is a real diagnosis—land is finite and housing has become a speculative asset—the prevailing headline is simpler: less construction, lower prices.

What the expert committee on housing proposes

The starting point is a paradox the market has struggled with for years. Some argue that each new real estate development raises land prices before final housing costs: mandatory cessions, public housing quotas, infrastructure, and soaring material and labor costs. Under this logic, building more doesn’t make anything cheaper; it only inflates the starting cost. This argument has supporters even among those who outright reject the proposal.

The problem is that this reasoning, taken to the extreme of “building nothing,” clashes with an uncomfortable fact: there is a declared deficit of 600,000 housing units and growing, a figure not from a suspicious think tank but from the Bank of Spain itself. If demand keeps rising and supply freezes, the predictable result is not cheaper housing, but the opposite. The most repeated conclusion is that the diagnosis hits the symptom but misses the cure.

Why prices rise even when more is built

The explanation gaining the most ground concerns land use. If developers build for the market to decide whether a property ends up as residential rental, tourist, or vacation use, prices don’t drop—they shift. Housing ceases to be a place to live and becomes another financial asset, where the buyer with the most muscle always wins the bid.

From this stems the proposal generating the most consensus among critics: removing primary housing from the speculative circuit. Public rental housing at capped prices, in sufficient volume so property holders lose the incentive to hoard, and limits on the number of properties per individual or legal entity. The argument is that if speculators offload burdens, prices fall naturally, revealing how much real construction is needed and where. Before raising block after block of concrete, they say, it’s better to know what value matters.

The factor almost everyone agrees on: who demands

The geographic comparison is what best withstands scrutiny. Madrid and Barcelona have prices far higher than Soria, Zamora, or Ciudad Real, and the difference is explained by real demand from people who want to live there, not just speculation. Where there’s no demand for life, there’s no bubble to sustain: no matter how much is invested, prices don’t rise.

This shifts focus to population flows. A country receiving hundreds of thousands of people annually and tens of millions of tourists makes it difficult for housing to become cheaper, some argue. Others add the weight of foreign buyers and policies facilitating property purchases by foreign capital. The debate intensifies when crossed with immigration, and here it’s crucial to separate the economic phenomenon from the rhetoric: demographic pressure on urban land is a measurable fact; the political conclusions each draws are not.

Scarcity as a result of the system, not the market

Underlying the issue is a classic reference: the economy of scarcity described by economist János Kornai when analyzing communist systems in Eastern Europe. His thesis was that scarcity was not an accidental failure but a product of the system’s own imperfections. Translated to bricks, the parallel discussed is that intervening in supply without touching demand can fabricate precisely what one aims to combat.

The other side of the coin is Spain’s urban history. In the post-war era, entire neighborhoods of cheap, 60-square-meter, no-frills but dignified housing were built in city outskirts. This is where half of Spain started its family projects. Today, nothing similar is done, not due to lack of land around cities, but lack of political will.

---

With these premises, Montero’s proposal has a communication problem she herself fuels: if the diagnosis is that the market treats housing as an asset, the solution cannot be to freeze supply. And if the problem is that too much is built, someone must explain why the deficit keeps growing.