Santiago de Compostela: BNG mayor bans tourist flats, rents skyrocket
The ban on tourist flats in Santiago de Compostela, Spain, has sent rents soaring: more supply, but sky-high prices. Does rent intervention work?
English · Original discussion in Spanish · Published
Santiago de Compostela: banning tourist flats sends rents soaring (and nobody is surprised)
When the BNG mayor of Santiago de Compostela decided to ban tourist flats and declare the city a "stressed rental area", she presumably hoped to ease the rental market. The result: prices have skyrocketed. According to data from the city council itself, two years ago it was possible to find 11 flats for under 500 euros a month; today not a single one remains at that price. There are currently 60 flats for under 600 euros, a figure that sounds good until you realise they used to be far cheaper. Supply has increased, yes, but prices are not coming down: the economic theory of the herd clashes head-on with reality.
More supply, higher prices: the law of supply and demand does not apply
The paradox has a name: the tourist-use dwellings (VUT) that have returned to the traditional market have done so at high prices. Owners are trying to recoup their lost investment and set rents at the level tourists used to pay. The result is that, although more flats are available, the affordable stock has evaporated. Public intervention, far from making things cheaper, has triggered an escalation in the metropolitan belt: in Ames, Oroso and Teo there are no longer any flats for under 600 euros. Renting on the outskirts costs the same as in the centre.
Two positions facing the same disaster
On one side, those who argue that housing does not trinc market laws and demand more intervention: banning investment funds, capping prices, expropriating. On the other, those who point out that the only way to make something cheaper is for it to be abundant, and that until more is built or demand is discouraged, any price control will simply shift the problem elsewhere. The empirical evidence from Santiago proves the latter right: the ban has not created a single new flat, it has only redistributed scarcity.
Santiago's metropolitan belt, the next battleground
Data from April 2026 confirm that the border effect has spread to the municipalities of the metropolitan area. The report by the Axencia Galega de Inmobiliarias (Galician real estate agency association) reveals that there are more flats available in Ames, Oroso and Teo, but at higher prices. Demand has not disappeared, it has simply moved outward, driving up land prices and pushing out lower-income tenants. The uncomfortable question: how much further can the bubble stretch before it bursts?
Related debates in the forum
When the BNG mayor of Santiago de Compostela decided to ban tourist flats and declare the city a "stressed rental area", she presumably hoped to ease the rental market. The result: prices have skyrocketed. According to data from the city council itself, two years ago it was possible to find 11 flats for under 500 euros a month; today not a single one remains at that price. There are currently 60 flats for under 600 euros, a figure that sounds good until you realise they used to be far cheaper. Supply has increased, yes, but prices are not coming down: the economic theory of the herd clashes head-on with reality.
More supply, higher prices: the law of supply and demand does not apply
The paradox has a name: the tourist-use dwellings (VUT) that have returned to the traditional market have done so at high prices. Owners are trying to recoup their lost investment and set rents at the level tourists used to pay. The result is that, although more flats are available, the affordable stock has evaporated. Public intervention, far from making things cheaper, has triggered an escalation in the metropolitan belt: in Ames, Oroso and Teo there are no longer any flats for under 600 euros. Renting on the outskirts costs the same as in the centre.
Two positions facing the same disaster
On one side, those who argue that housing does not trinc market laws and demand more intervention: banning investment funds, capping prices, expropriating. On the other, those who point out that the only way to make something cheaper is for it to be abundant, and that until more is built or demand is discouraged, any price control will simply shift the problem elsewhere. The empirical evidence from Santiago proves the latter right: the ban has not created a single new flat, it has only redistributed scarcity.
Santiago's metropolitan belt, the next battleground
Data from April 2026 confirm that the border effect has spread to the municipalities of the metropolitan area. The report by the Axencia Galega de Inmobiliarias (Galician real estate agency association) reveals that there are more flats available in Ames, Oroso and Teo, but at higher prices. Demand has not disappeared, it has simply moved outward, driving up land prices and pushing out lower-income tenants. The uncomfortable question: how much further can the bubble stretch before it bursts?
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (18 replies).
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