Spain's housing crisis: three paths, no deal, and one awkward fact

Housing: half the price of a new flat is already land and taxes

The usual suspect—the big fund buying entire buildings—matters far less than the story suggests. In Madrid, Blackstone has amassed 19,000 rental homes, a huge number in absolute terms and tiny compared to the total stock. More than half of landlords who rent out own just one or two properties. If hoarding were the cause, the arithmetic wouldn't work. It doesn't.

What does work is a mix of mutually reinforcing factors: a population growing every year—500,000 new residents by some estimates, up to 800,000 by others—, new supply that never arrives, owners' antiestéticar of squatting and default, pure touristification, and a rental law that, depending on how you look at it, either brought order to the market or emptied the long-term supply. The latter is what those who remember that many landlords pulled their flats when mandatory extensions were broadened argue.

Why do rents rise if there are empty homes?

Because the empty home isn't where people are looking, and often isn't on the market by its owner's choice. Antiestéticar of squatting and default keeps homes closed that would otherwise be rented, and new construction doesn't fill the gap: it builds product at €400,000, not the €150,000 most people need. Half the price of new housing is land and taxes, according to the breakdown that keeps coming up, and on top of that are ever-growing regulations that make every square metre more expensive.

There's a jarring figure: up to three million empty homes are mentioned, against three million couples that could form. If both figures were true, the problem would be solved by a mass move. It doesn't happen, and that's the clue that the market isn't failing on price alone: it fails on location, on the landlord's legal certainty, and on expected returns. Owners rent out to make money; if risk rises and returns fall, they hide the property. And they hide it in short-term or room-by-room rentals, where the five-to-seven-year extensions don't reach.

The proposed taxes: 0%, 25% and 50%

The most repeated tax recipe is a scale based on the number of properties: zero rate for the first home, 25% for the second, 50% for the third and beyond. Along the same lines, banning sales to legal entities and capping the number of homes per owner, arguing that anyone who wants to invest in real estate should do so in offices, warehouses or commercial premises.

The package includes more: banning purchases by those without a Spanish ID, giving non-resident owners six months or a year to sell—with confiscation of the property if they don't, in the harshest version—and public loans at 1% fixed for developers. On the other side, the textbook response: close the Ministry of Housing and repeal all housing legislation. The irony is that both sides start from the same diagnosis—that the market is already de facto intervened—and only disagree on the direction of intervention.

What happens if rents are capped?

A cap of €10 per square metre per month and €1,000 per square metre for sales sounds like a definitive solution. The problem is that €1,000 per square metre is below construction cost, and a rent of €10 per square metre per month is equivalent to a home selling at about €2,000 per square metre. With those numbers, developers don't build and owners don't rent. Supply disappears before the price does.

Another, softer formulation sets rent at 40% of the country's average wage and limits properties per owner. Those in favour of intervention point out that the alternative has already been tried and the result has been a decade of increases. The response is the law of supply and demand with a warning: capping or banning takes stock off the market, and a recurring calculation puts the effect at a 50% rise in rents rather than a fall.

Demography, the argument that splits the debate

Here the tone rises. Every year Spain takes in around 800,000 people according to one of the figures used, with no equivalent provision for housing, healthcare, education or transport. This is the axis of part of the analysis, which calls for linking home purchases to residence and, in the harshest versions, mass deportations. The other side responds that the phenomenon isn't Spanish: Toronto supports average wages of CAD 70,000 with homes at a million, and Madrid is heading towards a €30,000 average salary against an €800,000 average flat. Canada doesn't have a land problem.

The uncomfortable coincidence is that the countries with the most resources and best data have spent a decade failing to solve this. Hence a school of thought holds that the solution can't be local: any measure clashes with a global capital market. In that terrain, territorial deconcentration produces the unintentional moment of the function: moving institutions to empty out big cities sounds good until someone remembers that moving a single faculty means relocating 14,000 students and 2,000 workers.

From 'build like in the 60s' to wage stagnation

The conversation drifted where it always does: whether the problem is bricks or pay. One camp argues that cheap housing is banned by regulation, just like affordable cars: there are lots full of unsold vehicles and prices that won't fall, a sign that the affordable product isn't made because it isn't profitable to make it. Applied to real estate, the diagnosis is that luxury is offered to those who can't pay for it.

The other axis is the paycheck. 30 years of stagnant wages are cited, along with four million people struggling seriously to make ends meet, with a painful detail: Spain's minimum wage is around €21,000 a year against Germany's €26,000 and France's €30,000. And the cursed word appears: productivity, precisely defined as gross value added per hour worked. It's not that fewer hours are worked here, that analysis argues, it's that each hour generates less value because capital per employee, company size and management quality are lower.

At the end, someone drops that anyone who inherits a settled position will never know what it's like to pay €1,200 for a dive in Vallecas. All the diagnoses are on the table and none is entirely false. What if the price were the symptom and not the disease?