Spain's VPO housing: buy at capped price, resell for double

The VPO that gets released after 25 years and resold for double

There is a business that, according to some participants in a forum debate, never appears in any developer's brochures: buying protected housing at a capped price and waiting until the rules allow it to be declassified so it can be put on the open market. One forum user claims that whoever did this with a 100,000-euro flat is now selling it for 270,000. The debate over Spain's VPO law (the law governing officially protected housing) is back on the table with an uncomfortable question: why is a public housing stock built with advantageous land and permits allowed to end up in the speculative market without giving anything back to the system?

The key lies in a deadline. After 25 years, officially protected housing can be declassified and move to market prices, according to the argument in the debate. In the Basque Country that deadline used to be 15 or 20 years; the law was then changed and now they are never released, or take 75 years, according to one participant. Catalonia recently passed a rule that bans selling or renting at market price even after the deadline has passed if the flat is in a high-pressure housing area, and with no compensation for the owner, according to another. Three models, three different outcomes, and none of them really solves the underlying problem.

What it means for a VPO to be subsidised

There is a confusion running through the whole issue: the idea that VPO housing is paid for with public money. Not exactly, as argued in the debate. Protected housing can be developed by a private company or a public administration, and the only thing that defines it is that it meets certain technical requirements and is sold at a capped price. In areas where planning rules require a minimum share of protected housing, market-price homes simply cannot be built there. The extra cost is not borne by the taxpayer: it is borne by the developer who gives up margin, one participant argues.

That said, the practical result, according to the thread, is that there are provinces where VPO housing is more expensive than market-rate housing. There have been cases of new 80-square-metre flats awarded for more than 200,000 euros, according to one forum user. If the buyer pays that, where is the subsidy? The question is not rhetorical: it is the one asked by people who earn too much to qualify for a VPO and too little to compete in the open market without a mortgage up to their eyebrows.

The unfairness felt by those who pay but never get in

There is a strand of opinion arguing that the very concept of VPO should disappear. Its argument: if the state is responsible for making flats unaffordable, it makes no sense for it to then hand out cheap homes to a lucky few at its own discretion. Those left outside the quota pay taxes to subsidise their neighbour's flat and, on top of that, are expected to applaud.

On the other side weighs a different argument: without protected housing, all available land would go entirely to the open market and prices would not fall, because demand would still be there. VPO housing does not make market-rate housing more expensive; it simply reserves part of the land for those who cannot pay for the rest. The problem is not that it exists, but how it is allocated and what happens when it is declassified.

The Basque and Catalan cases: two ways of closing the door

For years the Basque Country saw a steady trickle of declassifications: flats bought at capped prices that, after 15 or 20 years, entered the open market with considerable capital gains, according to the debate. The response was to change the law so that they are never released, or on deadlines so long they amount to never. Catalonia has gone further: in high-pressure housing areas, the owner cannot sell or rent at market price even after the deadline has expired, and the rule provides for no compensation whatsoever, it is argued.

That raises a first-order legal problem. If the owner bought under one set of rules and the administration changes them halfway through the game, is that not de facto expropriation? The answer will be up to the courts. Meanwhile, the market looks the other way and investment funds keep finding cracks to slip through.

Who ends up living in a VPO

In theory, protected housing is for living in. In practice, exceptions are admitted, as noted in the thread: civil servants posted to another city who rent out their VPO at the maximum price with undeclared extras, successful applicants whose financial situation improves and who sell, and people with enough wealth not to need it. It is not the norm, but it happens, and every case that comes to light erodes the legitimacy of the entire system.

Public housing should never have passed into private ownership, another strand argues. If the protected stock had remained in public hands as rental housing, there would be no private capital gains and no comparative grievances. It is a debate that has been on the table for decades and that nobody seems willing to close.

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Given all this, the likely outcome is that the next reform of the VPO law will once again fall halfway: patches to the deadlines, exceptions by region, and an underlying problem left intact. If the real goal were for protected housing to stay protected, it would be enough not to sell it. But that would miccionan giving up a model that has been quietly generating capital gains for decades. And nobody wants to bell the cat.