The Difficulty of Moving to Work in Madrid or Barcelona: High Housing Prices Slow Labor Mobility and Widen Inequality

The International Monetary Fund (IMF) has focused on an issue affecting many of us: the rising cost of housing. It is not merely that it costs more to have a roof over our heads; this phenomenon has direct consequences for our economy, slowing worker mobility and widening the gap of inequality.

The IMF has published two studies, one focused on Spain and another on the European Union in general, and the conclusions are quite clear and worrying. Essentially, rising prices, whether for rent or purchase, are making it difficult for people to move to areas with more job opportunities and, consequently, where wealth is generated.
Historically, labor mobility has been a key element for efficiently allocating the workforce—that is, for people to work where they are needed most and where they can be most productive. When this doesn't happen, everyone loses.

The study on Spain provides a very graphic illustration of this. Labor mobility, as we said, is an engine that allows workers from areas with less employment and lower productivity to move to regions with better prospects. This, in turn, boosts overall productivity, helps reduce chronic unemployment, and allows local economies to adapt better to economic ups and downs. And this is where the real estate market comes into play. If affordable housing does not exist, moving to another city or province becomes an almost impossible mission.

The IMF economists estimate that higher housing prices 'significantly discourage' internal movements of people. To give you an idea, a 10% increase in housing prices in the place a worker wants to move can reduce their decision to relocate by 4%. Conversely, if prices rise in their place of origin, a 'push effect' is generated, making people leave more. A 10% increase in housing costs in the departure area can increase emigration by 2.8%.

This push effect is particularly notable among groups such as young people and immigrants. In these cases, a 10% increase in housing prices in their place of origin can lead to migration flows abroad increasing by between 6.2% and 7.9%. Why? Because these groups generally have less access to property ownership and are more flexible in choosing where to live, making them more sensitive to fluctuations in the real estate market.

The interesting thing is that the study indicates this effect is even more pronounced when discussing rentals, reaching two or three times higher than in the case of purchasing. This tells us that housing cost is a determining factor in moving decisions, and that lack of affordability specifically affects the youngest and newcomers.

The data for Spain is conclusive. Researchers calculate that if housing prices in the most productive provinces (such as Madrid, Barcelona, or some in the Basque Country) had not risen faster than inflation between 2017 and 2023, about 63,000 more working-age people would have moved to these areas. In practice, only about 1,700 did.
The mentioned provinces, along with the Balearic Islands, are those that have seen the most dramatic increases in both purchase and rental prices.

Although the direct impact on GDP from these migrations would have been 'modest' (around 0.05% during that period), it must be noted that these benefits accumulate over time. Furthermore, experts warn that this figure could be an underestimate, as it does not account for 'agglomeration economies.' These refer to how the concentration of economic activity in one territory can boost productivity. Nor are the benefits of attracting dynamic regions to new waves of international immigrants taken into account.

It is important to remember that young people, who are currently suffering the most difficulties accessing housing, are also those who have historically moved geographically the most. In 2023, almost 57% of inter-provincial residential moves in Spain were made by people aged 16 to 35, despite only representing 33% of the working-age population. Similarly, those born abroad accounted for 47% of moves but only 22% of the active population. The conclusion is clear: housing price increases have a significant impact on geographical mobility, as the groups most sensitive to these prices are precisely those who move the most.

This problem, far from being exclusive to Spain, is a reality across the entire European Union. The other IMF study confirms that rising housing costs significantly affect migratory movements throughout the EU. It is estimated that affordability constraints on housing could have caused about one million internal EU relocations to be cancelled in the last decade.

And we return to inequality. The IMF points out that rising housing prices are widening the wealth gap between those who own property and those who rent.
The probability of accessing ownership for households without sufficient savings to buy or rent has been halved since before the 2008 financial crisis.

Regarding productivity, the report stresses that poor housing affordability also harms macroeconomic efficiency. Using data from various European regions, the study concludes that high housing costs discourage immigration to areas with higher labor demand. In other words, lack of affordable housing weakens the adjustment of the labor market and reduces the efficiency with which labor is allocated across regions, especially those experiencing growth.

In summary, the IMF delivers a serious warning: high housing prices are not just a pocket problem; they are acting as a brake on the economy as a whole. They make it difficult for workers to move where they are needed most, which limits productivity and efficiency. At the same time, they are creating a growing gap between owners and renters, exacerbating inequality. It is a vicious cycle that requires urgent attention if labor mobility and economic prosperity are not to be stuck because of a roof that is becoming increasingly unattainable.