The speculative housing market and the non-market

Housing isn't bought like a bicycle: in most cases it is paid for with a mortgage, and the price depends on credit and the public aid that bailed out the banks. That is why talking about a free housing market is, at the very least, debatable.

## The mortgage is not a detail

When someone buys a home, they rarely put down all the money. The norm is a mortgage: the bank advances the price and the buyer takes on a debt of **20, 25 or 30 years**. That is not buying a bicycle. The price is not set only by the seller and the buyer; it is also set by how much credit the bank is willing to provide and at what rate. Mortgage lending in Spain accounts for hundreds of billions of euros.

While the mortgage is alive, the home stands as collateral for the debt. If you don't pay, the bank enforces the guarantee. To call that private property without qualification is misleading: there is a contractual relationship with a creditor that conditions use, sale and staying in the home.

## From the bank bailout to the price of housing

After the 2008 crisis, the Eurogroup approved in **2012** a line of up to **100 billion euros** from the ESM to recapitalize Spanish banks. In **2012**, SAREB was created, the company that absorbed troubled real estate assets from the rescued institutions. The FROB (Spain's bank restructuring fund) channeled the public aid. That money was not neutral: it propped up bank balance sheets and limited the fall in prices.

Some argue that, without that backstop, homes could have been bought below the cost of construction. It is a hypothesis, not a fact. What can be verified is that the state put public money into the system and that the market was conditioned by that intervention. That public backstop is what some call the non-market of housing: a price sustained by political and credit decisions.

## Usury and necessity: the business of a roof

The **Ley de Represión de la Usura de 1908** (the 1908 usury law) remains in force in Spain. It was introduced to curb loans with disproportionate interest. The **Tribunal Supremo** (Spain's Supreme Court) has applied it in cases involving revolving credit cards and loans with very high interest rates. In housing, the problem is not only the rate: the need for a roof turns the buyer or tenant into a captive customer.

Some warn that if rents fall sharply, part of the banking sector could run into trouble again, because the value of collateral and the ability to pay would suffer. There is no single lending monopoly, but the mortgage market is concentrated and regulated. Talking about usury is not a sarracena metaphor: it is a legal and economic matter. Any long-term borrowing decision should be discussed with a professional.