Social housing has become one of the most important issues in the election campaign. And according to recent Spanish Central Bank report, if nothing is done, the market might explode once more.
The Spanish property market is in complete disarray, as evidenced by the most recent data from the Spanish Central Bank (Banco de España). According to a report, nearly half of all people who live in market-priced rented housing are at risk of “poverty or social exclusion” or live in poverty.
According to the bank report, Spain holds the sad European record. The percentage of the people renting their accommodation on the verge of poverty, is in Spain, much higher than in any other European country. Richer countries such as Germany and France are below this figure, with approximately 29 percent of households at risk of poverty if they must pay market rents. It is still a high figure, but significantly lower than the figure for the Iberian Peninsula.
Another issue is that in Spain, almost everyone has to pay market rental prices because social housing is scarce, accounting for only 2% of total housing stock. This is the figure that establishes Spain as the undisputed European champion. As a result, an increasing number of people are falling into poverty. Spain lags far behind countries such as the Netherlands (30 percent of social housing) and Austria (24 percent), and the only country that comes close is Germany, which has only 9% of its properties in the social housing regime but a much stronger purchasing power.
Spain is also at the top of another list. According to the report, households in Spain must spend 41% of their income on rent, which is nearly double the European average. Only Greece outperforms Spain in this category.
The BdE highlights the massive changes that have occurred since the financial crisis. It refers to the “sharp decline in the proportion of households owning a home observed in Spain since 2014.” In recent years, this has contributed to a “increase in wealth inequality,” according to Angel Gavilán, the central bank’s Director General for Economics and Statistics.
In reality, this trend began earlier, with the 2008 property bubble. Thousands of families lost their homes during this period because they were unable to pay the inflated interest on their mortgages. Unemployment was also a factor, but not as much as tying interest rates to Euribor. When Euribor skyrocketed during the financial crisis, many people’s interest rates became unaffordable.
While banks were bailed out with billions in tax money, countless families were evicted from their homes. The rental market’s limited supply was suddenly confronted with high demand, driving up prices. With no social housing available to slow down this process.
The number of people living in their own apartments has decreased dramatically since 2011. At the time, nearly 83 percent of households owned their homes; by 2020, this figure had dropped to just under 74%. The proportion of young people under the age of 35 living in their own homes has nearly halved from 69 percent previously recorded.
Young people in particular were pushed into the rental trap. Exploding prices and loss of purchasing power made rents increasingly unaffordable. Employees in Spain have lost an average of 5.5 percent of their purchasing power in 2022, according to the Organisation for Economic Cooperation.
To illustrate the problem, the bank has pointed out that, for example, rents in Barcelona, Catalonia, increased three times faster than wages between 2010 and 2020. In 2022, the average rent in Barcelona was 1077 euros, surpassing the minimum wage that many people must live on.
The government squandered four years by doing nothing. It has done little to prevent both social inequalities and lethal inflation. Mortgages are becoming unaffordable once more, even for those who obtained them through new, much more controlled processes designed to prevent another property bubble.
Because there will be more people needing to rent, this will result in a new wave of repossessions and even more pressure on the rental market, with not enough social housing in sight.
The new housing law, which was enacted shortly before the upcoming elections following lengthy negotiations between Prime Minister Pedro Sánchez and coalition partner Podemos, is expected to result in no rent reductions. They may even rise by 3% in 2024, after which the increase should be limited to the inflation rate. The wage gap will widen further if wages do not keep pace. The number of evictions from rental properties will rise as well.
The positive aspect of the law, which was passed by the Senate on Wednesday, is that “greater emphasis is placed on the necessary increase in the rental offer,” according to the BdE. However, it will be many years before this can be noticed.
So far, the Socialists have resisted calls from junior partner Podemos to finally make “toxic” properties that Sareb has taken over from banks available. This will soon change. However, the government admits that 50.000 Sareb properties destined for social housing, together with another 15.000 more to be built, might be far from enough
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