Spain is implementing a bold strategy to address its housing crisis, including a hefty tax on non-EU property buyers and measures to support local renters. With housing prices soaring, especially for the youth, the government aims to discourage foreign investment while encouraging landlords to offer affordable rentals. Additionally, plans include creating a new state housing company and potentially eliminating golden visas for foreign investors. However, the government faces challenges in garnering support for these initiatives amid opposition and concerns about property rehabilitation.
Spain’s Bold Initiative to Tackle Housing Shortage
The Spanish government is taking decisive action to address the ongoing housing crisis with a series of drastic measures. A new proposal mandates that non-EU citizens lacking residency in Spain will face a tax of up to 100% on the property value when purchasing real estate. This initiative is part of a comprehensive twelve-point plan unveiled by Prime Minister Pedro Sánchez on Monday.
This significant tax hike for third-country nationals is designed to reduce their desire to invest in Spanish properties, as the nation grapples with a critical need for housing for its residents. Notably, in 2023 alone, non-resident third-country nationals acquired 27,000 homes in Spain, underscoring the urgency of Sánchez’s intervention in the real estate sector.
Addressing the Housing Crisis for Young People
Access to affordable housing has become a pressing issue, particularly for the youth in Spain. According to the real estate platform Fotocasa, property prices have surged nearly 30% over the past decade, while rents have skyrocketed by 78%. Sánchez has highlighted the gravity of the situation, stating that it necessitates immediate and effective measures, which extend beyond Spain to affect all European nations.
In an effort to curtail speculative property acquisitions, Sánchez expressed concern over the oversaturation of Airbnb rentals, stating, “We have far too much Airbnb and far too few apartments.” Currently, cities like Madrid and Barcelona host nearly 45,000 Airbnb properties, contributing to the rising rental costs.
To support local residents, Sánchez intends to incentivize landlords to lease their properties to locals. The government plans to offer financial assistance for renovating apartments, provided they are rented at reasonable rates. Moreover, landlords who comply with the state rental index will be exempt from income tax on their rental earnings, according to Sánchez’s commitments.
A new state housing construction company is set to receive two million square meters of land designated for social housing development. The initiative also aims to gradually release thousands of previously existing apartments from Spain’s bad bank, Sareb, which was established following the real estate crisis in 2012.
Similar to Portugal, Spain is also planning to eliminate “golden visas” for foreign investors by early April. Over the past decade, wealthy individuals could obtain residency permits and Spanish citizenship by investing at least 500,000 euros in real estate or more than one million euros in local businesses. This route has attracted investors from various backgrounds, including Asian millionaires and Russian oligarchs, as well as British nationals post-Brexit.
However, it remains uncertain whether Sánchez can secure the necessary support to implement these measures effectively. His minority government depends on the backing of Catalan and Basque parties, which have historically resisted what they viewed as intrusive housing market policies.
Concerns are also raised regarding the feasibility of quickly rehabilitating the long-vacant and dilapidated properties held by Sareb. The demand for housing in urban centers continues to outpace supply due to limited construction opportunities.
Sánchez’s housing strategy emerges just days after a similar proposal from opposition leader Alberto Núñez Feijóo. While both parties recognize the housing crisis, their approaches differ significantly. The conservatives advocate for public guarantees to facilitate apartment purchases in their governed regions.
Furthermore, the conservatives are pushing for legislation that would allow for the rapid eviction of squatters, who number in the thousands across the country. In contrast to the lengthy legal processes currently in place, the PP aims to introduce rental loss insurance to encourage hesitant landlords to offer their vacant properties.