Receive free updates from the real estate sector
we will send you a myFT Daily Recap email gathering latest Real estate news every morning.
Spain plans to use a “bad bank” born of its latest financial crisis to create up to 50,000 public housing units as the country and neighboring Portugal seek government-led solutions to the rising cost of property.
The countries – two of the poorest in Western Europe – want to reverse a legacy of underinvestment in public housing that means they have the most limited stock of subsidized housing in the region.
The measures reflect the pain caused across Europe by a housing boom that has far outpaced wage growth in most countries. For some people, rising rental rates, mortgage bills, and real estate prices dwarf food and energy prices as the brunt of the cost-of-living crisis.
Spain’s cabinet will later on Tuesday approve a plan that will increase the national stock of 290,000 public homes by 17 percent using properties from its bad bank, set up in 2012 to absorb the toxic assets of failed lenders after a bubble burst. real estate. four years before.
Pedro Sánchez, Spain’s prime minister, said the measure would address a “genuine and huge problem” by making more housing available at fair prices, especially for young people. “Housing in Spain is a constitutional right, but not a real right. Young people have to wait an unacceptably long time to access housing and become independent, ”he said.
The severity of the problem was underscored on Monday by new data from property portal Fotocasa showing that rental prices in Spain hit a new record in March, rising almost 10 percent from a year earlier to 11.55 euros a month per meter. square.
Sharp interest rate hikes by the European Central Bank over the past year mean borrowing costs for mortgage holders are now at their highest level in a decade. Spanish housing is the least affordable since the end of the country’s property boom.
In Portugal, residential property has never been so expensive relative to income and there is great angst that local residents are being excluded from Lisbon and Porto, its largest cities.
Marina Gonçalves, Minister of Housing, told the Financial Times: “The responses in the private market are not enough.”
Portugal’s government last year approved plans to invest 2.4 billion euros in public housing by the end of 2026. Last Friday, it presented to parliament a housing bill that would allow the state to convert vacant private properties into social housing, but with rent payments still going on. owners.
“This is a problem throughout Europe, so we must promote new responses,” said Gonçalves.
Although estimates vary, public housing represents approximately 2 percent of Portugal’s housing stock and between 1 and 3 percent of all housing in Spain (below the EU average of 7.5 percent). percent and far from 14 percent in France and almost 17 percent in the United States). UNITED KINGDOM.
The figures reflect the fact that public housing has been only a sporadic political priority in the Iberian Peninsula since the collapse of its dictatorships in the 1970s. Instead, various democratically elected governments have used public subsidies and tax incentives to encourage housing. people to buy their own properties, giving the countries the highest levels of home ownership in Western Europe, at over 75 percent.
In more recent years, the fiscal costs of the financial crisis that began with the 2008 housing crisis left governments in the region with limited scope to undertake new spending.
Socialist-led governments in both countries are carrying out broader reforms to make their private property markets fairer, but say public housing is crucial.
Spain plans to sell 21,000 vacant properties from its bad bank, known as Sareb, to regional and municipal governments so they can convert it into public housing. It will also formalize the status of 14,000 Sareb homes that are occupied but in limbo because, for example, the tenants signed rental contracts with developers that later went bankrupt, according to a government official.
The final part of his plan is to make vacant land belonging to the bad bank (which is majority owned by the central government) available for the construction of 15,000 new public housing units.
Jesús Leal, a sociologist and professor at the Complutense University of Madrid, said that “public housing is the only long-term solution” to an affordability crisis.
But he said he was “a bit skeptical” whether Sánchez’s new plan would be effective because Spain’s property crisis is most acute in big cities like Madrid, Barcelona and Valencia, while bad bank properties are elsewhere.
Many of its real estate assets are near the Mediterranean coast of Spain, but they became toxic because they were not in prime locations but some distance from the beach and employment centers.
The head of the government stated: “Obviously Sareb does not have buildings in the center of large cities. But the quantity is important. Fifty thousand homes is a very high number compared to the total amount of public housing available today.