Good evening! This week's edition of the In Common newsletter comes from Kaitlin Dryburgh, policy and communications co-ordinator.
Europe is grappling with a housing crisis and rarely a week goes by without a bad news story attributed to the lack of affordable housing.
It’s encouraging to see that some are taking the right steps to roll-back on the profit-making approach to the housing. Spain’s Government has announced plans to introduce a property tax of up to 100% on second homes in the country bought by non-EU member residents. If passed it won’t solve all issues, but it’s definitely a good start for a country that has had their housing market heavily impacted by the tourism industry.
However, in a further development, the Spanish Prime Minister Pedro Sanchez has floated plans to outright ban residents from outside the EU buying homes in Spain.
On the whole this is a rather significant U-turn, considering in 2013 Spain was flouting its Golden Visa Scheme, which allowed non-EU member residents to gain residency in Spain if they invested €500,000 in property. Not surprising then that no more golden visas will be handed out after April.
This has been a fairly big news headline in the UK as a large proportion of those non-EU residents are from the UK (this won’t come as a surprise since we have daytime TV shows all about Brits finding the perfect holiday home, often in Spain), as well as US and South American nationals. Like many of those living in busy cities that attract a lot of tourists, locals are being priced-out. The rise of the holiday rental and those wishing to expand portfolios has lessened the housing available to the ordinary Spaniard and bumped prices up to a level that many can’t compete with.
Spain has a particularly high concentration of second-home owners. In 2023 alone, non-EU residents bought 27,000 properties. Combined with the fact that only 2.5% of Spain’s housing is social housing, this has created a perfect storm, making Spain’s housing market appear more like a speculative investment opportunity than a place for people to live. It’s about time Spain sent the message that the housing market should be for homes, and everyone should be able to afford to live in their own country, without being priced out by a hedge fund manager from Surrey.
Second homes in general, and especially those owned by residents from outwith the country of origin, never help a housing market in trouble. Canada has banned non-resident foreigners from purchasing homes in a bid to make the housing market more affordable. While countries such as Denmark and Switzerland have conditions for non-resident foreigners looking to purchase property in their country.
It wasn’t long ago that there were major demonstrations in Madrid, Barcelona and Valencia, where thousands of Spaniards protested over the unaffordable and unattainable nature of housing. In expensive tourist hotspots some have worked out that it’s cheaper to take a flight to work than actually try and rent there. Unfortunately, with the renters’ market made up of mostly young people, the average person is spending over 40% of their salary on accommodation, which really puts them at risk of falling under the poverty line.
Spain is by no means alone in its quandary. Their economy heavily relies on tourism, yet this spiralling industry is starting to kill the locals. Other hotspots like Venice have a list as long as your arm concerning the problems with tourism (in Venice, sinking should be top of that list ... but second should be their lack of housing for locals). They have approached this via a tourist tax, of which many are sceptical about whether it’ll preserve the population of native Venetians; so far it hasn’t really done much good. Spain on the other hand seem to be taking the correct first steps, but do they go far enough?
Non-EU members are a good start, but they’ve still left the door wide open for residents of other EU countries, and within Spain, to snap-up housing and push prices up. Corporations and investment portfolios are also free to speculate.
A tax will of course raise some welcomed funds, but how much housing will really be freed up from this move or indeed reduce in price? I think it’s fair to say not a lot.
Although Brits and other non-EU member residents do enjoy a bit of Spanish real estate, on the whole we only make up around 4% of all properties bought in Spain ever year. So there’s still a lot more to do. The lack of social housing is a significant challenge, one that won’t be overcome unless they build more houses. Rent controls, further regulation on landlords, proportionate property tax and subsidies (ones that don’t just benefit construction companies) to organisations like housing cooperatives are policies that we all need to be deploying to ease our spiralling housing markets.
Last year the Scottish Government announced a housing crisis. Not a lot has happened since. So keep going Spain, and Scotland? Could we do a bit more learning from elsewhere?
