Cost-effective ways to balance supply, demand for rent in Spain.

Current position of the real estate market in Spain and Catalonia

Factors that reduce the supply of floors

1. Immigration and growing demand: Spain welcomes hundreds of thousands of immigrants every year. In fact, in 2023, the INE reported an increase of 537,611 people in the population, mainly thanks to immigration. This has led to an increase in the demand for housing, especially in cities such as Madrid and Barcelona, as well as in their metropolitan areas, which are places highly sought for by the job opportunities and services they offer.
2. Vacation and seasonal rentals: In Cataluña, with the arrival of the Housing Act in March 2024 and the designation of 271 municipalities as tensioned areas (covering 90% of the population), many owners have decided to rent their flats on a temporary or holiday basis, thus avoiding the price limits. According to data from the Govern, the traditional rental offer decreased by 17.2% during the second quarter of 2024, while the tourist rent had a notable increase in Barcelona and the Costa Brava.
3. Few construction: Spain builds some 80,000-100,000 homes per year, compared to an estimated demand of 250,000, according to experts like Gonzalo Bernardos. The lack of labor, slow permits and high taxes deter the promoters, leaving a structural deficit.
4. Investment funds: The large investment funds, such as Blackstone and Cerberus, are acquiring housing lots or even full buildings, especially in urban areas. In Cataluña, after the implementation of the rental control, some of these funds have decided to sell or maintain their empty properties, awaiting better returns, which in turn decreases the offer available.

Consequences: rising prices and closed floors

• Offer and demand: With less floors on the market and a demand that does not stop growing, prices do no more than climb. In Cataluña, despite the fact that there has been a 5% drop in the most stressful areas (according to Govern, October 2024), the average price remains 865.56 â¬/month, something that is unattainable for many, considering that the average per capita rate is between 18,000 and 20,000 †annually (INE, 2023).
• Closed floors as strategy: Many owners choose to leave their flats empty or rent them only when prices are really attractive, as during the high season tourists. This is because the black market or holiday rental gives them greater benefits without the limitations imposed by the Housing Act.

Annual income and affordability

The affordability of housing is typically measured as the percentage of income allocated to it. The UN recommends not to exceed 30% of family income. In Spain:

• Average annual income: Varà a by zones. In Cataluña, it is about 19,500 †annually (1,625 †/ month), but in Barcelona it exceeds 22,000 †(1,833 †/ month). In rural areas, it falls to 15,000-17,000 â ¬.
• Current prices: In tensioned areas such as Barcelona (1,131.75 â€/months of average rent), an average person spends 62% of his/her rent per card, far above the sustainable threshold. In unstressed cities (603.83 â ¬ / month), it remains 37%, also high.

This indicates that current prices are unsustainable for most, especially in tensioned areas where everyone wants to live by proximity to employment, services and quality of life.

Cost-effective ways to balance supply, demand and affordability

In order to make the floors profitable for the owners and assumable for the population, solutions that combine private incentives, public intervention and regulatory adjustments are needed. Here are specific proposals:

1. Increase housing supply

• VPO Massive construction: The State and the Autonomous Communities (such as Cataluña, with the Salvador Illa plan of 50,000 public housings up to 2030) must accelerate the construction of Official Protection Housing (VPO) for affordable rent. This requires:
  • Reduce bureaucracy (permissions in months, not years).
  • Subsidize private promoters with tax exemptions in exchange for regulated rents (e.g., 500-700 â¬/month in tensioned areas).
  • Public-private partnerships with investment funds to build and manage whole buildings at controlled prices.
• Repair of empty floors: In Spain there are about 3.4 million housing units (INE). Increase your marketplace with:
  • Tax bonuses (IRPF reduction to 70-90% if rented at affordable prices).
  • Grants for reforms, conditioned on long-term rents.

2. Regular holiday and temporary rental

• Limit to tourist rental: In Barcelona, the patronal Apartur claims 1 billion for licensing limitations. An intermediate solution would be:
  • Establish a maximum quota of turmoil floors per neighborhood (10-15% of the total).
  • Force owners to allocate a percentage of their properties to traditional rentals (e.g., 1 in 3 floors).
• Seasonal rental control: Regular contracts of less than one year (up to 6 months, as proposed by the Govern) and penalize their use to dodge the Housing Law, with fines or licenses.

3. Include small owners

• Staple tax benefits: In tension zones, increase the reduction of the IRPF (currently 50%) to 70% if the rent is below the reference index (example: 951 †in Sant Cris, Barcelona, compared to 1,827 †today).
• Public assurances: Subsidize non-payment and damage insurance to reduce the fear of rent, compensating the lowest profitability safely.

4. Limit the speculation of investment funds

• Taxes on accumulation: Gravar with progressive rates to funds that maintain more than 10 housing units or allocate them exclusively for holiday rent.
• Social rental: To demand that a percentage (20-30%) of housing acquired in lots be rented at regulated prices (e.g., 600-800 †in Barcelona).

5. Adapting prices to per capita income by area

• Index of local affordability: Adjust the Reference Price Index of the Ministry not only by the characteristics of the floor, but by the average income of each municipality. Example:
  • Barcelona (renta per cápita 1,833 â ¬/month): More than 550€ (30% of the rent).
  • Lleida (renta per cápita 1,400 â ¬ / month): Maximum rental of 420 â¬.
• Direct subventions to tenants: In tensed areas, supplement the income of low-income households (up to 1,500 â€/month) with aids of 200-300 †monthly, financed by taxes to large holders.

6. Promoting decentralization

• Incentives to live outside tension zones:
  • Improve infrastructures (transport, schools, hospitals) in rural areas or medium-sized cities (Tarragona, Girona).
  • Subsidize rents or mortgages in these areas (100-200 €/month) to reduce the presiding over Barcelona and Madrid.

Rentability for owners and affordability for tenants

• Owners: With these measures, a small owner in Barcelona could rent 600€/months (compared to 1,131 †current) and obtain a net profitability of 4-5% per year thanks to tax exemptions and security, while a fund could diversify between regulated rent (higher volume) and holiday (higher margin).
• Tenants: A rent of 550-700 †in tension zones would be assumed for average income (30-40% of income), and direct aids would cover the most vulnerable.

Conclusion

The mixture of immigration, holiday rentals, low construction and massive purchase by funds has generated a market where the offer is limited and prices are triggered. This has led some owners to choose to keep their floors empty until profitability is the ideal. However, there are viable solutions, such as increasing construction, regulating the tourist rent, encouraging the owners and adjusting the prices according to the per capita income, which could change this situation. In Cataluña, where 90% of the population lives in areas with high demand, the challenge is even greater. But with mixed policies that combine private incentives and public control, you can find a balance that benefits everyone, preventing access to housing from becoming an unattainable luxury.