The scarcity of housing in Spain, particularly among young people, presents a growing challenge that is becoming more complex with each passing day. The country’s strong economic performance, as confirmed by the recent positive report from the IMF, may alleviate some sense of urgency, with the IMF experts forecasting a GDP growth of over 2% for the current and next year, supported by a dynamic labor market and a competitive productive sector in a complex global context. However, the housing shortage, recognized by the IMF as a major social issue, could become a significant limitation, hindering mobility to dynamic areas and constraining talent attraction. This is particularly detrimental to the Spanish economic model, which relies heavily on labor force participation, with little productivity growth. The rising housing costs also contribute to inflation, affecting production costs and indirectly influencing salary demands.
The main bottleneck seems to be the lack of supply: in recent years, only about half of the necessary housing has been built to meet the demand driven by population growth, resulting in a growing deficit, even if all vacant homes were put on the market or vacation rentals were halted. However, some key questions remain open. Firstly, contrary to some claims, the residential construction deficit is not due to a shortage of urban land, as urban land is abundant in Spain, given its low population density. Despite the post-financial crisis drop in land prices, the price of land remains low, indicating that the market alone will not solve the scarcity issue. Providing legal certainty to developers, particularly in terms of administrative procedures and legal challenges, is necessary to unlock construction on available land.
Investment allocation also plays a role in addressing the housing shortage, especially given the demand from the rental segment, which is crucial for mobility and young people’s independence. Releasing more properties for ownership might not alleviate this unmet demand efficiently; instead, focusing on expanding the rental market could be more effective in the long term. Another factor, according to the sector, is uncertainty regarding construction costs and labor availability, which could limit investment. Increasing training programs for the unemployed and improving labor conditions could help address the perception of scarcity. However, anticipating rising production costs and delays in support initiatives for the sector may only postpone construction activities.
As the housing supply scarcity intensifies, finding a solution becomes more complicated, requiring a comprehensive plan to address various investment obstacles. Lowering interest rates and demand support measures, which are generally ineffective, will not halt the rising prices and the shortage of affordable housing. In terms of rental housing, Spain’s situation mirrors that of other Mediterranean countries, with around a quarter of the population residing in rental properties in 2023, up from less than 20% before the financial crisis. Compared to Central European countries like Germany and France, where over half or around 40% of the population live in rental accommodations, respectively, Spain still lags behind. Additionally, only one in three tenants benefit from reduced or subsidized rents in Spain.
