Spain is a country renowned for its beautiful culture, weather and language; however, it is also home to civil unrest, particularly surrounding the topic of housing. Ever since the 2008 financial crash, more and more adults have been unable to join the property ladder, with 30 years being the average age people can move out and finally get their own place (Real Instituto Elcano, 2023) ¹. But why has this crisis been able to reach such a dangerous level?

20TH Century 

After the Franco Dictatorship collapsed in 1975, Spain transitioned towards more inclusive economic institutions, where property ownership and private rights were more heavily encouraged and enforced. This could be seen partially through the new government encouraging homeownership, such as through the removal of the “Decreto Boyer”, a law that had previously removed strict rent controls (Spanish Property Insight) ². Now, with this law removed, landlords were able to charge higher prices – instead of the low, fixed prices of the Franco Era – and update renting prices once a year, effectively making the rent market controlled by market forces instead of through Government Intervention. However, this created a lack of confidence for renters, and as a result, the majority decided to sell their property instead. This created a surplus of housing on the market, losing prices and subsequently allowing more to get onto the property ladder. 

In 1994, the “Urban Leasing Law” reintroduced protections for tenants to revitalise the renting market (My Lawyer Abroad, 2023) ³ , and in 1998, the “Land Law” deregulated land use, massively encouraging developers to build more. The combination of these 2 new laws both aided renting and buying houses becoming the primary cause of the following Real Estate Boom.

Pre-2008

Before the events of 2008, Spain was prospering like the majority of nations. Banks were offering out sub-prime mortgages (mortgages with higher interest and reduced background checks for those with lower credit ratings), allowing millions to get onto the property ladder. In combination with the events of the end of the 20^th Century, Spain’s housing situation was thriving. By 2007, around 80% of the population owned a property (Statista, 2023)⁴.

However, signs of a market crash were beginning to show. By 2007:

•  House prices were 7x that of the average salary, compared to 3.8x in the 1990s (Banco de España, 2008)⁵. These prices were unaffordable, and the rate of house ownership was stagnating as a result.
• Mortgage debt was rising exponentially, reaching 110% of GDP, as opposed to 37% in 1997.
• There were over 3 million unsold homes, indicating demand was wavering whilst supply remained high, a textbook sign of an imminent crash (Virto Property, 2023) ⁶. 

The Crash

2008 was home to the Financial Crisis, in which the global economy collapsed. 

An overview of the crash is that banks in America, such as Lehman Brothers, had been providing “sub-prime” mortgages to consumers. Compared to regular mortgages, these were provided for those with worse credit and higher risks of defaulting. To manage this risk, the repayment rates were increased, and since house prices were rising at such fast rates, it was believed banks could simply repossess property and sell it for the same (if not higher) price than it was bought for originally. However, the housing market was in a bubble, and burst due to prices rising unsustainably fast. 

Since interest rates had been raised in the US to control inflation, variable mortgage rates had become far more expensive, resulting in many being unable to repay their loans. In combination with house prices falling as the bubble burst, many mortgage holders found themselves owing banks more money than their house was worth, known as negative equity. 

What happened to Spain?

Over the next 5 years following the Financial Crash, over 600,000 foreclosures had been made by Spanish banks, leaving hundreds of thousands desperate without secure housing (Gutierrez & Delclòs) ⁷. As a result, the cost to rent rose drastically, since the majority of Spaniards could no longer afford to outright own property. Homes repossessed by banks were not initially placed back into the market, instead being sold cheaply in bulk to foreign investment firms. This reduced the supply of housing in the market, at a time when it was needed most, further driving up price of renting. Gentrification also became an issue, since some of these investment firms, such as Blackstone, created high-end rentals using these foreclosed properties, which forced out long-term residents of neighbours due to unaffordable prices, instead selling to foreign buyers or the wealthiest of the region. This strategy was so successful that Blackstone is now one of the largest landlords in the country, using its subsidiary Testa Residencial to extend this control. 

In addition, before the crash, 11.7% of Spain’s GDP was based in construction (BBVA Research, 2016)⁸. The collapse of the housing market left many developers unable to continue their business, instead going bankrupt or leaving the market whilst they could. Those who did remain became far more apprehensive about starting large construction projects, with the fear of another crash imminent. Construction projects that had already been started were simply abandoned due to lack of funding. This can be seen most clearly by looking at holiday resorts in Spain. At this time, many were being constructed at the same time, but when this crash occurred, companies had to decide which to complete, if any, leaving some half completed and half vacant.

Ultimately, unemployment soared, housing availability crashed, and house prices/ rent prices rose. 

 What is the Spanish Government Doing?

The population of Spain is currently in a series of protests regarding unaffordable housing, with groups such as the Tenants Union protesting against the concept of buying houses as investments, and the unavailability of housing for the domestic population of Spain (Mirror, 2024)⁹.

Pedro Sanchez is the Prime Minister at the moment, and is part of the Spanish Socialist Workers’ Party, and according to CIS (Centro de Investigaciones Sociologicas, 2025)¹⁰ ,the issue of cost of living and housing has become the largest issue amongst Spaniards. At the moment, the PM has proposed a cap on rent prices to prevent “extortionary” figures; however, no numerical value on “extortionary” has been provided yet. Furthermore, he has introduced a 12-point plan to fix the housing crisis, focussing on “more housing, better regulation and more support” (La Moncloa, 2025)¹¹. One of these points transfers 3,300 houses and 2 million km^2 of land to a newly created Public Housing Company, which will be used to build thousands of “housing units” at non-extortionate rents. Furthermore, this new company will have priority purchasing land for construction use, helping to secure it’s long term viability in solving the housing crisis. 

However, this main solution is considered an “empty promise” by many in Spain, since a similar public company, called Sareb, is already in place and has a similar, smaller scale version of this plan, and has only had limited success (Europinion, 2025) ¹². If Sanchez is to have success with his Public Housing plan, he would not only need to unify Sareb and the Public Housing Company, but also every single small, regional scheme of a similar nature, to avoid serious conflicts and inefficiencies. However, practically, this would be near impossible to do due to the potential for political disagreements and debates. Instead, purely increasing funding for the construction of social housing, such as through subsidies to encourage developers back to the country would be more worthwhile, since Spain only invests 0.3% GDP towards housing, whilst the average for European Nations is 1%, a staggering difference. Spain must also focus on ensuring all housing is being fully utilised, since at the moment, there are around 3.8 million empty homes in Spain, which equates to approximately 14% of the total housing supply in Spain. Since the majority of which are owned by Foreign Investment Companies, this could potentially be a deliberate measure to ensure rent and housing prices, maximising prices, akin to how to the diamond supply is restricted to inflate prices. 

Finally, Sanchez has proposed an “up to” 100% tax on non-EU and non-residents purchase property in Spain (The Guardian, 2025) ¹³, with the goal being to stop tourists purchasing properties as holiday homes, as many Brits do for example. This is a tense political factor, since many protests have occurred against tourism in Spain as a whole (since it ultimately drives up prices in these regions), yet the Peoples Party (PP) strongly opposes such measures, since they consider it a xenophobic measure. Additionally, it is considered a distraction by many, since there are much greater underlying causes of the housing predicament in Spain. 

It is paramount that Spain gains control of these issues, since not only is it a key tipping point within the polls, but it is having real world impacts for so many people within Spain.  

References

1. Real Instituto Elcano (n.d.) The plight of young adults seeking to leave the parental home. Available at: https://www.realinstitutoelcano.org/en/commentaries/the-plight-of-young-adults-seeking-to-leave-the-parental-home (Accessed: 21 February 2025).
2. Spanish Property Insight (2024) Brief history of rent controls in Spain. Available at: https://www.spanishpropertyinsight.com/2024/09/27/brief-history-of-rent-controls-in-spain (Accessed: 21 February 2025).
3. My Lawyer Abroad (n.d.) Spain: Easy guide to understanding the lease regulation. Available at: http://www.mylawyerabroad.com/spain-easy-guide-to-understanding-the-lease-regulation/ (Accessed: 21 February 2025).
4. Statista (n.d.) Housing ownership rate in Spain by type. Available at: https://www.statista.com/statistics/1185377/housing-ownership-ratein-spain-by-type/ (Accessed: 21 February 2025).
5. Banco de España (2008) Annual Report 2008. Available at: https://www.bde.es/f/webbde/Secciones/Publicaciones/PublicacionesAnuales/inf2008e.pdf (Accessed: 21 February 2025). [page 40]
6. Virto Property (n.d.) Unoccupied property in Spain to face an additional tax. Available at: https://virtoproperty.com/news/unoccupied-property-in-spain-to-face-an-additional-tax (Accessed: 21 February 2025).
7. Gutiérrez, A. and Delclòs, C. (2016) Foreclosures in Spain between 2008 and 2014. International Journal of Housing Policy. Available at: https://www.sciencedirect.com/science/article/pii/S1056819023002622 (Accessed: 21 February 2025).
8. BBVA Research (2016) Spain Real Estate Report, April 2016. Available at: https://www.bbvaresearch.com/wp-content/uploads/2016/05/Spain-Real-Estate-Apr16_R1.pdf(Accessed: 21 February 2025).
9. Mirror (2025) Huge protests planned in Spain as locals fight against unaffordable housing. Available at: https://www.mirror.co.uk/travel/europe/huge-protests-planned-spain-locals-34718401 (Accessed: 21 February 2025).
10. Centro de Investigaciones Sociológicas (CIS) (2025) Housing and cost of living survey. Available at: https://www.cis.es/documents/d/cis/es3489marMT_a (Accessed: 21 February 2025).
11. La Moncloa (2025) Housing Forum 2025: Government measures to address the crisis. Available at: https://www.lamoncloa.gob.es/lang/en/presidente/news/Paginas/2025/20250113-housing-forum.aspx(Accessed: 21 February 2025).
12. Europinion (2025) Addressing the housing crisis in Spain: Will the new public housing company be the solution? Available at: https://www.europinion.uk/post/addressing-the-housing-crisis-in-spain-will-the-new-public-housing-company-be-the-solution (Accessed: 21 February 2025).
13. The Guardian (2025) A vicious circle: How the roof blew off Spain’s housing crisis. Available at: https://www.theguardian.com/world/2025/jan/20/a-vicious-circle-how-the-roof-blew-off-spains-housing-crisis (Accessed: 21 February 2025).