The government is abandoning the housing issue in Spain, claiming that only the losers will benefit.

The government partners ERC and Bildu have presented a housing bill that has been agreed upon with the government. This bill regulates many aspects of rental housing, which we will discuss further, but what they have just done has destroyed the rental market without solving the problem.

The housing proposal regulates many aspects, from the percentage of government housing to the potential increase in rental prices. However, such excessive regulation has already been tried, and the results were unsatisfactory. It did not make housing more affordable, especially for the most vulnerable populations, and it reduced the supply of affordable housing.

New housing law

The new housing law includes price caps, eviction regulations, public housing regulations, and tax measures. It also regulates the operations of real estate agencies. For example, it states that the commission for agencies should be paid by the seller or the tenant.

The price cap also defines the concept of a "tense area," which meets one of two conditions: if, over the past five years, rental prices have increased by three percent above inflation, or if they account for more than 30% of the average income of tenants. These areas will be declared by the government or autonomous communities and will last for at least three years. Measures will be taken in tense areas to prevent rental price increases, and maximum prices will be established. If in 2023 the rent increase was capped at 2%, in 2024 it will be capped at 3% in tense areas, and thereafter it will be determined by the government or autonomous community based on a specific index. This index will, of course, be based on the electoral interests of the government. It is currently assumed that it will be lower than the consumer price index.

The concept of a large property owner is also changing. Now, to be considered a large owner, one must have not five or ten apartments, but hundreds. There is no point in calculating the profitability of owning a few apartments. This limitation is aimed at average owners. Furthermore, eviction processes will be extended to more than two years. Large owners will be subject to extrajudicial mediation, which will be determined by autonomous communities.

It is expected that tax measures will be adopted, which, although not disclosed in the 2022 draft, include the following: a 50% tax deduction for those renting out housing; a 70% tax deduction for those renting out housing to young people aged 18 to 35; a 90% tax deduction for special cases (for example, for areas of tension or when the rental price decreases by 5%). Additionally, municipalities will be able to levy a property tax (IBI) on vacant residential properties of up to 150% for owners who have four or more residential properties in the same municipality for two or more years.

I also want to encourage rental housing by requiring that new developments include 30% social housing, half of which should be designated for social rental, and that public and state housing do not lose this function overall. In other words, new developments of free housing will subsidize state housing.

Regulating the work of real estate agencies makes sense if it is done by those who hired them, but otherwise, all other points are meaningless.

Other studies, such as those in Berlin, Massachusetts, and San Francisco, have shown that property owners are trying to circumvent measures (for example, renovating kitchens, as was done in Berlin, to increase rent). Ultimately, the Berlin regulation was repealed. These measures certainly hinder gentrification, although many rental properties are leaving the rental market for the sales market. This means that the winners are those who are lucky, even though they often do not leave their homes, as they would like to avoid "losing a tempting bargain." In other words, they also become victims of regulation.

If we want to solve the housing problem, the solution lies in building where people want to live. Singapore and Vienna have addressed the housing issue in their respective areas. In both cities, this has been achieved through the construction of housing and its provision to the community. In Singapore, this is done through sales for terms of up to 99 years, while in Vienna, it is through rentals managed by the state administration, which is the landlord for most of the housing for Vienna's residents. However, neither of these cities limits the possibility of offering more expensive housing. In other words, without significant funding from the central government, autonomous communities, and municipalities, it is doubtful that a real effect will be achieved, and the negative consequences will be worse in the long term for tenants. We will face a situation where the rental market will be disrupted for decades. Investors will think carefully before renting out housing. Even if regulations are lifted in a few years, it will still be risky: what if similar regulations are reintroduced, like those with the old rent system, where families paid a small amount for housing that hadn't been updated for many years.

Ask the readers: how would you solve the housing problem?