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Speaker 1Hello, I'm Guy Hedgcoe and welcome to Business Daily. Today we're in Spain, which is one of Europe's best performing economies. However, it's also a country which is seeing increasing anger on the streets due to a lack of business. The situation has gotten
Speaker 4worse over the years. You know, a few years ago I could rent an apartment. Now I can barely afford a room in Madrid. I have to share an apartment with strangers. So I have to keep changing apartments, live with different people. So it's very hard for me to settle, to really connect with my neighborhood, to really, yeah, plan my life.
Speaker 1In this episode, I'll be looking at the causes of this crisis, including examining the role of tourism, which many see as a culprit. I'll be talking to some of those affected who want, as well as seeing the drastic action from the authorities, as well as meeting others who believe the government is already doing too much. That's on Business Daily from the World Service. Blanca Castro has to wash her dishes in the bathtub. That's because her kitchen has a large hole in the ceiling, and leaks water from above, making it dangerous and unusable. Blanca believes that the company which owns her flat and others in this building has deliberately halted all maintenance work in order to encourage the tenants to leave.
Speaker 5For some time now, they have stopped fixing things in the building which need maintenance, and in some cases that makes it uninhabitable. The current rental bubble is encouraging, encouraging a lot of big owners to do what they are doing here, which is to get rid of the current tenants who have been here a long time in order to have short-term tourist flats, or simply to hike up the rent.
Speaker 1Every five years, Blanca's rental contract, which fixes how much she will pay, is up for renewal. But the company that owns the building has told Blanca and her neighbours that it will no longer renew their contracts. It was not available for comment when I tried to get in contact, but Blanca has said that it will no longer renew their contracts. Blanca says that she and her neighbours are determined to stay.
Speaker 5Moving to another building right now would mean paying double the rent I currently pay, which is about 800 euros. It's not viable for me. I would have to go and live outside Madrid, but I don't want to do that. This is a social injustice. The idea that a free market and profit at any cost is more important than the right to live in a dignified way. Progresistas complices de
Speaker 6los rentistas!
Speaker 1Over the last decade, salaries in Spain have increased by around 20%. But during the same period, the cost of an average rental has doubled. That steep rise in rental costs has made people angry. I'm at a massive protest in central Madrid, which is demanding action from the authorities to bring rent under control. Simultaneous protests are also taking place across the rest of the country. And this is just the latest expression of fury at this problem.
Speaker 7It's not only a problem of Madrid. In Barcelona, in Malaga, in all the big cities, the prices are completely unaffordable. So the average rent in Spain right now is about 1,000, 1,200 euros, something like that, per month. And obviously the wages are. are not that high. So obviously we ask for radical measures because the problem is very radical. So we are here to say that we are tired of this situation and to ask for public policies in this matter because the government keeps talking about the importance of the public policies and whatever. But then we see nothing.
Speaker 1Spain has one of the highest home ownership rates in Europe. But with youth unemployment at 25%, young people in particular are often undervalued. They are unable to buy or rent.
Speaker 4I'm 30 now. It's really difficult to plan a life if I can stay in a place permanently, right? Because I have to keep changing apartments, live with different people. So that's really an issue for me in terms of having a family, in terms of really, yeah, settling. In my own city.
Speaker 1These protesters want the central and local governments to step in and forcibly slash rents. Polls show that housing is now Spaniards' biggest worry. But what has caused this crisis? Carlos Cuerpo, economy minister in the coalition government, says its roots are in an earlier property crisis the country suffered between 2008 and 2014, when a housing bubble burst.
Speaker 8So after the financial crisis, there was a drop in the creation of new houses, of new housing. And basically the construction sector went from representing 12, 13% of our GDP to be barely around 6% of our GDP. So basically underinvestment for more than a decade. And that together with the fact that there was also a depletion of the stock of housing that was in the hands of the state. Therefore, that the state could use to provide affordable housing. And then aside from that, we had an increase, particularly in the last couple of years, three years of demand by the creation of new households, which are smaller. As we know, these are the demographic trends and also by the intake of immigrants that we're having, thanks also to the evolution of our economy. So these two elements combined are actually proven to be a big challenge for for us to be able to have Spanish, new citizens access affordable housing.
Speaker 1I'm next to a group of workmen and some cranes where a block of flats is being built just on the outskirts of Madrid. This kind of site is much less common now than in 2007 at the height of Spain's property boom, when more than 600,000 homes were built in just one year. Last year, by contrast, only a sixth of that number of homes
Speaker 9were completed. The big issue is supply. You know, on the demand side, we have a lot of demand both from a rental and from the sale side. The big problem is that we need to build more properties.
Speaker 1Juan Villen is head of mortgages at Idealista, Spain's largest property website. He says that there have been and still are too many obstacles hindering the building of homes.
Speaker 9So the problem on the on the construction side is that, the laws are so complicated. We have so many laws that it takes years, if not decades to produce land to make land available to build and workforce is a big issue. And right now, we have estimates that the gap in the construction sector is around 700,000 people. The cost of materials have gone up. The cost of the workforce has gone up again. You know, we saw this coming. The politicians in general were myopic. Not thinking about this in 2015, 16. You're listening
Speaker 1to Business Daily from the BBC World Service.
Speaker 2All seafood is well caught like their vibrant sockeye salmon or verified responsibly farmed and all sweets included. including fall themed cookies are made without high fructose corn syrup.
Speaker 3See what adding futures can do for you at cmegroup.com/podcast. Derivatives are not suitable for all investors. Investors and involve the risk of losing more than the amount originally deposited and any profit you might have made. This is not. Not a recommendation or offer to buy, sell or attain any specific investment or service.
Speaker 1I'm Guy Hedgcoe, and today I'm looking at Spain's housing crisis. The shortage of homes is not just about a lack of building. I'm on a train taking me from Madrid down to the city of Malaga on the south coast. Malaga is one of the places in Spain which has seen particularly steep rental increases. It's also an extremely popular tourist destination, and many people see a very close connection between tourism and the housing crisis. Last year, Spain received 94 million foreign visitors, and it's now vying with France to be the biggest international tourist destination in the world. In central Malaga, a guitarist plays as large, groups of tourists pass by. At times, bottlenecks of tourists form in the narrow, winding streets. Their presence can also be felt in the housing market, with short-term holiday rentals dominating some areas of the city. I go and meet Quique Espana, a local urban planner who has been involved in campaigning for tourism to be brought under control.
Speaker 10So we are now in Plaza de la Merced, a place that, in a way, concentrates all the problems. We have in the city of Malaga, but also in the housing situation in Spain. That means that, for example, in this area of Plaza de la Merced, 82% of the apartments are tourist rentals.
Speaker 1And that's pushing you out of the city centre. It's also making the accommodation in the city centre more expensive. Is that correct?
Speaker 10Exactly. When you reduce the whole offer of houses or apartments, the market is so reduced, that the prices go very, very, very high. And it's really unaffordable. It's only for people who are rich from other parts of the city or of the world that come here and can pay that prices. So that means that people are being kicked out from the city, basically. And also, they have to come back again to work, to serve, in a way, in the touristic industries. Because the only jobs that are available, more or less, in the city are the ones in. restaurants, hotels, and all the touristic industries. So that means that, on one side, it's very difficult to stay in the city, so you are kicked out. Your salary and your jobs are kind of precarious and difficult. And at the same time, you are, in a way, disconnected from the possibility of experiencing the city in a kind of neighbourhood way.
Speaker 1Quique says another problem, the many properties that are being bought up by investors purely to speculate on the market, without the intention of renting them out, further restricting the amount of available housing.
Speaker 10So in Spain, the housing market is basically a refuge for profit for many real estate investors. This is a refuge for profitability, which makes things very. difficult, because it kind of produces a system in which housing is not for living, it's an asset. And when an asset, like housing, is based on land, it makes things much worse. Because it's not like apples, that the prices can change and you can buy apple or not, maybe you can buy bananas or something like that. But everyone needs a home. Everyone needs a place to live in.
Speaker 1So what are the authorities doing? What are they doing about all this? The socialist prime minister, Pedro Sánchez, acknowledges the seriousness of the problem.
Speaker 11We have a tremendous challenge before us, which is ensuring people have access to housing. And this is one of the biggest, if not the biggest, causes of inequality for the middle and working classes in our country. And what do people want from us, their governments, when it comes to housing?
Speaker 1That, of course, is a huge question for central governments. It's a huge question for the central and local governments. Sánchez's administration has rolled out a series of policies and objectives aimed at countering the crisis. It is apportioned land for the building of affordable homes. And it wants to increase low-cost public housing from less than 3% of all homes to the European average of 9%. Judging from his rhetoric, Sánchez favours intervening in the market. What does a mother ask of us when she sees that her daughter cannot independentize or buy a flat?
Speaker 11What does a mother want when her daughter, who is more than 30 years old, cannot leave the family home and buy a flat? What does a family want when it spends half of its income at the beginning of each month on an exploitative rent? Or when someone sees that in a country with thousands of empty flats, their 10-year-old child can't have their own room to play or study in? I think what Spaniards are asking us to do is to act. They want the housing market to operate according to the law of reason, of social justice. Not the law of the jungle. They want to ensure that vulture funds and speculators are not doing whatever they like.
Speaker 1The short-term tourist rentals, which are the cause of so much anger in many cities, are already being targeted. The central government has announced higher taxes for such properties. And the mayor of Barcelona, for example, has announced the closure of all the city's 10,000 or so tourist apartments by 2028. Barcelona's authorities also stepped in when an investment fund, which had bought an old residential building, attempted to eject the tenants so it could rent out the flats as tourist accommodation. Protests were called, and City Hall ended up buying the building and letting tenants stay. Meanwhile, the central government has proposed introducing a tax of up to 100% on the purchase of properties by non-residents from outside the European Union. On the grounds that these homes should be made available for ordinary Spaniards. It's a measure that's seen as likely to affect British buyers, for example. But for many, the most drastic measure so far is part of a housing law approved last year, which means rental caps can be introduced in areas where prices have got particularly out of control. In Barcelona and the surrounding region of Catalonia, one of the few areas where it's been implemented, the cap has reduced rental costs slightly, and the government, has declared it a triumph. But not everyone is convinced. Critics of the cap warn it has caused many owners to take their properties off the rental market. Juan Villen says this and other legal changes in recent years have been scaring property owners.
Speaker 9The problem with caps is that you have a problem with the supply. Because an investor, if you are capped on the returns, you will say this is not a good investment, and if I have alternatives, I will go to the alternatives. And that is what's happening in Catalonia right now. You may end up controlling prices, but at the expense of obliterating supply.
Speaker 1So it's all about a balancing act, isn't it, this?
Speaker 9Exactly. And the question is, huge imbalance between supply and demand. Demand continues growing, and we have no signs that that will stop. And supply, it's not that it's not growing, it's that it's. Being reduced. We see that in many different countries a similar problem of the imbalance between supply and demand. The problem is that we are really late in terms of building good enough stock of social housing so that we can give solutions to vulnerable people that doesn't go against private landlords. We have not been fast enough in building new properties in order to. balance supply and demand, you know. So let's say that we are late, but the problem is that we are late and it looks like we are not changing. So the problem is that we haven't even started reverting the trend.
Speaker 1Affordable housing is crucial for any society. It influences where people live, which in turn can dictate the availability of workers in a certain area. It also affects overall well-being, and research shows can even have an impact on birth rates. But in Spain, a divide has opened up on this issue. There are those, like Juan Villen, who see the regulation of the housing market as potentially damaging and believe the government has already meddled too much. And then there are others, like Quique España and these people protesting on the street who feel the cards are stacked against tenants and want to see much more strident action from the authorities. The only thing the two sides seem able to do to agree on is that there's a shortage of housing and that means this crisis seems to be getting worse. That's all from Business Daily, presented and produced by me, Guy Hedgcoe. Thanks for listening.
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