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Home Breaking News Paper stones - Regulating housing: notes for discussion

Paper stones – Regulating housing: notes for discussion

The Spanish government is immersed in an intense political debate about how to regulate housing. It is no wonder: 10 years after the traumatic process that led to the real estate bubble and subsequent financial crisis that left many households without jobs and with a mortgage to face, the housing emergency continues unabated. It should be remembered that although its provision and allocation is largely delegated to the market, housing is a basic good and a constitutional right. On the other hand, the housing market is subject to strong externalities and does not operate at arm’s length. These characteristics constitute an unequivocal reason to regulate the housing market. From Piedras de Papel we want to contribute modestly to the debate by offering in this article a small X-ray of the housing emergency situation in Spain and other stylized facts of the housing market. In a second article, we will analyze the proposed measures, discuss the evidence on their effectiveness and their use in other countries.

The housing situation in Spain is exceptional in different respects compared to our neighbors. Our public stock of protected housing is one of the smallest in Europe: 0.9 social housing for every 100 inhabitants, compared to an average of 3.8 in the EU, and only 2.5% of the total stock is protected housing, compared to an average of 9.3 % in the EU (in countries like Austria, 1 in 4 houses are public). This is not so much a product of the scarce construction of protected housing (although it has been reduced over time) but above all of the inability to retain its public ownership. In recent decades, a majority of the stock built of (public protected housing that has passed into private hands-, although being very different, it is convenient to distinguish them in the case of acquisition by the tenants themselves, who are low-income households, in which case housing retains a social function, in cases of its acquisition by large corporations), sometimes even endangering its tenants, and often for speculative purposes. The stock of protected housing for social rental is currently barely 2% of the total housing stock.

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On the other hand, the proportion of the salary that households spend on rent is very high, which generates serious difficulties in access, especially for young couples, especially if they have children. The Spanish average stands at 40% of the annual gross salary, but in some cities, such as Madrid or Barcelona, ​​this percentage reaches more than 50%. Eurostat defines as “overload” that the costs of paying for housing represent more than 40% of the household’s disposable income. This problem occurs with more intensity in the poorest 20% of the Spanish population, in which more than 1 in 3 households suffers from this overload.

In addition, this extra cost has a particularly high incidence in homes rented at market prices. While for the other tenancy regimes, Spain is not far from the European average in terms of exposure to overcharge, in the case of tenants who rent at market prices, the percentage of homes with surcharge exceeds 34%, while for the EU it does not reach 25%. During the Great Financial Crisis, the housing crisis hit most homeowners with an outstanding mortgage when the price of their homes plummeted, sometimes below the amount of the mortgage still owed. However, for some time now, tenant evictions far outnumber evictions that affect mortgaged homeowners. Although the pandemic has brought evictions to a halt due to the moratoriums and prohibitions applied by the government in response to it, this problem is expected to return strongly once the health emergency subsides and the delinquency rate rebounds. especially if the economic crisis is persistent.

The problem of overburdening of housing costs has been getting worse in recent years due to a strong appreciation of rent that has not been accompanied by significant wage increases. A look at the poverty rate reveals that the costs associated with housing significantly increase the risk of poverty in all age groups, although the youngest are the most affected. Young women under 30 have already experienced two major economic crises in their short working lives. Each crisis has resulted in lower entry wages into the labor market, while recoveries barely resolve the worrying intermittency of employment trajectories, highly affected by precariousness, temporary employment and some of the highest levels of youth unemployment in the EU.

The conjunctural vulnerability of the most affected households in times of crisis has become structural and endemic because it has conditioned access to a basic good such as housing. A serious structural problem in our country, which international organizations such as UNICEF have been denouncing for years, is that of child poverty, in which Spain is at the forefront of Europe. The High Commissioner for Child Poverty issued a report on the impact that housing had on the material well-being of children and adolescents. It certifies that access to housing is an important source of household vulnerability, and that especially in rental households, child poverty reaches very high levels. Child poverty, rental housing situation and housing cost overload are highly correlated.

However, despite all this housing poverty, Spain is a country rich in housing. It is true that part of the value of the home is due to a real estate bubble effect that still persists, but even so, the percentage of real estate wealth over national income exceeds 450%, and is one of the highest among the neighboring countries.

In Spain, a high percentage of households own their main home. It is also the country in the Euro Zone where more households own real estate properties other than their main residence, and the distribution of this residential wealth is quite concentrated. The use of housing as an investment vehicle is high in Spain compared to our surroundings, assuming a significant percentage in the asset portfolio of families with more resources, unlike other countries where assets related to business ownership predominate. In addition, the wealthiest households also invest in housing through financial vehicles thanks to a growing role of real estate investment funds (SOCIMIS), whose favorable tax treatment, implemented after the collapse of the construction sector with tax advantages in order to After re-stimulating real estate investment, it has had a doubtful effectiveness as a social housing policy and is also highly regressive.

Lastly, real estate investment continues to be especially attractive and high in Spain due to the tendency of housing to appreciate, the result of multiple factors, and despite the housing stock left by the bubble. The dynamics of the real estate market generate important vulnerabilities in the balance sheet of both households and financial institutions, and in the past they have caused strong macroeconomic imbalances that should not be repeated. As we have tried to show, the housing emergency is a reality that especially affects the most vulnerable households, especially those younger, with dependent minors and on market rent. Despite this housing poverty, Spain is a country rich in housing, a fact that invites optimism, since it is not so much a problem of shortage of supply, politically much more difficult to solve, but rather of market allocation . In a second article, we will analyze the proposed measures, discuss the evidence on their effectiveness and their use in other countries.



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