Spain approves housing decrees that triggered - and may dominate - snap election

Spain's government on Tuesday approved two housing decrees whose rejection by parliament last week prompted Prime Minister Pedro Sanchez to call a snap election.

The measures, which include rent caps, a temporary ban on evictions and limits on corporate purchases of residential property, were "based on plain common sense", Sanchez said in a press conference, arguing that opinion surveys showed the public was broadly in favor of intervention in the property market.

"They protect the most vulnerable and, in some way, begin to bring order to what is currently a deeply dysfunctional market that does not operate according to the logic of supply and demand because of rampant speculation," he said.

Sanchez said on Monday he was bringing forward an election previously scheduled for 2027 because failing to garner enough support for his proposals to address a housing crisis made him realize he needed more seats in parliament.

Calling the election, on November 29, has allowed Sanchez to bring in the new rules with the support of a smaller caretaker body.

The measures will come into effect temporarily when the decree is published in the official state gazette but must then be sent for approval by the caretaker lawmakers who remain in place after parliament was dissolved, Sanchez said.

The standing body of 69 members, including lower house speaker Francina Armengol from Sanchez's Socialist Party, has a slim majority in favor of the measures, according to state broadcaster TVE.

A second decree proposing the automatic renewal of rental contracts would only come into effect if approved by the reduced legislature since the government did not have a majority to validate it, Sanchez said.

The interventionist measures will only serve to drive away the investment needed to increase supply, said Carolina Roca, president of the Association of Property Developers of Madrid.

"The legal uncertainty inherent in both decrees will result in a sharp slowdown in the limited investment secured to date in the construction of affordable housing," she said.

Election issue

Spain's snap election will likely revolve around housing – an issue which has topped voters' list of concerns for three years straight but, until two weeks ago, failed to dominate the political debate.

It was the attempted eviction of 87-year-old Maricarmen Abascal in central Madrid last month after her building was bought by a real estate firm that upended the country's politics. 

Abascal's case triggered nationwide protests and catapulted the issue to the top of the agenda, even overshadowing immigration which had dominated headlines for weeks following a mass migrant crossing in Ceuta.

Spain's housing shortage shares patterns with others across Europe: complex bureaucracy and labour shortages stalling supply, proliferating short-term rentals and high demand in urban centres pushing up prices, and rural areas hollowing out.

From Ireland's 2024 election to Berlin's recent mayoral race, the topic has particularly galvanized young voters across the region tired of spending a rising proportion of their incomes on rent.

Sanchez's housing plans were initially struck down by rightwing MPs who argued the measures – ranging from rent caps to limits on purchasing real estate for corporate entities – would worsen the problem by choking supply.

Alberto Nunez Feijoo, the leader of the center-right opposition People's Party, is pledging instead to build 250,000 new homes a year in projects creating 600,000 more jobs. Feijoo also wants to speed up urban planning to free up land for development and provide stronger mortgage and rental guarantees for young people.

Spain's regionalized structure often stands in the way of housing progress. Central governments can set housing legislation and devise nationwide plans for incentives and subsidies, but their implementation, and wider urban planning, is largely devolved to regional governments and municipalities.

All types of instruments – from rent controls proposed by the Socialists to eased planning permissions proposed by conservatives – have been struck down, blocked, or simply not implemented since the Socialists took power in 2018.

From glut to deficit

Two decades on from a housing bubble and subsequent market collapse that scarred its economy, Spain has flipped from a housing glut to a major deficit, estimated by its central bank at 750,000 homes and likely to reach a million by 2028.

A steady recovery in demand, boosted by ultra-low interest rates and rising immigration, was not matched by new supply in the areas needing it most, as developers and lenders scarred by the crisis and lacking workers were loath to resume building.

Although 73% of Spaniards own their homes, over half of 18-34 year olds now live with their parents or depend on them for living costs. House prices rose at three times the rate of wages last year, official statistics show, pushing more people to rent.

At just 1.7% by European Commission calculations, its social housing stock is among the lowest in the EU.