Real Estate

Spain takes on private equity landlords as cost of housing soars

Spain’s leftwing government is championing rent controls as property costs rise across Europe, part of a proposed housing law that it says will protect vulnerable tenants against investment funds and other big landlords.

Critics say the measure is misguided and will put the country’s supply of accommodation at risk. But Ione Belarra, leader of the radical Podemos party that supports the bill, said it would right the balance in a sector transformed by the eurozone financial crisis over a decade ago and the arrival of institutional funds. Investment group Blackstone is now Spain’s biggest landlord.

“The big investment funds saw a niche here to speculate in the housing business,” Belarra, who is also Spain’s social affairs minister, told the Financial Times in an interview.

“Now we are beginning to put limits to this and say to the big landlords that they can keep doing housing business, but not at any price,” she added. “Not at the price that there are evictions, or that people have to pay more than 30 per cent of their income in rent.”

Blackstone, which now owns close to 30,000 homes in Spain, declined to comment.

The proposals come at a time of concern across much of Europe at rising rents and property prices. In Germany, Berlin’s citizens voted in September to expropriate big landlords to reduce rents.

The bill casts light on negotiations over the economy within the ruling coalition, with Podemos pushing for a more radical line than the bigger Socialists of prime minister Pedro Sánchez.

Podemos insisted on the text of the housing bill as a condition of its support for the 2022 budget, the Socialists’ legislative priority.

Among many other moves the bill seeks to ban the sale of social housing to investment funds. In 2013, when local authorities were desperate to balance their books in the wake of the financial crisis, Blackstone bought 1,860 flats from the city of Madrid for €129m. They are now part of the group’s €5bn portfolio of Spanish property, which includes hotels and offices.

Blackstone’s accumulation of those assets has coincided with deep structural changes in the Spanish property market.

Before the crisis the economy revolved around the construction sector, which drove the banking system, the job market and even government revenues. After the crash, mortgages became far harder to obtain and hundreds of thousands lost their homes.

Spain’s social affairs minister, Ione Belarra, says people should not have to pay more than 30 per cent of their income in rent © Fernando Alvarado/EPA/Shutterstock

As a result, more people sought to rent, reversing a trend in which housing ownership had risen for decades — although owner-occupiers still account for more than three-quarters of homes.

Increased demand has pushed up costs. According to calculations by EY, the consultancy, average rent has risen more than 40 per cent over the past five years, despite a dip during the pandemic.

The issue is all the more powerful among Podemos supporters because of Spain’s youth unemployment rate of more than 30 per cent — more than half of 25 to 29 year olds still live with their parents.

Against such a backdrop, the housing bill, whose backers hope will become law in the first half of next year, is politically charged.

One measure would allow regional governments to force big landlords — defined as those holding more than 10 properties — to cap rents in so-called “stressed areas”, where rent has risen significantly above inflation. The legislation would also allow regions to implement tax incentives for smaller owners to reduce rents or impose penalties to prevent them from keeping properties vacant.

Javier García-Mateo, partner for real estate at EY in Spain, said rental properties’ share of the country’s total housing inventory had risen from less than 10 per cent in 2010 to 15-20 per cent today, but argued the proposed law threatens future supply.

“In any market in which you intervene with a cap, you will disincentivise developers,” he said. According to his estimates, of a pipeline of 28,000-29,000 flats that developers were preparing to build for rental, some 8,000 have been put on hold until the consequences of the law become clearer.

Spain’s Association of Rental Property Owners also contends that the bill would limit housing supply and reduce investment.

“This government, and in particular Podemos’s proposals always have the same assessment from the economic elites — whatever measure it is, we always hear that it will sink the economy, that the country is headed for disaster,” said Belarra, who took over in June from founder Pablo Iglesias as Podemos’ leader. “This argument is beginning to wear out.”

The Socialists strike a more emollient note. David Lucas, the government’s top official for housing policy, emphasised that 85 per cent of landlords are smaller property owners, for whom tax incentives rather than obligatory caps will apply.

He notes that, according to the current draft, caps would not come into force for 18 months, to allow time to compile a new index of rental prices.

In any case, regions governed by the opposition centre right People’s party have vowed not to apply the curbs permitted by the law should it be approved by parliament.

But Lucas also argued that the legislation is long due. “Each time there was a crisis, it was difficult for many citizens to get housing, while many others lost their homes,” he said. “This was an unsolved problem.” 

Many voters are unconvinced. “Rents are going higher and higher,” said Casandra, who leases a 30-square-metre flat in Vallecas, a traditional working class district of Madrid where rents have risen markedly. “I don’t think this law will stop that. If I were a landlord I would also increase the rent.”


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