It is not only in the capital Madrid that rents are hardly affordable for many people.
Photo: dpa/EUROPA PRESS | Jesus Hellin
There is no data from rental activists pointing to a dramatic situation in Spain. It is data from the Spanish Central Bank. They show that practically half of all people who live in rented accommodation at market prices are at risk of »poverty or social exclusion« or live in poverty. According to the Banco de España (BdE), Spain holds the sad European record, because that is “the highest value in the EU,” writes the BdE. Rich euro countries such as Germany or France are below the average of just under 33 percent, but in both countries 29 percent of households are at risk of poverty if they have to pay market rents.
In Spain, almost everyone has to pay market prices, as there is very little social housing at two percent. Spain is also the European champion. As a result, more and more people are slipping into poverty. It lags far behind countries such as the Netherlands with a share of 30 percent or Austria (24 percent). Germany is also below average with only nine percent social housing.
Spain is also high on the list of euro area countries where households have to spend more than 40 percent of their income on rent. At 41 percent, the number is “almost twice as high” as the average, writes the central bank. In this category, however, Spain is outperformed by Greece and the Netherlands in the euro area.
Without mentioning the financial crisis, the BdE points to the massive changes that have taken place since then. Ángel Gavilán, for example, refers to the “sharp decline in the proportion of households with home ownership that has been observed in Spain since 2014”. In recent years, this has contributed to an “increase in wealth inequality,” explains the central bank’s Director General for Economics and Statistics. In real terms, however, the trend started earlier. Behind this is the wave of evictions in the context of the financial crisis, when hundreds of thousands of families could no longer pay the mortgage interest. Unemployment played a role, but above all that interest rates are often tied to Euribor in the short term. This is the interest rate for interbank transactions. When that skyrocketed during the financial crisis, interest quickly became unaffordable for many.
While banks were bailed out with billions in taxes, countless families were thrown from their homes. The scarce supply on the rental market was suddenly met with great demand and drove up prices. Since 2011, the number of people living in their own apartments has fallen sharply. At that time it was almost 83 percent, in 2020 only just under 74 percent. For young people under the age of 35, the number has almost halved from the previous 69 percent.
Young people in particular were pushed into the rental trap. Exploding rents and loss of purchasing power due to high inflation are making rents increasingly unaffordable. According to the Organization for Economic Cooperation, employees here lost an average of 5.5 percent of their purchasing power in 2022 alone. In the Catalan metropolis of Barcelona, rents rose three times as fast as wages between 2010 and 2020. The average rent rose to 1077 euros in 2022, eating up the minimum wage that many people have to live on.
The social-democratic government let four years go by almost unused. It has not prevented many mortgages from continuing to be linked to Euribor. Due to rising interest rates, this will lead to a new wave of expropriations and even greater pressure on the rental market, as interest rates will once again become unaffordable for many.
The new housing law, which came about shortly before the upcoming elections after lengthy negotiations between Prime Minister Pedro Sánchez and coalition partner Podemos, will not result in any rent reductions. They may even increase further, by three percent in 2024, after which the increase should be limited to the inflation rate. Since wages do not keep up, the gap continues to widen. The number of rental evictions will also increase.
According to the BdE, the positive thing about the law, which was passed by the Senate on Wednesday, is that “greater emphasis is placed on the necessary increase in the rental offer”. However, it will be many years before this can noticeably change. So far, the Social Democrats had resisted calls from junior partner Podemos to finally put apartments on the market that the state bad bank had taken over from banks. This is to happen now. But that’s 50,000 at best, with many yet to be completed and 15,000 to be built, the government admits.