The application of rent limits that comes into force today in the 140 largest municipalities in Catalonia has already paralyzed all projects to build social housing and rent-free housing, according to the different agents in the real estate sector.
“Except for the projects that were already in progress, everything has stopped,” acknowledges Miles Leonard, director of the capital markets area at the consulting firm Cushman.
“We have to analyze what possibilities there are of taking legal action,” acknowledged the manager. In his opinion, however, the institutional owners are going to put the rental apartments they have in Catalonia up for sale, one by one, selling them to individuals. “Other options, such as short-term or medium-term rentals, are difficult to implement here,” he admitted.
Some international pension funds have built entire rental housing complexes in Catalonia. This is the case of the Dutch APG, the Germans Patrizia and DWS, or the American CBRE IM. In their case, the sale to individuals of these homes, located in well-connected areas of the metropolitan area and practically new, will allow them to leave Catalonia with benefits, because the lack of apartments has skyrocketed their prices in recent years.
Not only have projects to build rent-free housing been stopped, but also social housing, despite the fact that this is theoretically a Government priority. “This morning we had a meeting with a bank and they have already told us that they are not going to give us a single euro. And without financing we cannot build apartments,” explained Xavier Vilajoana, president of the Association of Promoters and Constructors of Catalonia (APCE) and of Euroconstruc, a company specialized in the construction of subsidized housing.
The initial proposal of the Generalitat was that new or rehabilitated apartments in the last five years, those with official protection, those with social rent or very low rents would not have rent control. But with the rule published on Thursday, they will also be affected. Vilajoana explains that when the Generalitat qualifies a promotion as Protected Housing for rent, it also sets the price at which it can be rented, and this income forecast allows the developer and the future buyer to obtain financing. Now the index will be applied, which in some cases is lower and will vary each year.
“We are going to study legal actions. Because of that regulation and how it has been approved,” he says. The Generalitat published the new Report that regulates the stressed areas and the resolution in which it approves it on the same Thursday, when the law requires that there be a period of 20 days of public information so that those affected can present allegations. “They don’t know what they have done,” he lamented. They have just definitively destroyed the sector” of private promotion of social housing for rent.
The Generalitat’s resolution also leaves trapped the owners who took advantage of the possibility of handing over their homes to the administration, when they were occupied, legally or illegally, by vulnerable families who could not pay the rent. The mechanism, established in the 2015 law, provides that the Agència de l’Habitatge de Catalunya pays the owner who is a large holder an income equivalent to that of a special regime protected home (the lowest). But in exchange it assures you some income from the property. The assignment only lasts for the duration of the current contract, but with the new rule, when it ends, the owner will have to rent the apartment at the same price, regardless of whether the rate is higher.
The same will happen to those who have transferred their homes to entities that allocate them for social rental. Carme Trilla, president of the Fundació Hàbitat3, which manages some 400 social homes in this way, points out that the key is time limits. “If it is three years, as the law expressly says, we will all be able to adapt,” she says, although she admits that “in the sector there is fear that the rule will become permanent as some of its promoters would like.”
Trilla recognizes the complexity that the regulations will introduce, to determine at what level of the income range set by the index the property will be located and regrets that the Housing Law imposes on social promoters such as Hàbitat3 itself the obligations of large companies. Forks. In her opinion, the challenge will be to generate the supply of apartments necessary to improve access to housing so that controls can be lifted. “Spain already had rent control in the 20th century and we know well what happened: it destroyed the rental market.”
In his opinion, to increase the supply of housing – which is now already in free fall – despite the rent cap, incentives are necessary, such as co-payments, tax deductions or providing collection guarantees. In this sense, Trilla criticized the obligation to offer social rent to vulnerable families that has been imposed on large tenants (owners of five or more apartments) in Catalonia. “It is an arbitrary decision, which financially sinks the affected person. Of course we have to avoid evictions, but not at the expense of the owners. We have to pacify the sector because solving the housing problem requires the collaboration of private owners, who are the owners of 98% of the homes we have.”