In the last two years, Spain has barely built half of the housing it would need to cover population growth, according to data from CaixaBank Research, and is one of the OECD countries where the lack of supply is most noticeable of housing, a ranking in which the Netherlands, Ireland, Denmark, Germany and Austria are even worse off.
“Right now the lack of supply is the main factor driving the rise in house prices in Spain”, pointed out Judit Monturiol, senior economist at Caixabank’s research service and author of the study. So, in 2022 and 2023, 235,000 homes were targeted, and the country gained 1.1 million inhabitants, according to the INE.
According to the study, “the demand for owned housing in the main advanced economies has recovered strongly, while the supply has been very rigid in the short term”.
“Spain was not among the worst countries for housing deficit in recent years, although construction collapsed from 2008, because there was a stock of housing built in the boom years that was being absorbed”, Monturiol points out. This stock, which the Ministry of Public Works put at 600,000 homes, has now been limited to “obsolete homes or located in locations for which there is no demand”.
Monturiol recalled that a previous study by CaixaBank Research placed the biggest deficit in housing construction in the cities of Madrid, Barcelona, ??Múrcia, Terrassa, A Coruña, Vigo, l’Hospitalet de Llobregat, Sabadell and Saragossa. But there is also a deficit in smaller towns, such as Santa Coloma de Gramenet or Sant Just Desvern, in the Barcelona area.
The insufficiency of construction in the major European economies is due to the fact that “supply tends to adjust slowly to a demand shock, as time is needed to plan and build new developments”. Some cities have geographical obstacles (mountains or the sea, like Barcelona) that limit construction. However, Monturiol points out, to this factor is added “zoning”: restrictions linked to planning and land use regulations that make it difficult to promote new housing, something that according to the OECD “would have contributed to increase the price and reduce the accessibility of housing”. Caixabank researchers point out that real estate market regulations are more prevalent in metropolitan areas that are already highly urbanized, where population density is high and where more housing is precisely needed.
The study points out that, according to OECD data, another factor that has limited supply is the lack of public investment in housing construction. So, he points out, in the most developed countries in the world that are part of this organization, aid from public administrations to private entities to promote housing has fallen by more than 50%, while direct public investment in promotion fell 80% This reduced public investment has reduced the stock of social housing in these countries, the report notes, “which has contributed to reducing housing affordability, particularly for low-income households”.
Housing construction is also limited by the lack of productive capacity: in Spain, a large part of the industrial fabric was destroyed during the real estate crisis, with the closure of many developers, and many professionals left the sector. “There is a lack of manpower – Monturiol admits – but if promotion activity grows and the risk for entrepreneurs is reduced, new companies will surely be created”. And industrialization, now incipient, “will make it possible to make up for the lack of labor and at the same time reduce costs and incorporate women and young people into the sector”.
The study considers that public administrations must act to promote housing development with measures such as encouraging the creation of finalist land; reduce administrative times in the granting of licenses; increase the budget allocation to deploy public housing policies; facilitate the reconversion of uses (for example, transforming office buildings into homes); increase buildability in areas of high demand and lack of land; promote collaboration with the private sector to build affordable rental housing (for example, through concessions and surface rights), and facilitate access to financing on favorable terms.
According to CaixaBank Research, “these measures would help the supply of housing to be more elastic to respond to housing needs more quickly when demand increases, without generating excessive pressure on the price”.
