In the last two years, Spain has built barely half of the homes it would need to cover population growth, according to data from CaixaBank Research, and it is one of the OECD countries in which the shortage of housing is most notable. housing supply, 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 housing prices in Spain,” said Judit Monturiol, senior economist at Caixabank’s research service and author of the study. Thus, in 2022 and 2023, 235,000 homes were approved, while the country gained 1.1 million inhabitants, according to the INE.
According to the study, “the demand for home ownership in the main advanced economies has recovered strongly, while supply has been very rigid in the short term.”
“Spain was not among the worst countries for housing deficit in recent years, although construction plummeted starting in 2008, because there was a stock of housing built in the boom years that was being absorbed,” says Monturiol. This stock, which the Ministry of Public Works estimated at 600,000 homes, has now been limited to “obsolete homes or homes 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, ??Murcia, Terrassa, A Coruña, Vigo, l’Hospitalet de Llobregat, Sabadell or Zaragoza. 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 large European economies is due to the fact that “supply tends to adjust slowly to a demand shock, since it takes time to plan and build new developments.” Some cities have geographical obstacles (mountains or sea, like Barcelona) that limit construction. However, Monturiol points out, zoning is added to this factor: restrictions linked to urban planning and land use regulations that make it difficult to promote new housing, something that, according to the OECD, “would have contributed to increasing the price and reducing accessibility to housing.” CaixaBank researchers highlight that real estate market regulations are more prevalent in metropolitan areas that are already highly urbanized, where population density is high and precisely where more housing is needed.
The study indicates that according to OECD data, another factor that has limited supply is the lack of public investment in housing construction. Thus, 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 by 80%. . This lower public investment has reduced the social housing stock in these countries, the report states, “which has contributed to reducing housing accessibility, 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, while many professionals left the sector. “There is a lack of manpower – Monturiol acknowledges – but if the 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 promotion with measures such as encouraging the creation of final land; reduce administrative times in licensing; increase the budget allocation to deploy public housing policies; facilitate the conversion of uses (for example, transform office buildings into homes); increase buildability in areas of high demand and scarcity of land; boost 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 make the housing supply more elastic to respond to housing needs more quickly when demand increases, without generating excessive pressure on the price.”