Spain responds to housing shortage: Ban on property purchases by investment funds

Madrid. Spain's cabinet is responding to the nationwide protests against the housing shortage with two legislative decrees. The resolutions include a ban on funds buying real estate until 2028.

The investment funds, often referred to as “vulture funds” in Spain, are criticized for fueling the severe housing shortage in Spanish cities through speculative purchases and for converting the properties into luxury properties or holiday apartments, which further drives up rents.

“We will stop purchases by vulture funds to stop speculative purchases,” Housing and Urban Development Secretary Isabel Rodríguez Garcia said Tuesday after the Cabinet meeting.

The Spanish minority government made up of socialists and the left-wing Sumar alliance has also decided to protect against forced evictions until 2030 and to regulate individually rented rooms and short-term rentals. For the latter, it is introducing a VAT of ten percent. Previously, apartments rented by a landlord without hotel-like services were exempt from VAT.

In addition, the government is planning tax relief depending on income as well as interest-free government mortgage loans for the purchase of your first property. A second legislative decree provides for the automatic extension of rental contracts. Unlike in Germany, rental contracts in Spain are limited to five or seven years.

Parliament still has to approve the resolutions so that they are valid in the long term. The government plans a vote in Congress this Friday.

In surveys, a lack of housing and high rents are the Spaniards' biggest concerns. The aim of the measures that have now been decided is to provide some relief on an ad hoc basis and to respond to the massive pressure from the population. There will be elections in Spain next year.

The population's discontent erupted in mass protests after 87-year-old Maricarmen Abascal's apartment in Madrid was evicted last Wednesday because she could no longer pay the rent.

The elderly woman lived in the apartment in the upscale Madrid district of Retiro, close to the city park of the same name, for 70 years. When the apartment was sold to a real estate company, they increased her rent from 500 to 1,650 euros per month, according to Spanish media.

The Maricarmen case attracted national attention because numerous neighbors and tenant association members protested in front of the apartment to prevent the eviction. The images of the elderly woman being taken out of her apartment on a stretcher by paramedics dominated the news. And they sparked massive protests in more than 23 Spanish cities under the slogan “Ni una Maricarmen más” (no more Maricarmen).

The left-wing populist party Podemos represents the most radical position: among other things, it calls for the expropriation of 650,000 apartments that currently belong to funds or major investors in order to convert them into social housing.

The massive protest and the rapid reaction of the Spanish government show the extent of the housing crisis in Spain. The high level of immigration in recent years has exacerbated the lack of available living space. The Spanish Central Bank assumes that there will be a shortage of 755,000 apartments across the country and that the number will grow to one million by 2028. The shortage is driving up rents and purchase prices.

According to the Spanish daily newspaper “El País”, rents rose by 87 percent and purchase prices by 80 percent between 2015 and 2025 - but wages only rose by 30 percent. Young Spaniards often cannot afford their own apartment, even though they work. This is socially explosive.

In order to keep this under control, there is currently activism on all fronts in Spain: with the mediation of the conservative-governed Madrid city hall, the small real estate company Urbagestión, which owns Maricarmen's apartment, has agreed to a rent that is no higher than a third of the senior citizen's income and should therefore amount to around 500 euros, as before. The national excitement should be contained in this way.