Friday, January 21

Sorcha Edwards: “If the price control only applies to part of the rental housing, the impact will be limited”

Sorcha Edwards is Secretary General of Housing Europe, the organization that integrates 46 national and regional federations from 25 European countries, and one of the main European voices on housing policy from a social perspective.

The collateral effect of the Housing Law: it will increase the number of tourist apartments in stressed areas

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A policy that, in the coming weeks, will face relevant changes in Spain, given that the Government has yet to approve, after all the mandatory consultation procedures, the final draft of the new Housing Law.

This will not be a reality, at least, until the final stretch of 2022, when it passes its parliamentary procedure, and will open the door to benchmark rates in rents in stressed areas, although the autonomous communities will have to decide to put them. underway, something unlikely in those presided over by the PP. And there are more measures that have to be ready in the coming weeks, such as the 250 euro rental voucher for young people.

We spoke with Sorcha Edwards about the impact that the new regulation will have and, also, about the causes of the housing problems that Spain has dragged on for decades.

As an expert in social housing and in the face of regulatory changes, what are, in your opinion, the major problems affecting Spain?

There are quite a few factors that have shaped the current Spanish property market. If we go back to just over 10 years ago, the consequences of the financial crisis were especially severe, when construction came to an abrupt halt. Furthermore, in Spain, traditionally, there is a preference for home ownership, which has been driven by public policy. Already in that financial crisis, the needs of the people changed, because fewer Spaniards could buy and the demand for rent grew, especially among young people. However, since then, supply and demand have never reached a meeting point. In our last report of March 2021, we see that the social rental stock is only 1.6% of the housing supply in Spain. The public rental offer remains extremely small and this shortage has been exacerbated by the privatization of housing and tourist rental, which has led to price speculation, not only in large cities, but also in small ones.

Which are the countries that develop the best housing policy and what could or what should Spain copy?

Austria and Denmark are the best students when it comes to effective politics. Approximately 24% and 21% of the entire stock of flats in both countries, respectively, is focused on social housing. There are quite a few reasons why they have been successful, but if we have to point one, it would be their long-term commitment to providing decent and affordable housing, which does not change with election cycles.

The Spanish Government finalizes a new Housing Law that, among other aspects, includes a price index to limit rent increases in areas with high prices. These indices have already been tested in other countries. Is it an adequate solution to mitigate the increases in rental prices?

Price or rent indices can be seen as a way to provide stability and, also, to reduce evictions. At the same time, they can enable reasonable returns for homeowners and promote a stable, long-term investment in housing. On the other hand, poorly designed rental indexing systems can encourage landlords to kick out their tenants because they seek to increase what they charge. Price control requires strong administrative and supervisory capacity. In the report # Housing2030: Effective policies for affordable housing in the UNECE region “ , which we have developed with UN-Habitat, experts indicate that indexing or regulating rents can discourage private investment in rental housing and therefore reduce supply. There are no miracle solutions, or easy ones.

So from your experience, do these indices work?

Similar measures have been introduced in Germany or the Netherlands. However, they have not proven to be the solution to curbing excessive rents.

In Spain, in fact, the price index will only be applied in the autonomous communities that request it and is focused on large holders, companies that have more than 10 properties. Will that reduce its impact?

We always emphasize that indexes are only part of the puzzle. Measures on the supply side are crucial and depend on each context, but if price control is not mandatory and only affects part of the stock, the impact will be even more limited.

On the other hand, Spain is one of the European countries with the least social housing for rent. How can social housing be promoted to be effective?

A good housing system can only become a reality with the long-term commitment of policy makers, at all levels. You need to invest continuously. What is motivating is that it is a job that, in other countries, is being done.

To what level would Spain have to reach in order to really have an effective volume of social housing?

This is a difficult question, but as I have mentioned, countries that have been successful, like Austria or Denmark, have about a quarter of their housing stock dedicated to social or affordable housing. We must also bear in mind that we are talking about quality homes, which guarantee a social ‘mix’ and which are adapted for different social groups, young people, the elderly, people with disabilities …

In Spain, more than 26% of the population has to allocate more than half of their salary to pay rent. How do you rate this aspect? What could be done to improve this data?

For example, with the EU recovery funds, which should serve as a start, to improve housing policies and increase the supply of more affordable housing. It is vital, too, from the point of view of social welfare.

And how do you see that the investment of large funds in the real estate sector has had a positive or negative impact on the development of social housing and accessible to medium and low income?

The funds have further deepened the housing crisis. Companies must be regulated to prevent their investments from having a negative impact on the right to housing. Tax policy or avoiding land speculation or reselling homes are also tools that legislators can use. Finally, this is a bit less valid in the case of Spain, given the small stock levels of public or social housing, but governments should avoid the privatization of social housing that reduces the capacity of the State to offer affordable housing.

Spain is going to approve a youth voucher of 250 euros for those under 35 years of age. Is direct aid to young people positive to allow them to have access to rent or can it have an inflationary effect?

Young Europeans suffer from the housing crisis and are often excluded from the property market in big cities. Eurostat data indicate that, in the southern EU countries, young people are emancipated later and not because it is their choice. In Spain, more than 45% of young people between the ages of 25 and 34 live with their parents, while the EU average is 30 years. The aid is essential but, once again, all aspects of housing must be supervised, monitored, to ensure that they do not lead to higher prices, for young people and for the entire population.

Finally, given the problems that exist in the housing market in Spain, does the Spanish real estate market have a solution?

Absolutely. We must change the narrative and consider housing more as a basic social and human right and less as a profitable investment good.