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New home building collapses in Barcelona as social housing quota on new developments starts to bite

New development in Barcelona ada colau social housing quota
New development in Barcelona has come to a grinding halt thanks to Ada Colau’s social housing quota

A report just published reveals that housing starts collapsed in Barcelona in the first quarter of the year in response to a social housing quota of 30% on new developments imposed by Mayoress Ada Colau, who claimed it would lead to more than 300 affordable new homes in the city each year.

In the first quarter of the year there were 271 housing starts in Barcelona province, 63% less than the same time last year, when there were 730, according to a report from the Association of Promoters of Catalonia (Asociación de Promotores de Cataluña – Apce).

The decline in housing starts in Barcelona province explains why the number of homes started in Catalonia as a region was down 5.4% in Q1, whilst housing starts were up 23% in Spain as a whole.

The figures also show that housing starts in Barcelona city fell from 24% of the province total in Q1 2018 to 10% today, showing that the biggest decline has taken place in Barcelona city.

Why are housing starts plummeting in Barcelona whilst rising in the rest of Spain? Because at the start of the year leftie Mayoress Ada Colau managed to impose a social housing quota of 30% on all new developments and full renovation projects i the city with a surface area of 600m2 or more, forcing private developers to dedicate 30% of the project to affordable housing. In the Barcelona market today, that makes all such projects unviable.

The figures for Q1 don’t even tell the full story. They include projects that obtained licences before Colau’s social housing quota came into force at the start of the year. I suspect that not a single developer has requested a licence for a project that complies with the social housing quota since it came into force. I’ve been asking around and nobody knows of one. That suggests that housing starts in Barcelona will be close to zero when the Q2 figures come out, or at least close to zero for projects that comply with the 30% social housing quota.

When she first got her quota approved by the municipal government she boasted it would lead to between 300 and 400 affordable new homes a year, and urged other cities to copy her “change of paradigm” by forcing private developers to finance and provide social housing. As I argued at the time, “you don’t need a degree in economics to see that Colau’s social housing quota will reduce house building and the supply of new homes in the city.”

But it looks like Colau’s social housing quota has caused new home building in Barcelona to collapse, not just decline, and I fear worse news is to come. Not only will she fail to deliver anything close to 300 affordable new homes a year she promised, she will reduce the supply of new homes for everyone, and drive up the price of housing even further.

Housing affordability is one of Ada Colau’s signature issues, yet everything she does simply restricts the supply of housing in Barcelona, and drives up the cost. Though it makes property in the city more valuable, and boosts investment returns for owners, it’s bad news for the city as a whole.

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