VC has set an objective of increasing the supply of social and affordable housing, dealing with what they call in Spain the housing emergency, but granting itself the rights of preemption and first refusal on all property deals above a certain size, following in the footsteps of Barcelona. This will just discourage investors, and ultimately degrade the housing stock, and raise the cost of housing in the Valencian Region.
According to the local news source Valenciaplaza.com, the councilor for Housing and Bioclimatic Architecture, Rubén Martínez Dalmau, is putting the final touches to a new decree, responding to the housing crisis, that will give the regional government the right of eminent domain on property transactions in a wide range of circumstances.
The decree will enable the intervention of the regional government in transactions such as foreclosures, and acceptance in lieu mortgage settlements, where the acquiring party are mainly financial institutions, the press reports.
Who cares? Well, the decree also gives the administration the right of first dibs on all blocks of flats sold privately, as has already happened in Barcelona. Under the guise of investing in social housing, this clause gives the regional government the right of first refusal and preemption in the “sale of buildings with a minimum of five homes….when a percentage of 80% or more of the building is sold.”
This significantly increases the risk of urban development in the Valencian Region. Imagine going to all the effort and cost of underwriting and due diligence to make an offer on a site, only for the regional government to walk away with it unless you make a high offer. This gives the administration an option on all good deals, discouraging private investment. It also encourages corruption, because the obvious way to beat eminent domain in this case is to pay too much on the condition you get cash back under the table.
The bottom line is this decree, if it goes through, will discourage private investment and, in the long run, degrade the housing stock in the Valencian Community, and raise the cost of housing.