Moody’s warns that eviction ban will exacerbate housing problems

spanish rental default eviction moratorium
Protesting against bank repossessions. Photo credit: Antonio Marín Segovia / Foter / CC BY-NC-ND

A report from the international ratings agency Moody’s warns that Spanish government policies to protect non-payers and squatters from eviction will discourage housing investment. 

Housing is always a delicate subject, but in Spain today it’s a minefield. For a start, it’s the focus of a political battle between the left-wing parties in Government, with the hard left pursuing populist policies to invalidate property rights, whilst the moderate left try to strike a balance between property rights, and the constitutional right to ‘dignified housing’ for all. 

The Covid pandemic has made the situation worse, and resulted in new and frequently changing regulations that increasingly undermine property rights. The very latest change protects squatters from eviction if they are ‘vulnerable’, which of course they can all claim to be. Squatter mafia extortion-rackets are particularly good at exploiting this condition.

The international ratings agency Moody’s has noticed. In a recent memo to investors, reported in the Spanish press (I couldn’t find the original, so all quotes are my translations from the press reports), it observes, in the dry language of a ratings agency, that  “although the measures are temporary, they follow a trend in recent years towards housing regulations that undermine the rights of creditors to repossess properties, which reflects the increasing relevance of the social risk in housing.”

The trend towards weaker property rights in Spain is clear, and was the subject of a study I mentioned here last year in my article on the Erosion of property rights, a growing problem in Spain. Moody’s notes that  “giving social rights to illegal occupants weakens the legal security of owners. These social measures are difficult to undo once granted, and there is an increasing probability that the majority of these measures will be extended or replaced with others when they expire.”

This is a problem, in particular, for portfolios of bank repossessions, which were taken over from bankrupt developers. “These properties tend to have a high level of illegal occupancy, around 5% to 10% before the pandemic, and higher now with the crisis.”

Moody’s point out that the lack of social housing will only make the situation worse. The new law only allows eviction if a social housing alternative is available, which it rarely is. Only 2.5% of the housing stock in Spain is publicly owned. Moody’s note that regional governments spend just 0.8% of their budget on social housing, compared to 40% on health and 20% on education. The new regulations will increase the demand for social housing that doesn’t exist. As a result, private owners will be forced to bear the cost.

Squatter extortion-risk on the rise

The new regulations banning the eviction of squatters also encourage the organised extortion of property owners by gangs using squatters to hold properties to ransom, and this is a fast-growing problem. State protection of squatters in Spain makes it ruinously expensive for owners to take back control of their properties once squatters are installed. So, if you own a second home in Spain that is left empty for long periods of time, you should minimise the risk of squatters making themselves at home in your property by keeping a close eye on it. With that in mind I have helped develop a cheap and effective new solution harnessing the power of the latest property-watch technology to help you do this. I hope to put it on show here next week. Sign up below to be kept informed.

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KEEP AN EYE ON YOUR PROPERTY

Soon to be launched, a simple and cheap solution to help you keep an eye on your property using the latest surveillance technology in a ground-breaking way, plus a guide to home security in Spain. Sign up here to be kept informed.

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KEEP AN EYE ON YOUR PROPERTY

Soon to be launched, a simple and cheap solution to help you keep an eye on your property using the latest surveillance technology in a ground-breaking way, plus a guide to home security in Spain. Sign up here to be kept informed.

By submitting this form you agree to our Privacy Policy & Terms of Use. You will be sent an opt-in email with data privacy (GDPR) information to confirm your interest.

SPI Member Comments

Thoughts on “Moody’s warns that eviction ban will exacerbate housing problems

  • The banks are stuffed with property they cannot sell.
    The youngsters are homeless , hopeless and unemployed.

    Perhaps a concerted action by the central and local Gov’t to buy the banks bad assets at a reasonable discount and establish a training program to get youngsters building solar parks, windmills, power lines and battery parks , along with a total re-evaluation of the electricity supply might help.

    There is plenty of spare land bombarded with sunshine . Spain should be awash with cheap electricity. When their youngsters sign up for a training program they get a cheap state backed mortgage . The only question is the lack of political vision.

  • Christopher Nation says:

    Hello Mark

    that’s very worrying.

    I decided back in ’19 to move to France, before the pandemic struck. I fondly hoped I would be in France by mid/late summer ’20, funds in hand …

    My flat in central VLC went on themarket at the beginning of Feb ’20. Two weeks later came the first ‘lockdown’, and the world ground to a halt. Since then I have had not a single offer. One reason being that not one but two agencies got the valuation badly wrong.

    I had to make a run for it in the late autumn, to beat the Brexit deadline, arriving in FR on 2nd Nov. An agency still had the keys and instructions to sell or rent, whicever came first. Neither happened, so my flat stands empty. My contract with them ends on 24th Feb and they are to stand down on that date.

    One thing that worries me is that the absolutely minimal consumption of electricity can be seen by the meter reader, the meters being in a cupboard at the top of the stairwell. I unplugged absolutely everything, dispensed with WiFi, returned the router …

    I have excellent neighbours, above and below. Both have keys. They can be trusted. Do you think it would be a help in this situation to have these people spend time or at least turn things on and off? The girls downstairs have no TV or DVD player. They watch stuff on line – Netflix etc. I have encouraged them in the past to watch stuff on my TV. I don’t think they ever have, to date.

    I don’t expect you are in a position to make individual recommendations but I hope your follow-up to this problem takes into account some of the points I’ve made here.

    I know there are tech solutions to monitoring properties. However, they can’t prevent access, if a determined attempt is made. I certainly can do nothing pro-active, pinned in a corner, in France.

    • Mark Stücklin says:

      Hi Chris, good to hear that you are safely installed in France. How does it compare to life in Valencia?

      I wouldn’t worry too much about the electricity meter showing minimal consumption. The squatter risk is low, but it does exist, and if you can minimise it at a reasonable cost that’s worth doing. You might not be able to stop a break in, but you can report it to the police quickly if you know what’s going on in your gaff. My solution will be perfect for you. I’ll email you the details.

      I’m surprised you haven’t had any interest. From what I can tell the market is moving, just at a lower price than before. Pricing is key.

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