New-home building in Barcelona has ground to a halt in response to a policy aimed at increasing the supply of affordable homes in the city, say developers. This will increase the cost of housing for everyone, they argue.
Back in December 2018, Barcelona city hall, run by Mayoress Ada Colau, and her hard-left party Barcelona en Comu, introduced a social housing quota of 30% on all new developments and renovations above 600m2 to force developers to increase the supply of affordable housing. Supported by housing activist groups, Colau claimed the policy would lead to more than 300 affordable new homes each year.
At the time developers warned the policy would backfire by discouraging new development and renovation in the city, which is what has happened.
The Association of Real Estate Developers of Catalonia (APCE) has revealed that housing investment in larger projects that would have to dedicate 30% of homes to affordable units has fallen to almost nothing. Investors are shunning Barcelona in favour of the suburbs and Madrid, they claim.
Colau’s 30% social housing quota policy “has not achieved its objective,” says Xavier Vilajoana, President of the APCE, in comments to the Efe news service this August. According to Vilajoana, the number of new building licences issued that comply with the policy “could be counted on one hand.”
Another big developer with a head office in Barcelona told the Spanish press “there is almost zero interest in new building licences. Promoters are doing almost nothing in Barcelona, and if there is less supply, house prices will rise.”
The developers point out that “the numbers don’t add up” if you have to dedicate 30% of a new project to social housing, and mixing households with very different financial resources in the same building is a “difficult fit.” In other words, Colau’s flagship housing-policy makes all new projects above a certain size financially unviable, and much harder to sell. As a consequence, investment in new developments in the city has collapsed, as forecast.
The policy will also lead to the long-term deterioration of the city’s housing stock, as owners of buildings will no longer renovate if they are forced to dedicate 30% of the building to social housing. Over the long term, this will have a negative impact on the quality of houses for sale in Barcelona.
The lack of new development activity is also bad for municipal finances, as building permits are an important source of revenue for the city, developers point out.
The City government has never said how many building licences have been granted that comply with the policy since it was introduced in December 2018. City officials claim the policy has not reduced the level of new home building, but won’t say how many licences they have granted that comply with it, and how many affordable new homes this means. It’s fair to assume that, if the policy was working, they would be boasting about it. All they will say is that the policy will stay in place, with plans to increase the social housing quota from 30% to 40%.