Mark Stücklin
Barcelona’s supply of long-term rental homes is shrinking fast in response to misguided public policy, and the 37th America’s Cup in 2024 will only make the situation once.
I know a Ukrainian couple looking without success to rent a home in Barcelona despite having a much higher income than most locals. They aren’t refugees from the war as they made their plans before Putin invaded their country, and they aren’t looking for high-end luxury in Barcelona, just a small flat in good condition in a central area with a going market price, yet all their offers have been rejected.
The reason why they can’t find a home to rent in Barcelona is simple. There is a shortage of properties on the rental market in Barcelona, so landlords can be extremely picky about who they rent to. Landlords prefer someone local with a steady job and decent income who can’t be fired, rather than a couple of high-earning digital nomads from a war-torn country. But if the market was the other way around, and there was a shortage of potential tenants, it’s a safe bet my Ukrainian friends would have had an offer accepted by now.
Why is there a shortage of homes to rent in Barcelona?
Partly because the city’s location between the hills and the sea creates a structural shortage of land, but mainly because of spectacularly misguided housing policy that fails to make the most of the land available, and discourages housing investment.
Barcelona has been run for the last seven years by Mayoress Ada Colau – a former squatter and hard-left activist who believe strongly in regulating the housing market to control rents, prevent evictions, protect squatters, and discourage ‘gentrificación’, which is a dirty word in Spanish. She has been supported by the regional government of Catalonia, called the Generalitat, which broadly shares her views of housing economics. As a result, the following housing policies have been pursued in Barcelona in recent years:
- Rent controls were introduced in Barcelona in September 2021 tying rents to an index published by bureaucrats taking little account of property characteristics other than size and location. Though struck down by the Spanish supreme court in March this year for being unconstitutional, whilst they were in force the rent controls, and legal uncertainty they generated, discouraged rental housing investment leading to a reduction in the supply and quality of rental housing available in Barcelona. Colau and her team say rent controls will be back as soon as the government in Madrid passes a new housing law currently going through parliament that will devolve rent control powers to regional governments.
- Squatter-friendly policies that protect squatters more than owners, and make it easy to extort money from owners by holding their properties to ransom. Official support for Spanish squatters and little defence of private property rights has discouraged housing investment in Barcelona, and made the city the squatter capital of the world.
- A social-housing quota of 30% was imposed by Colau on all new developments and renovations in the city above 600m2, making it no longer possible to turn a profit on house building in Barcelona. As a result, new developments and renovation projects above 600m2 in the city have collapsed to zero, reducing the supply of new and renovated homes coming on the market, which was one of the main sources of rental housing investments for small investors.
- Demonising housing investors and landlords, who are treated as speculators and bloodsuckers regardless of their business models. Investors have got the message they are not welcome in Barcelona, and many of the bigger funds now give the city a wide berth. But housing is a capital-intensive business, so the city is being starved of housing investment by politicians demonising the sources of capital they need.
Barcelona’s planning department is also famously slow and expensive to deal with, which increases the costs and risks of developing in Barcelona. All these factors together have led to a collapse in the supply of long-term rental homes on the market.
Immaculada Amat, from the family-run Amat Immobiliaris estate agency in the Barcelona area, has been warning of this trend for some time. “I see a very worrying trend,” she explains in her latest newsletter. “The slow, but constant movement of properties away from the rental market to the sale market. At the same time, we see a massive reduction in the purchase of new homes by small buy-to-let investors. All together this is causing the opposite of what we need to happen: A reduction in the number of homes for rent caused by, in our opinion, wrong-headed policies.” Looking forward, Immaculada forecasts the alarming decrease in the number of homes for rent in Barcelona to continue.
The rental market in Barcelona is already extremely tight. A quick search of the rental market today reveals there are 400 flats for rent in Barcelona’s upmarket right Eixample district, and exactly the same number in Madrid’s Castellana district, which is about half the size. Given the size of Barcelona’s Eixample Dreta there should be more like 800 flats for rent on the market, if the comparison holds.
America’s Cup to make rental shortage worse
Barcelona has won the race to host the 37th America’s Cup, and this will make Barcelona’s rental-housing shortage worse. At a time when the supply of homes for rent is shrinking in response to misguided policies, the regatta will increase demand for mid-term rentals that will further reduce the supply of long-term rental housing on the market, at least until the end of 2024.
The drain of properties from the rental market to the sale market is keeping a lid on the price of property for sale in Barcelona, at least for the time being. According to the portal Idealista, house prices in the Catalan capital are down 0.7% since March 2021, compared to an increase of 3.3% in Madrid. But at some point the flow from rental to sale will dry up, and foreigner buyers will return to Barcelona in greater numbers, some of them after falling in love with the city during the America’s Cup. After all, the ‘92 Olympics really helped put Barcelona on the map, and maybe the America’s Cup will remind the world of Barcelona’s charms.
One thing is for sure. The mid-term rental market (>32/<365) is going to be hot in Barcelona in 2023 and 2024. Many of the people participating in the cup and staying in Barcelona for months or even between one and two years will prefer renting a home to a hotel. Nobody with a nice gaff to rent in a smart part of Barcelona is going to offer long-term rentals until after the regatta finishes in October 2024.
